A Marketing Case Study on Nike
1.0 INTRODUCTION OF NIKE
Nike is a major publicly traded sportswear, footwear and equipment supplier based in the US which was founded in 1962 originally know as Blue Ribbon Sports. Nike is the world leader in the manufacturing of sportswear and gear with more than 47 market shares across the global (Nike.com, 2011).
Nike produces a wide range of sports equipments such as running shoes, sportswear, football, basketball, tennis, golf, etc. Now Nike follows the global fashion trends and is well known and popular in the youth culture and hip hop culture to supply some fashion products. Nike recently teams up with Apple Company to produce the Nike+ products which can monitor a runner’s performance through a radio in the shoe that can link to the iPods. Besides that, Nike also becomes the top of three companies which are climate-friendly companies which build better image to customers.
Nike’s excellence marketing strategies are their energy to achieve their market goals. Nike believes the “pyramid influence” that the preferences of a small percentage of top athletes influence the product and brand choice. So Nike contracted with many athletes’ spokesperson, professional teams and college athletic teams to advertise and promote their products to customers. Nike seriously pay attention on the technology producing, design and selling such as e-commerce, high-tech running shoes, Nike+ with Apple, etc. Nike outsourcing their products most of the factories are located in Asia such as China, Indonesia and India.
2.0 PROS OF NIKE’S CORE MARKETING STRATEGY
Nike put heavily proportion in their marketing strategies and products deign. In order to sustain their dominance in the industry and retain their competitive advantages, Nike actively responds to the market trends and changes in consumer preference by adjusting their marketing strategies, the mix of existing product offerings, developing new products, styles and categories, and influencing sports and fitness preferences through various marketing strategies. Now we discuss the pros of Nike’s core marketing strategies and related them to the relevant marketing theories help us to depth understanding.
More efficient product distribution is the more sales and thus more profits. The delivery of the right products and at the right time to the customers is not only effect the utility but also leads to high level of consumer’s satisfaction and loyalty. Nike distributes its products on different level basis. The high premium products are given to a certain distributors while leaving the low priced to be sold at highly discounted price at the retail stores such as Wal-Mart (Jeannet J, 200, pp 44).
Nike has become the leader in the e-commerce by being the first to the market with its e-commerce website. Nike launched its e-commerce site in April 1999 by offering 65 styles of sport shoes to the US market for purchasing (Nike, 2000). This program represents the first time a company has offered mass footwear through the Internet and provides competitive advantages to Nike.
2.2 Advertising and Promotion
Nike makes contracts with some celebrity athletes which can draw attention to their products such as Tiger Woods, Ronaldo. This has created a relatively high level of Nike’s awareness. Besides that, Nike also employed a large amount of advertisements through the mass media (Goldman S, 2000, pp 154). Nike’s brand images, including the Nike’s name and the trademark are considered to represent one of the most recognizable brands in the world. The Nike name and associated trademarks have appeared from players’ shirts, pants and everywhere. Their aggressive advertising campaigns, celebrity endorsements and quality products all enhance their brand and image. For example, when a celebrity athlete sponsors a specific brand of athletic shoes, the brand will be associated with success.
Nike targets on the consumers who care more about the utility and quality of the products rather than the price. In this way, the price is not affect too much (Frank, 2004, pp173). This has make Nike to set relatively higher price than its competitors. This strategy focuses on the consumers who like Nike and pushes the products value to a higher level. The customers who consider a product to be high quality are likely to pay the high price more often and consistently. Once the consumers develop the product intimacy, they come to associate their person with the products and will pay whatever price quoted on the products.
Nike use vertical integration price strategy in which they take ownership of the participants at channel level that differ and they also engage in various channel level operations both to control costs and thus influence the pricing function (Goldman S, 2000, pp154).
2.4 Market Segmentation and Target
Most of the consumer of Nike’s products is mainly athletic. Nike is the master of segmentation, their segmenting market typically target’s athletes, both women and men from the age 15 to 35. Nike’s targeting market is active people who enjoy high quality sporting goods, especially footwear. Nike focuses on creating premium consumer experiences on product innovation, brand leadership and elevated retail presence. Nike targets on these customers by agreements between Nike and athletic teams, college’s athletic teams for products sponsorship and eventual promotion to the members of these teams. Even though others are likely to buy the products, Nike focuses on the athlete more than any group of individuals even though it also target on the youth. This strategy is especially successful because of its ability to reach a large number of athletes.
3.0 CONS OF NIKE’S CORE MARKETING STRATEGY
Although Nike’s marketing strategies had brings lot of positive implications to the company, but it will bring negative implications to Nike too. The negative implications that will identify in this assignment are high cost incurred, influence of spokesperson, and competitors.
Since Nike has implemented several marketing strategies, it had incurred high costs in producing and promoting its products. The costs are increase among handling inventory, designing, advertising and production. (Abhiroopsur, 2009) Beyond that, the inflation had raised the costs of raw materials and transportation. To deal with these problems, Nike has increased the products’ prices and reduces its marketing budget. Therefore, this could hurt the long-term growth of the Nike. (Taulli, 2011) According to Boggan (2001), Nike had also employed child labor in Cambodia to reduce its production and labour costs. This had affected its brand image, and it might have many people boycott Nike and stop to buy anything from Nike. (Boggan, 2001) Furthermore, Nike has been using child labour in the production of its soccer balls in Pakistan. (TED, 2011)
3.2 Influences of spokesperson
One of the Nike’s core marketing strategies is depend on a group of athletes to promote its products. Nike prefers to have high profile athletes as its endorsers, like Runner Steve Prefontaine, Michael Jordan, and LeBron James. The athletes had positive and negative influence on changing consumer preferences, changes in consumer tastes and priorities, and also consumers’ buying decisions. The action and attitude of Nike’s chosen spokespersons could bring the impacts on its promotional strategies. For instance, it will attract the athlete’s idolater to purchase the products if Nike using a popular athlete as endorser. On the other hand, if the athlete were caught in drug addicted or any immoral attitude, it will affect the customers not to buy Nike’s products, thus will affect Nike’s sales, revenue and profit. (Cloke M., 2011)
3.3 Intense Competitors
There is intense competition faced by Nike. Their competitors are Adidas, Reebok, Puma, and so forth, whilst competition is tighter with the coming of Adidas. More, the product line is slightly different between Nike and Adidas. Nike is mainly focus on footwear for men and women who between 15 to 35 years old, while Adidas is specialize in footwear for men, women and children between the age of 10 to 30. This had shown that there is less diversification of Nike marketing strategy. They could also provide footwear for children to attract more parents to become their potential customers. Additionally, Nike distribution strategy is mainly focus in domestic market which is United States of America, whilst Adidas’s main office is located at Germany, but it focus in European market. Therefore, Nike should distribute its products to more region and countries in order to capture more potential customers and achieve greater reputation. (Allick et al., 2000)
4.0 RISKS OF NIKE’S CORE MARKETING STRATEGY
Nike faces many risks when they use their core marketing strategies to achieve their goals and these risks can come from both internally and externally environmental circumstance. The risks will have a negative influence about Nike’s future development, for example, the market share in the world, reputation, brand image and customer loyalty.
4.1 Changes in Market Trends, Consumer Tastes and Preferences
Nike needs to stay on the top of changes in consumer taste and preferences as evidenced by changes in fashion. So Nike face the risk that fashion trends may change so fast that Nike fails to follow. For example, for a period, the global athletic sportswear is focus on personality and Nike’s products still be general to the customers this will lead Nike go behind of their competitors if their competitors can follow the trends. For another example, such as the social changes, women are becoming more fitness-conscious and are increasingly being targeted as growth potential in the sporting apparel and footwear industries. Due to constant changes in consumer tastes and fashion, these industries are always changing. If Nike cannot follow the fitness trends in the market they will face risks of losing market shares. To compete with this risks and problems, Nike should position it as a trendsetter and not a trend follower and be responsible to their customers. (St. John University, 2004)
4.2 Fast changing of Nike’s products
From the above risk, the changing in fashion and customers’ preference had brings negative effect on its marketing strategies. Hence, Nike should introduce new products to maintain its customer loyalty as well as attract new customer markets. However, it will also have negative implication if Nike’s implement new products rapidly.
As we know, Nike’s products are focus on the athlete’s shoes, apparels and equipments and their target consumers are for the athletes. But now the global trends are to be fashion and personality. So Nike change its marketing strategies and products design to become more fashion and focus on the youth consumers. It brings risks to Nike because in the traditional mind of customers, they consider Nike only sell the athletic products. The fashion or the changing style products is unimaginative for customers to purchase. Not all the customers can follow the changing of Nike. Sometimes customers maybe feel fed up because they cannot follow the changing of Nike’s products will lead Nike lose customers which drop down the customer loyalty and market shares. (St. John University, 2004)
Therefore, Nike should analyse the market and customers’ preference as well as customers’ buying behavior from time to time. Nike could prepare survey form to their customers in order to have more understanding on customers’ taste, requirements when buying sportswear or footwear, and also collect the feedback and recommendation from consumers.
4.3 Expanding to the Overseas
One of Major Nike’s marketing strategies is to expand to overseas and become the leader in the world. It also will bring risks to Nike when they expand their business globally. For example, Nike outsources their products to developing countries such as China, Indonesia, and Thailand. Currency exchange rate fluctuations can disrupt the business of the independent manufacturers that produce Nike products by making their purchase of raw materials more expensive and more difficult to finance. Besides that, the global economic recession influence the overall business operation in the outsourcing countries. For example, inflation rate too high in an outsourcing country will increase the cost and reduce the profits for Nike. What’s more, the war and fuel price fluctuations also can lead to unstable situation for Nike over the long period. (Florzak, 2011)
5.0 COMPETITORS – ADIDAS
5.1 IFFICULTIES FACED BY ADIDAS WHEN COMPETE WITH NIKE
5.1.1 Marketing Strategies
One difficulty most likely to be faced by Adidas is in its marketing, compared to its competitor Nike, Nike spends more money on advertising and promoting their products reputation, Nike spend about $1.13 billion as of 1998 involving celebrities like Tiger Woods, Micheal Jordan, Carl Lewis etc. while paying these celebrities large amount of money (Bedar, 2002), as of 2010, Nike spent about $800 million on Nontraditional advertising by using other medium of advertising their products other than TV and has reduce TV and Print advertising by 40%, and in 2006, Nike introduced the Nike + Platform which is a multi-channel, multi-sensory integration between apple and Nike technologies that allows persons to track performance (Fluffylinks, 2012) in essence, Adidas will have a hard time trying to compete with Nike in terms of advertising and promotion, considering Nike’s utilization of low labor cost of production, Nike can afford to spend so much money in creating awareness for their products and gaining consumers loyalty by utilizing celebrities. Adidas will have to invest more money on advertising and create innovative means of advertising their product, having consumers in mind and following the trends of technologies, for example, Adidas can collaborate with IT companies such as Samsung to create innovative means of advertising their products.
5.1.2 Adidas and Reebok Reputation on Its Finances
Adidas and Reebok joining up together as a merger would be a good deal for leading over Nike but the two companies have a bad reputation due to financial problems which almost led them to bankruptcy and since they are to work together. The expansion of their business will take a while to develop because they have to have strong advertising strategies until the Asians .If the Asians like their ideas then they might as well adjust to the culture in countries like china since it has the biggest population. In the long run Asian countries like China might as well take a long time to work with the company in terms of coming up with factories in china. This might be one of their biggest problems which will enable them take a long time to lead Nike in terms of their market Nike. To go through all that they will be a lot of expenses thus the company might run bankrupt again. (Adidas-Rebook, 2011)
5.2 HOWADIDAS COMPETE WITH NIKE?
5.2.1 Develop the Small Computer “Smart Shoe” Product Line
The development of a product line of smart shoes will build on this reputation and show buyers that Adidas is humorless about innovation and using technology to advance athletic accomplishment. The line of smart shoes combines a microprocessor or implanted controller, sensors, and tiny motors along with memory and battery. The sensors work to steadily monitor, measure, and supply data looking at the landscape, impact of each step, athlete’s body temperature, environment temperature, and athlete’s heart rate. This data can steadily be fed to a microprocessor which agent motors to adjust padding and airflow within the shoe. (Dogiamis et al., 2009)
Wireless GPS system is another feature on the small computer production line that enables runners to decide their accurate location, distance traveled, and speed from the shoe’s GPS by wearing a small wireless GPS wrist strap. The shoes implanted memory can keep data about workouts such as average heart rate, body temperature, calories burnt and force of each step. For situation, in basketball the micro can watch how high the athlete jumps and how hard of a landing they make. As many athletes demand goods created that can deliver both watching and accomplishment bettering capabilities, they will find Adidas the solution thus leading to much higher revenue, profit, and market share in sports that Adidas already leads and in sports where Adidas lags in revenue, profit, and market share (Dogiamis et al., 2009)
5.2.2 Implementation of Rebranding Reebok Program
Adidas Group should phase out its high accomplishment athletic shoe line and reposition itself in the casual footwear and active footwear market within the next years. The high accomplishment athletic shoe line can be sponged up into the Adidas brand. Adidas It should consider opening Reebok retail outlets that market Reebok as well stylish Reebok at more upscale department stores such as Macy’s and Nordstrom. Reebok should ensure keeping up a very high level of quality and durability of its shoes. However, it should work with major fashion designers such as Calvin Klein to come up with a well stylish product line of shoes meant for active, casual use, gain brand image as an upscale and more cultured shoemaker. Reebok should first come up with a line of casual but well stylish shoes designed by Calvin Klein that blend quality and style. (Dogiamis et al., 2009)
The rebranding of Reebok can help Adidas to make larger advancements with women. They want a shoe that can be useful for all visible feature of an active lifestyle. Therefore, marketing Reebok as a well stylish line of shoes meant for active lifestyle might allow Adidas to make larger in roads with women. Reebok should start a line of well stylish shoes prepared toward women with active lifestyles. (Dogiamis et al., 2009)
The overall rebranding of Reebok should be finished to avoid internal competition within Adidas Group where the Reebok division is seen as the less profitable sibling of Adidas and to keep buyers from believing that Reebok is not an expensive substitute for an excellent Adidas product. (Dogiamis et al., 2009)
5.2.3 Expand Its Sponsorship Program (Marketing)
Adidas mainly focuses in the European market even though it is known in other parts of the world, which is because of its collaboration with soccer events all over the world and football associations with bodies such as FIFA, UEFA, leagues, clubs and individual players, in 2010, Adidas experience its most successful year in the history of football with sales above 1.5 billion Euros. It also had a sure climax during the 2010 FIFA World Cup of which it sponsored the wining team Spain and the adiZero F50 which is also an Adidas product had the top scoring boot in the event, lastly, Adidas Football group on Facebook massively increased from 100,000 members to over 6 million members presently. Adidas has been an official sponsor of the Olympics and has also been included as a sponsor of the 2012 Olympics; this gives it an edge over its competitor Nike. (AdidasGroup, 2011) It should use this opportunity to carry out precise marketing, by focusing on its segment market which includes the soccer, tennis and athletics teams and probably expand its focus to the up and emerging local teams in the grassroots, because, this group of people are keen about sports and spend time watching them on the TV but hardly get access to them unless they purchase the product themselves.
5.2.4 Change in Consumer Perception to Products
Adidas can also change the consumer’s perception about its products, most consumers perceive Adidas product as being too stiff and therefore are uncomfortable with it, Adidas can come up with a durable but use soft materials for its product as well as rebrand it product as not just a sporting shoe but also a fashionable shoe which consumers can wear on a casual basis example for outings, parties etc. when this is instilled in the minds of the consumers, more of Adidas product will be purchased by consumers as it will be perceived as durable and fashionable.
5.2.5 Encourage Product Customization
Adidas can also make provisions for consumers to customize their products online before it is delivered to them, this will give customers unique and a wide range of their products to choose from and will also allow them to understand what their consumers really want and focus on satisfying their consumer. With each consumer trying to be very creative and unique in their way, Adidas will shift its focus on their consumers from how much they are to pay for the product to how much they can benefit from the product. Adidas can promote this feature through its Facebook page which has over 6 million members.
5.2.6 Focus on Emerging Market
Adidas can capitalize on Nike’s weakness which is its focus on local market, Adidas can capture emerging markets, and already it has a lead in market such as India and Japan. In Latin America, it experiences a growth sale of 38% in 2007. (ReComparison, 2012) Although it is competing with Nike in China, it should focus on ranking its investment solely on markets which offer superior channels to long-term growth and profit prospects and should also focus on expanding its share to unreached areas especially in China, Russia, Africa and the United States. It should also ensure that it differentiates consumers’ buying behaviors as it differs in different regions and countries and understanding this will be an added advantage to Adidas.
6.0 CONCLUSION AND RECOMMENDATIONS
From the above analysis, we had understanding about the pros, cons and risks of Nike’s core marketing strategies with relevant marketing theories. Besides that, the difficulties Nike faced when they competing with Adidas. We discuss from the distribution, price, products design, promotion and advertising, market segmentation to analysis Nike’s competitive advantages in the global market. We also find that the other side influences of Nike’s core marketing strategies such as costly advertising, raw materials costs affected by the global economic, the spokesperson’s behaviors which has negative influences to the Nike’s brand images. What’s more, the risks of Nike’s core marketing strategies such as Nike cannot follow the world fashion trends, the profits has affected by the currency exchange and economic recession when expand to the global.
Nike has remained and continues to remain at the top in producing and distributing their sports clothes and equipments. However, Nike should consider the competitive pressure is very heavy and not allow the “sleep at the top”. So Nike should continuously find efficient marketing strategies to keep their top leaders positions.
The following recommendations are suggested in a situation where marketing management is competent. Nike should increase their market shares through issue new products, competitive pricing strategies, and advertisement and promotions activities. Nike also should restructure market dominance by separate themselves from the competitors mainly through mass promotion strategies and pricing strategies which make Nike more attractive to customers. Besides that, Nike must increase their awareness of corporate social responsibility to strengthen their image of themselves. What’s more, Nike should pay much attention to their R&D department to research out different kinds of people with different taste to get the market diversification goals.
All the above show a competent marketing management which can help Nike Keep their top market leaders and keep their competitive advantages.
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