Nike Brand Marketing Mix Analysis Final Paper
MT219-19: Marketing
Jill Stidd
Kaplan University
Given the importance in marketing for the deeper understanding of the strategic planning process and formulating a strong marketing plan, this paper analyzes the marketing mix for the Nike brand as well as stimulate suggestions and ideas for any areas of their existing marking objectives that change would create a better marketing plan.
I choose Nike brand because of my previous experience with the shoe sales industry and the fact that Nike’s headquarters and cooperate offices are local to where I live in Portland, Oregon. This history of Nike is that before Swoosh and before Nike there were to visionary men, Bill Bowerman and Phil Knight. These two men believed in their vision and invested $500 dollars each which created Blue Ribbon Sports Company. They placed their first order of 300 shoes in January of 1964. Bill sold the shoes out of his car, while Phil tore apart athletic shoes to see how he could make them better. He used one of the very important marketing tools of “trial” having anyone he knew to wear the shoes and give him feedback, hence became the start of customer loyalty and the foundation of Nike shoes. Nike is a major manufacturer of athletic shoes, apparel, and sports equipment there current portfolio is stated on their website, “Nike’s subsidiaries have a significant place in Nike's plan to grow to $23 billion in revenue by 2011. We estimate that 25 percent of the company’s targeted revenue growth in the next four years will be generated by these brands which currently represent revenues of more than $2 billion. Collectively over the past five years, these subsidiaries have nearly tripled revenue and increased their pretax income contribution more than fivefold. As part of our growth strategies, Nike continues to optimize its portfolio, ensuring that the company is investing in opportunities that will generate the highest returns. Nike’s Brand Portfolio currently includes four wholly owned subsidiaries: Converse Inc., NIKE Golf, Cole Haan Holdings, Inc., and Hurley International LLC.
(http://www.nikebiz.com/company_overview/subsidiaries/index.html, reviewed August 3, 2008.)
Nike’s width is action sports, basketball, cycling, eyewear, football, golf, running, soccer, skateboarding, swimming, tennis, women’s and men’s shoes, women’s and men’s athletic clothing, equipment. Nikes Depth in women’s running shoes is for example: Nike Shox Turbo VI+, Nike Air Max 360 III, Nike Shox Navina+, are but a few examples of their depth. Given the research that I have done it seems that the top competitive athletic shoes manufacturers today are New Balance and Reebok, they are all looking at one another to create their change and improvements. Currently Nike’s Position is #1, New balance is #2, and Reebok is #3, these statistics were stated on the New Balance video that we were to watch for a video project.
Given that Nike brand is a heterogeneous market great thought and attention to detail in regards to the target market and segmentation is vitally important to the success of Nike’s marketing plan. Nike’s marketing team without a doubt had to consider all five conditions before starting the task of market segmentation. Nike uses a differentiated strategy for market segmentation. It is clear that they had to use age, gender, race and ethnicity, income, and psychographic variables, such as personality characteristic, motives, and lifestyles to understand their target market in the wide range of athletic shoes they provide in both price and shoe quality, an example is that the “walker” does not need the same shoe as the “marathon runner” or a elderly person is not looking for the newest edgy design patterns as the teenager might be looking for. There is certainly a “status quo” with Nike branding with the promotional celebrities like Michael Jordan, his presence also brings the necessity for race and ethnic segmentation.
Nike brand marketing mix has been well planed in their definition of what they sell as a product via the website and other venues, options for price for the buyer as seen on their on-line store, their placement and distribution has been clearly outlined, and there promotion is state of the art. Because Nike’s product is a major manufacturer of athletic shoes, apparel, and sports equipment the product that they sell is a tangible good that would be classified as a consumer product because the products that Nike offers would be purchased to satisfy personal needs. I would like to note that I feel Nike has the potential to cross over into classifications as a consumer product.
For the average shoe buyer it would be considered a shopping product, but for the avid athlete, marathon runner, or Olympic competitor I think Nike would move into the specialty product. The features and benefits of Nike footwear is that they are a technologically advanced athletic shoe is design, comfort, support that certainly benefits every consumer looking for a shoe that meets their needs. Nike’s basic positioning is as an athletic shoe, apparel, and equipment that has been scientifically designed for athletics as well as those interested in the Nike brand. They support this positioning claim with various areas that are outlined on their website, here is one excerpt, “Today, Nike continues to seek new and innovative ways to develop superior athletic products, and creative methods to communicate directly with our consumers. Nike Free, Nike+ and Nike Sphere are just three examples of this approach.” http://www.nikebiz.com/company_overview/history/2000s.html , reviewed July 14, 2008.
I feel that Nike has researched extensively the basis for pricing their products, be it footwear, apparel, or various equipment offerings. It is obvious that ranked #1 they evaluate cost, demand and competition in setting the price structures. Nike’s price variable is that they have various price points from low to high for each of its categories that if offers. Mark up pricing is the pricing approach that Nike suggests to the retailers that sell Nike products. I think given the industry there is some demand pricing do to the fact of the popularity of some footwear that they designed that have a celebrities name attached as well as some competition based pricing happening with the mid range footwear that they sell. When they release a new product they must consider new product pricing. Given that Nike would be a company that has a goal to maximize profits for an entire product line rather than focusing on just an individual product the implement product-line pricing. It is my experience in the retail setting to see Nike using reference pricing in terms of setting a higher priced shoe of greater quality next to a lower priced “leader” shoe. As displayed in their on-line store they do implement odd and even pricing. They are aware that they use even pricing for their most expensive and top of the line footwear. (http://www.nike.com/index.jhtml?sitesrc=USLP#l=nikestore,grid,_grid,f-10001+12001/so-finalPrice0&re=US&co=US&la=EN , reviewed August 3 2008)
Reduced priced footwear as an odd price point for the appearance that this shoe is a bargain therefore it will be purchased. I also saw evidence in their online store of special event pricing, for example currently “back to school” discounts. I would have to say given my research in our text book and the online I would say that Nike product is a selective distribution. This article I found on the web describes my product category and supports selective distribution. “Selective Distribution Between exclusive and intensive distribution, there is selective distribution. Selective distribution is the strategy in which several but not all retail outlets in a given area distribute a product. Shopping goods are goods that consumers seek on the basis of the most attractive price or quality characteristics are frequently distributed through selective distribution. Because of this, competition among retailers is far greater for shopping goods than for convenience goods. Naturally, retailers wish to reduce competition as much as possible. This causes them to pressure manufacturers to reduce the number of retail outlets in their area distributing a given product in order to reduce competition. The number of retailers under a selective distribution strategy should be limited by criteria that allow the manufacturer to choose only those retailers who will make a contribution to the firm’s overall distribution objectives.” (http://www.web-articles.info/e/a/title/Exclusive-Distribution-and-Intensive-Distribution/, reviewed July 27, 2008.)
In terms of Physical distribution, Nike corporation states that Nike has added 700 manufacturing facilities. “Nike is committed to supply chain transparency by updating publish disclosure of the more than 700 contract factories worldwide producing Nike branded product. Disclosing our factory base encourages transparency and collaboration.
For Nike the Beijing Olympics provide an opportunity to share China's importance to our business. We have established aggressive business targets aimed at improving working conditions in contract factories, improving product through design, becoming climate neutral and investing in youth access to sport.” (http://www.nikeresponsibility.com/#workers-factories/beijing_factories , reviewed July 28, 2008). Nike is producing footwear, athletic wear, and uniforms for USA teams for the 08 Beijing Olympics as stated in the media on Nike’s Website, “EUGENE, Ore. (1 July, 2008) – Nike athletes, including Lauryn Williams, premiered Nike’s USA Track and Field (USATF) uniforms, which will be worn by members of the 2008 Olympic Team for Track & Field, before a sold-out crowd of 20,000 fans at the University of Oregon’s historic Hayward Field during the U.S. Track and Field Olympic Trials.” (http://www.nikebiz.com/media/pr/2008/07/01_USATF.html , reviewed July 28, 2008)
I feel that Nike has a great team that is planning an efficient physical distribution system that will insure decreased costs and increase in customer satisfaction. They have a very simply channel system, producer, retailer, and consumer, they seem to want full control of every operation. This production addition could potentially have great ramifications for the company if they are not fully stocked and ready for increased demand; however this company from all reports seems ready and eager for these goals to be met. This company is very aware of the cycle time of delivery as has researched all the venues for getting their product out to the consumer. They are even implementing some “on-line only” purchases of certain brands some of them the newest and with the most demand, understanding distribution for on-line sales would be extremely important customer satisfaction. Many of these customers would be “I want it now” customer.
Finally is analyzing Promotional techniques used by Nike I was impressed time and time again. Nike is a “new” company today than it was a few years back. Nike as a company was hit hard from a marketing perspective for attention to “toxic factories and the working conditions of their employees there” They have a great hurdle to unravel this debilitating review of their cooperate ethics, however in the financial report and a letter by the CEO of Nike, they are committed to a new paradigm with Nike, “This report covers a crucial period, and not just for Nike. Specifically, we saw heightened attention worldwide on corporate responsibility and the key challenges of climate change, poverty and equity. Simultaneously, we began to transform our vision of Nike’s role in contributing to positive change in communities around the world.
The opportunity is greater than ever for corporate responsibility principles and practices to deliver business returns and become a driver of growth, to build deeper consumer and community connections, and to create positive social and environmental impact in the world. We have made tremendous progress over the past two years in more deeply integrating corporate responsibility into our business model. We see corporate responsibility as a catalyst for growth and innovation, an integral part of how we can use the power of our brand, the energy and passion of our people, and the scale of our business to create meaning full change.”
(http://phx.corporate-ir.net/phoenix.zhtml?c=100529&p=irol-reportsAnnual ,reviewed August 3, 2008)
They use extensive advertising strategies on their website. Their idea to actually have an on-line personal trainer is yet another way to bring consumers to the website and visit and revisit thus promoting customer loyalty. “Jay Johnson currently serves as the Middle Distance Coach for the University of Colorado, his alma mater, where he has coached for more than five years. In addition to his coaching responsibilities, Coach Jay directs the Boulder Running Camp, one of the premier high school running camps in the country, and develops training materials for athletes and coaches of all ages and levels. Each week, Jay will be answering the best training questions we receive from you! If you have a question you want answered, email CoachJay@nike.com”. (http://insidenikerunning.nike.com/2008/07/09/july-9-2008/ reviewed August 1, 2008) , reviewed August 3, 2008) Nike’s decision to use athletes that can be great inspiration for others to start a training program and buy athletic shoes is a brilliant marking concept. Other Athletes they promote and sponsor and in turn promote Nike are: Asafa Powell, Shannon Rowbury, Shalane Flanagan, Bernard “Kip” Lagat, Kara Goucher.(http://insidenikerunning.nike.com/category/athletes/.com , reviewed August 1, 2008)
Other unique marketing promotion idea as well as brilliant integrated marking communications is there collaboration with Apple. An example, Nike + is an individualized site on NIKE.com that you can start your own monitored workout routine. Nike is smart to use the return to site basically every time you work out to record your results, using this device that they sell that you can put in a shoe that they sell! Nike+ teamed up with Apple and the iPod. “Welcome to Nike + iPod-Nike + iPod is your personal workout assistant. Music for every mile Supercharge your workout by creating high-intensity play lists. Check out what’s on your favorite athlete’s iPod.” (http://nikeplus.nike.com/nikeplus/v1/pdf/English.pdf) “Nike said yesterday that second-quarter profit rose 8.1 percent, helped by its iPod-compatible Nike+ line of running shoes. “Nike+ is turning out to be huge,” Nike CEO Mark Parker said in an earnings conference call. “In less than six months, Nike+ users have logged more than 3 million miles and there are over 3 million Plus-ready shoes in the global marketplace; we expect that number to double by the year end. Clearly our confidence in this concept has proven to be accurate.” Later in the call, Parker said, “Nike+ continues to be extraordinary, and we see that just accelerating as we add more styles to Nike+ over this next six to 12 months.” (http://www.ilounge.com/index.php/news/comments/nike-profit-boosted-by-nikeipod-sales/, reviewed August 1, 2008)
I did see coupons and cents off offers on other websites that were selling Nike shoes, however not the Nike website. I did not see any refunds or rebates with Nike shoes, I did not see a frequent user incentive, I know that Nike invests heavily in there brand and logo, their point of purchase materials, in terms of counter cards, display modules, signage, window displays and racks are always recognizable where you see NIKE shoes. I did not see any evidence of free samples, however I do know that they promote several different programs where they give away shoes to young children in “lets Play” program and others like it, if this would be considered free samples then yes, they use this promotion. I would say that Nike uses Consumer Games and contests heavily in there promotion with Nike 10K and Marathon’s, I think you could also add NIKE + personalized training program with this as well.
I am not sure exactly if Nike uses Trade promotions methods, however as I have stated prior, my father owns a european footwear store, and I do know that the shoe manufacturers use many of the trade promotions such as trade allowances (New balance does as stated in one of the video cases we heard) so I am sure Nike follows suite. Buy back allowances are used, scan back allowances are used, merchandise allowances are used , cooperative advertising is used when you place an add with there logo on it they will pay a portion of the add, free merchandise and dealer loader is used, premium money is used, as well as sales contests. I saw all these methods used over and over in the shoe sales industry.
I really feel that Nike current marketing mix is fully embracing there brand position. As I pointed out earlier in this report, Nike in the past had some trouble with this and is currently putting every resource and effort into being the “new” corporate business model. Their involvement in low income programs, as well as “let me play”, addressing child obesity that is rampant in our company, to “toxic-free factories” and shoe manufacturing are just a few of the areas that Nike is standing up to and evaluating in there segmentation. I have to say that I feel that Nike is on the cutting edge of marketing, there website proves it over and over. I feel there are no suggestions on my part in terms of product, pricing, distribution or promotion, as long as they continue this commitment to be a transparent in a information sharing corporation that is creating a green environment at every turn. That would have been my suggestion however they are 100% committed. They fulfilled their objectives of successful promotion by creating awareness of their product and commitment to the consumer, stimulating demand, identifying prospects having web users create their own accounts so there is personal information, retain loyal customers, and facilitate reseller support. When this is all a success the business is a success. Go Nike!
References:
http://www.nikebiz.com/company_overview/subsidiaries/index.html, reviewed August 3, 2008.
http://www.nikebiz.com/company_overview/history/2000s.html , reviewed July 14, 2008.
http://www.nike.com/index.jhtml?sitesrc=USLP#l=nikestore,grid,_grid,f-10001+12001/so- finalPrice0&re=US&co=US&la=EN , reviewed August 3 2008)
http://www.web-articles.info/e/a/title/Exclusive-Distribution-and-Intensive-Distribution/, reviewed July 27, 2008
http://www.nikeresponsibility.com/#workers-factories/beijing_factories , reviewed July 28, 2008
http://www.nikebiz.com/media/pr/2008/07/01_USATF.html , reviewed July 28, 200
http://phx.corporate-ir.net/phoenix.zhtml?c=100529&p=irol-reportsAnnual ,reviewed August 3, 2008
http://insidenikerunning.nike.com/2008/07/09/july-9-2008/ , reviewed August 3, 2008
http://nikeplus.nike.com/nikeplus/v1/pdf/English.pdf)
http://www.ilounge.com/index.php/news/comments/nike-profit-boosted-by-nikeipod-sales/, reviewed August 1, 2008)
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