A Marketing Case Study on 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 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.
2.0PROS 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 Air Max 2016 Black Blue Red 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 Nike Air Max 2016 Men 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.
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).
2.4Market 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.
3.0CONS 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)
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)
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)
4.0RISKS 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.
4.1Changes 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)
4.2Fast 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 Nike Air Max 2016 Men 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.
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 Nike Air Max 2016 Men 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)
5.1 IFFICULTIES FACED BY ADIDAS WHEN COMPETE WITH NIKE
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.