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Adidas Research Project
- 1. Adidas Megan Edmunds Hannah Geiger Louis Turner Ali Alwan Principles of Marketing MKT 2320-001
- 2. Introduction ● On August 18, 1949 Adi Dassler registered the “Adi Dassler adidas Sportschuchfabrik”in Herzogenaurach, Germany. ● In 2013, Adidas created a new cushioning technology in cooperation with the german chemical company BASF. ● Shoe lines in collaboration with Pharrell Williams and Kanye West. ● Sponsor athletes and ambassadors include Lionel Messi, Derrick Rose, Damian Lillard, James Harden, Selena Gomez, Stella McCartney and Kanye West. ● Adidas’ core competency
- 3. Background of the Objectives ● 5 Year Plan ● “Creating the New” ● Brand Desirability ● Speed ● Product Availability ● Diversifying Workforce
- 4. Purpose of the study ❖ The purpose of this study is to investigate how well Adidas competes with other brands on quality, innovation, and social responsibility.
- 5. Literature Review ● Products ● Prices ● Social Responsibility ● Place ● Promotion & Advertising Budget ● Market Strategy ● Competitor
- 6. Findings ● Innovation and technology ● Pricing ● Social Responsibility
- 8. Conclusion ● Innovation ● Competition ● Social Media
- 9. Summary Tables Market Drivers Market Concept Line Expansion Market Expansion Promotion Strategy Outcome Products Positive Positive Positive Positive Prices Positive No Impact Positive Positive Social Responsibility Positive Positive Positive Positive Place Positive Positive Positive Positive Promotion & Advertising Budget Negative Positive Mixed Positive Market Strategy Mixed Positive Mixed Positive Competitor Positive Positive Positive Positive
- 10. References Book Sources Caldwell, L. (2012). The Psychology of Price: How to Use Price to Increase Demand, Profit and Customer Satisfaction. Richmond, Surrey: Crimson Publishing Griffin, R. W. (2015). Fundamentals of management (8th Ed.). Boston, MA: Cengage Learning. Haig, M. (2011). Brand Success: How the World's Top 100 Brands Thrive and Survive. London: Kogan Page. Kotler, P., & Armstrong, G. (2016). Principles of marketing (16th Ed.). Harlow: Pearson Education. Lopez, S. (2014). Value-based Marketing Strategy: Pricing and Costs for Relationship 2 Marketing. Wilmington, Del: Vernon Press. Murray, A. (2010). The Wall Street Journal essential guide to management: lasting lessons from The best leadership minds of our time. New York: Harper Business.
- 11. References Internet Sources Adidas Official Website. (2017). Retrieved from https://www.adidas.com/us Anna, W. (2017, November 29). Inside Adidas’ Robot-Powered, On-Demand.Sneaker Factory. Retrieved from https://www.wired.com/story/inside- speedfactory-adidas-robot-powered-sneaker-factory/ Garcia, A. (2017, November 09). Adidas is running circles around its competition. Retrieved from http://money.cnn.com/2017/11/09/news/companies/adidas-us-earnings-nike-under-aamour/index.html Gilchrist, K. (2017, March 15). Adidas steps away from TV advertising as it targets $4 billion growth. Retrieved from https://www.cnbc.com/2017/03/15/adidas-steps-away-from-tv-advertising-as-it-targets-4-billion-growth.html Green, D. (2017, November 10). Adidas is denying the American curse that’s haunting Nike and Under Armor. Retrieved from http://www.businessinsider.com/adidas-business-boom - 2017-11 Hobbs, T. (2016, July 19). Adidas details 'revolutionary' three-pillar strategy as it aims to reclaim lost ground. Retrieved from https://www.marketingweek.com/2016/07/19/adidas-details-r evolutionary-three-pillar-strategy-as-it-aims-to-reclaim-lost-ground/
Editor's Notes
- On August 18, 1949 Adi Dassler registered the “Adi Dassler adidas Sportschuchfabrik” and set up shop with 47 employees in the small town of Herzogenaurach. Six years later what was considered a miracle helped propel Adidas to new heights. That miracle was when Germany defeated the seemingly unbeatable Hungarians in the 1954 World Cup final. The Germans were outfitted in Adi’s lightweight football boots with screw-in studs. Regardless of how much influence the boots had, Adidas became a household name on football pitches around the world (Adidas.com, 2017). In 1967 Adidas made a enormous step in expanding their product line. The iconic football player Franz Beckenbauer debuted his Adidas tracksuit. The first piece of apparel that Adidas ever produced. This opened up a whole new market to Adidas, who, so far, were famous for their shoes. Adidas now has a very well established apparel sector, not only with regards to athletic clothing but also lifestyle and even high fashion. Offering sports-wear-inspired high fashion apparel with Adidas’ Y-3 brand in collaboration with Japanese designer Yohji Yamamoto. From a sport tracksuit to the runway, innovation followed Adidas when it moved into the apparel market. Adidas earned the trust of not only many athletes across many sports, but also from the biggest sports governing body. In 1970 they provided FIFA with the official match ball for the FIFA World Cup tournament, and since then have provided every official match ball that followed (Adidas.com, 2017). In 2013, Adidas created a new cushioning technology in cooperation with the german chemical company BASF. This running shoe technology is called “boost” and not only provides supreme cushioning, it also returns energy back to the user for a one-of-a-kind running experience. Adidas has also been collaborating with important figures in pop culture creating trendsetting shoes and styles. Examples of this include, the Yeezy family of sneaker with Kanye West, and the NMD Human Race in conjunction with Pharrell Williams. Whether it is providing elite football players like Lionel Messi with top of the line boots to give them every edge possible, or working alongside great creative minds to produce the next wave of fashion. Adidas have always paved the way with innovative ideas and top of the line footwear-technology and continue to do so today (Adidas.com, 2017).
- Adidas started out in Bavaria, Germany. Founded by Adi Dassler, his business plan focused on providing athletes with the best possible equipment. With early success, such as making cleats for the german world cup champions, the company grew quickly. Over the years Adidas gained the trust of world class athletes by producing innovative products and getting personal feedback through working with the professional athletes one-on-one. As the new century started Adidas began to expand their product portfolio, but continuing to keep sports as their main focus. Adidas began to produce sport/streetwear, which is now a large part of their company. They are well known for their stylish apparel, sportswear, and their wide variety of shoes made for nearly every sport or activity (Adidas.com, 2017). Starting in 2015, Adidas began their new 5 year strategic marketing plan, “Creating the New.” Adidas predicts that this new marketing plan will speed up company growth by creating brand desirability. A large part of Adidas’ plan is to market with confidence and creativity. In order to do this they must research each culture and their trends. Fact file: from Adidas .com, “Adidas produces approximately 60 new footwear designs each year” (Haig, 2011, Pg.12). By “Creating the New,” Adidas is also working towards diversifying its workforce, hoping to bring forth different ideas, strengths, interests and cultural backgrounds. This helps fulfil the demands of customers all around the world. Adidas is also putting more focus on speed. Adidas wants to make sure that customers can get the products made quickly, in order to improve the customer’s overall brand experience. Improving the company's speed brings many advantages against competitors. According to Wired magazine adidas is making a robot powered factory in Europe, “Speedfactory, Adidas claimed, was “reinventing manufacturing” (Wiener, 2017). Adding factories in Europe, would also increase speed, and lower manufacturing in third world countries. This is still in early stages, but is just one area of innovation that Adidas is improving in as a brand. Benefits of Adidas new “Creating the New” marketing strategy include, improved product availability (which ensures faster delivery) and decreased risk (by creating more relevant products) making overbuying and end-season cleanup less damaging. Also, constant innovation, which helps capture higher demand with shorter lead-time, and advising seasonal products successes going out of stock (Adidas.com, 2017). Adidas over the years has not lost its main focus of sport and knows sport is a highly attractive role in people's lives. “The sport performance division is the bulk of Adidas market, representing 70 percent of overall sales. Sport heritage is currently at around 25 per cent and sport style at 5 per cent” (Haig, 2011, Pg.11). Through sport they innovate and improve products, in order to improve people's lives. With a major focus on brand desire and improved products, Adidas, resting at number two, hopes to become the number one sport brand in the market (Adidas, 2017).
- The purpose of this study is to investigate how well Adidas competes with other brands on quality, innovation, and social responsibility. We will analyze how these elements impact their financial expenditures. Furthermore, we will explore ways Adidas can expand and continue to be a leader in athletic footwear.
- Products Adidas has a very unique portfolio of brands and products. However, according to the Adidas Group their cores brands include Adidas and Reebok, “Our core brands – Adidas and Reebok – have strong identities in sport. Adidas appeals to athletes and Reebok focuses on the fitness consumer” (Adidas.com, 2017). Adidas has come out with many innovative and robust products starting with athletic footwear in 1949. Athletic footwear continues to be the major product of Adidas. According to Dennis Green (Business Insider, 2017), “Adidas’s hottest shoes, like Ultra Boost, Alpha Boost, and Pure Boost, have driven much of the growth, along with retro looks like the Stan Smith.” Adidas is also widely known for their athletic apparel and accessories. In 1967, when Adidas announced the Franz Beckenbauer tracksuit, “it became the first piece of apparel for Adidas and opened a whole new business” (Adidas.com, 2017). Adidas did not stop at athletic-wear either. In 1986 Adidas was the first sporting goods industry to advertise their brand for street fashion as well as an athletic brand. Today, the Adidas brand offers apparel and footwear for every sport, every fashion and every style. Adidas focus with their products is to produce innovative products that provide athletes with the best equipment to improve their game. The founder of Adidas’, Adi Dassler, secret to success was to meet with athletes and “listen carefully to what they said and constantly observed what can be improved or even invented to support their needs” (Adidas.com, 2017). Today, this is defined by the company as Open Sourcing which is a mindset based on creativity, collaboration and confidence. Open Sourcing is about having conversations between the brand, external experts and consumers and giving them the chance to have an impact in the decisions made by Adidas (Adidas.com, 2017). Prices Due to Adidas’ innovations and continuous product improvement which leads to top notch performance, all the Adidas products are premium priced. Adidas mainly uses competitive pricing keeping in mind competitors like Nike, Callaway and Puma. According to Kotler and Armstrong (2017), competition-based pricing is, “setting prices based on competitors’ strategies, prices, costs, and market offerings” (p.308). Competitive pricing is necessary in order to become the dominant business “If you aiming for the dominant position, you want to reduce the complexity for customers of comparing your product with the opposition. Try to match the format, the position and promotion and make clear what your advantages are without differentiating too much” (Caldwell, 2012, Pg. 46, 47). Because of constant innovation and making trendy products, product life cycle less problematic for Adidas “Price and strategy depend upon whether the product is radically new, or if it is an improvement of an existing one. The high cost of researching and developing new products is an important issue in each case; these factors will decisively influence the prices set” (Lopez, 2014, Pg. 37). By setting new trends Adidas is able to make their starting price high, and by not over producing, the downfall in price and relevance towards the end of the cycle causes less of a negative impact towards the company. However, when introducing a new and uniquely designed product into the market Adidas uses price skimming. Price skimming is setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales” (Kotler & Armstrong, 2017, Pg. 325). One of Adidas most popular shoes is their Ultra Boost which cost about $250. We believe that Adidas also uses psychological pricing. “In using psychological pricing, sellers consider the psychology of prices, not simply the economics. For example, consumers usually perceive higher-priced products as having higher quality” (Kotler & Armstrong, 2017, Pg. 329). Psychological pricing also explains why Adidas never uses penetrative pricing, because that would affect the brand equity of Adidas. Social Responsibility Alan Murray (2010), Deputy Managing Editor for the Wall Street Journal, writes in The Wall Street Journal Essential Guide to Management that given the conundrums of executive excess throughout the last decade, executives are increasingly emphasizing ethical standards. Emphasizing ethics “makes your customers more willing to buy from you, your employees more willing to work for you, and ultimately adds to your bottom line” (Murray, 2010, Pg. 160). As far as corporate social responsibility goes, Adidas is environmentally sustainable, socially ethical, and emphasises transparency. Some of the socially responsible achievements made just this past year include being listed fifth in the 'Global 100 Most Sustainable Corporations in the World,' launching a new sustainability strategy, going plastic-bag free in all stores, and creating a new shoe promoting sustainable oceans (Adidas, 2017). According to Adidas (2017), the company follows strict ethical standards for factory workers. Adidas goes far beyond the typical textile expectations, by understanding that every worker deserves a living wage. Meaning, not only enough to purchase the necessities of life, but to actually have a comfortable life. According to Adidas, it has its own internal team for assessing how well suppliers comply with a specific supply chain code of conduct. To remain impartial, every team values transparency and stakeholder feedback, while providing regular reports for compliance work. Furthermore, Adidas submits programs to public reporting by the Fair Labor Association (FLA), demonstrating the significance of transparency (Adidas, 2017). Place Adidas has made its products available around the world through various distribution channels. Adidas has its own exclusive stores in which the material is provided directly from the company. Also, many multi brand showrooms will also have Adidas apparel and footwear on display. These multi brand showrooms get the products from a distributor. The third and most up and coming mode of distribution for Adidas is online. The products are sold through online medium via fashion stores and the online website of Adidas. The head of the Adidas North America Mark King, told writer for Business Insider Dennis Green, an important piece of their marketing strategy is to “follow the customer” online and treat ecommerce with the respect it deserves (2017). Along with that, the high demand for online shopping has led Adidas to create a brand-new shopping app for their customer base. Promotion and Advertising Budgets Adidas endorses and promotes itself through media. According to Karen Gilchrist (CNBC, 2017), the CEO of Adidas is focusing on their marketing efforts on digital and social channels in order to target younger potential customers. In addition, Adidas is targeting $4.3 billion in sales solely through online channels in 2020. The creative team of Adidas is known to pump adrenaline in their customers through their well thought out advertisements. In 2004, the tagline for Adidas was “Impossible is nothing,” today the tagline for Adidas is “Creating the New.” Both taglines demonstrate defying the odds and that is exactly the message Adidas executes. Product placement is also a very important promotion strategy for Adidas. The Adidas Group ties up with the top players across the world such as Lionel Messi, Ronaldinho, Sachin Tendulkar and various others. Adidas also sponsors teams and some of the top teams include Real Madrid, France, Great Britain (in football), England and South Africa (in cricket) and several others. Along with players and teams in real life, Adidas is featured in various game advertisements like Sony Playstation, etc. Well-known celebrities also play a role in Adidas success – especially in the fashion world. Brand buzzers for Adidas include, Kylie Jenner, Gigi Hadid, Dakota Fanning, Emma Roberts and more. In Kanye West’s most recent collaboration with Adidas, he would publically wear pairs of unreleased YEEZY sneakers, generating buzz for the soon to be released Adidas Waverunner 700’s and the company. Even in the past Icons wore Adidas, helping tremendously with brand awareness and advertising. “Adidas shoes were worn in the Olympics as early as 1928. Athletes loved them. Indeed, athletic performance seemed to improve visibly with the arrival of Adidas. When Jesse owens dazzled the crowd (and dismayed furious Hitler) by winning four gold medals”( Haig, 2011, p.10). All of these techniques make sure that the legendary Adidas brand remains in everyone’s mind, the brand awareness is increased and the target customers can be retained and attracted easily. Market Strategy According to Thomas Hobbs (2016, Marketing Week), Adidas has three major objectives for the future marketing strategy, as it relates to distribution channels. Those three objectives are focusing on speed enabling products, marketing in six major cities, and building a closer relationship with celebrities. Focusing on speed-enabling products involves completely redesigning the entire Adidas business model, “from range planning to product creation, sourcing, supply chain, go-to-market and sales, as it looks to ‘significantly improve its speed-to-market’” (Hobbs, 2016). This shift will involve reducing products that are less successful, and focussing on what consumers want. According to Hobbs, Adidas plans to refocus all marketing efforts toward New York, Shanghai, Paris, Tokyo, Los Angeles and London. This refocus works very well with the online marketing improvements discussed earlier in our research. Now Adidas is focussing mayor efforts at the “50% of the global population currently living in cities and 80% of global GDP is generated in metropolitan areas” (Hobbs, 2016). While also improving online marketing to reach the rest of consumers who do not live in those six cities. Adidas has recently began collaborating with famous rap artist Kanye West. While decisions like this may be controversial, the brand has expressed interest in working with other celebrity endorsements in the future to redesign the idea of athleticism (Hobbs, 2016). Furthermore, reaching out to celebrity endorsements can mean big business for the brand, even an act as simple as tweeting “about the brand can add instant interest to the message” (Kotler & Armstrong, 2016, p. 435). Competitors With Callaway and Puma closely behind, Adidas and Under Armour are competing for Nikes spot as the frontrunner of sportswear. However, according to Ahiza Garcia from CNN, Adidas’ has had a good year thriving while the competitors struggle. “Adidas brand sales in North America are up 31% thanks to an emphasis on expanding and investing in the U.S.” (Gracia, 2017). In addition to Adidas’ long term success internationally, this new support in the U.S. market has only made the company more competitive. Mark King, president of Adidas North America, emphasized how successful marketing in America is a major element for athletic footwear to CNN, "Trends, media attention, just overall hype around sports, the epicenter is America" (Gracia, 2017). Despite success in America, Adidas is still leaps and bounds behind Nike. According to Gracia, “Adidas reported about $1.3 billion in North American sales this quarter -- including sales from Reebok. Nike had $3.9 billion in sales for the quarter” (2017). In order to close this gap further, Adidas should continue to follow the current marketing strategy described earlier in our research. Focussing marketing toward those six major cities, while investing in speed enabling products, and collaborating with celebrities, will strengthen Adidas connection in the U.S. and internationally.
- Adidas is seemingly unmatched when it comes to product quality and innovation. From our research, it shows that Adidas is incredibly dedicated to producing high quality products, but also with cutting technology. A clear example of this is Adidas’ boost technology, which provides the highest energy return in the running industry. This show Adidas’ drive to make athletes better, just like Adi Dassler did many years ago. This technology quickly grew popular among people not only in the running community, but to many outside of it as well. So much so, that the Ultra Boost running sneaker is commonly sold out in desirable colorways. This leads to them being then resold at a marked up price. Talking about price, in our findings we can see adidas use competitive pricing, especially when operating under the “adidas” branch. For example the aforementioned Ultra Boost retails anywhere from $180-$250. This is a competitive price for the market, reason being that Adidas creates advanced, quality products. This forces competitors like Nike to create competitive market offerings, which naturally brings the market price up. Every great business should be a great contributor to society’s well-being. Adidas is an outstanding example of a social organization. In their manufacturing plants around the world they make certain that every employee has a livable wage. Not only being able to purchase necessities of life, but to live comfortably. This is an example for how every company should operate, prioritizing people over profits.
- In searching for answers to our research, we browsed the internet to use credible web sources such as Adidas’ corporate website. Their corporate website was the most helpful and insightful online resource. Online-based text was just half of the data we collected, also pouring through physical texts in order to support our points and relate the content back to what we had learned in class. All of this was combined with making the utmost certainty that our data was accurate and relevant to our research.
- Adidas strives to rise to the top in the very competitive athletic industry despite the tough competition of Nike. Adidas has come a long way since Adi’s football boots with screw in studs and has well established relationships with top athletes around the world. Today, Adidas focuses innovating and improving products while working with experts and consumers one-on-one. In order to keep up with competition, it is crucial for Adidas to continually innovate and produce new products. Adidas is also focused on targeting a younger demographic through digital and social media marketing. Another focus point for Adidas has been working on building relationships with celebrity opinionators. In order to affiliate with the younger demographic and the fashion world we believe it is crucial that Adidas builds strong relationships with positive and powerful celebrities. We also believe that it is important for Adidas to continually improve and advertise what they are providing for their social responsibility. Members of our society love to associate themselves with companies who “give back” and “do positive” things for the world and their employees.