Nike Marketing Analysis


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Nike Marketing Analysis

  1. 1. MA Sports Management Philip Barnes Sports Marketing Panoramas Case Study Analysis Nike Incorporated Contents1. IntroductionSection 1.1: History, Development & Growth of the Company Page No. 2 1.2: Purpose of Case Study Analysis 22. Marketing ActivitySection 2.1: Brand Image 2 2.2: Marketing Mix 3 2.3: Strengths & Weaknesses, SWOT, PESTEL Analysis 4 2.4: Ambush Marketing 5 2.5: Awareness of Consumer Preferences 63. Recommendations and ConclusionSection 3.1: Formula One 7 3.2: Ansoff’s Matrix 7 3.3: Conclusion 84. BibliographySection 4.1: References 9 4.2: Appendix 11 Page No. 1
  2. 2. MA Sports Management Philip Barnes Section 1 - Introduction1.1. Nike was the ‘Goddess of Victory’ in ancient Greek mythology. Athlete runner Philip Knight and his coach, Bill Bowerman, were inspired by the myth and re-named their small sportswear company Nike in 1978. Since then, the business has grown phenomenally1 pursuing ‘differing advertising strategies within its various markets, while at the same time striving to communicate an identical brand identity worldwide (Von Borries 2004, p.19).’ The essence of the business involves the ‘design, development and worldwide marketing of high quality footwear, apparel, equipment, and accessory products (Nike Inc Annual Report (AR) 2008).’1.2. Nike’s worldwide marketing strategy is pursued in a creative, cyclic, interactive (Volmer & Precourt 2008) and occasionally aggressive (Mullin, Hardy & Sutton 2007) way with the slogan ‘Just Do It’ and the iconic ‘Swoosh.’ They have truly evolved into a ‘marketing behemoth (Goldman & Papson 1998, p.4).’ This study will critically assess their marketing activity providing recommendations for strategic change to ensure they maintain and further their success. An interesting question remains; is Nike, the market leader, also the marketing leader? Section 2 – Marketing Activities2.1. Deng (2009) suggests that Nike’s marketing strategy rests on a superior brand image; according to branding consultancy Interbrand, the Swoosh was the 28th most popular brand worldwide in 2008, ‘as recognizable as Mickey Mouse (Mullin, Hardy & Sutton 2007, p.162).’ The author suggests that the image maintains its prominence due to the Company’s great investment in advertising and brand promotion. To the customer this distinctive brand image represents good value and a correlation with high quality modern sports products whilst the brand presents a barrier to competition and profitability for Nike.1 Revenue of $18.627 billion in 2008 Page No. 2
  3. 3. MA Sports Management Philip Barnes Beech & Chadwick (2007, p.231) suggest that a Nike advertisement is ‘immediately recognisable by the Swoosh, and there is no need for the Company to include the name as well.’ However, Goldman & Papson (1998) warn of overexposure, ‘overswooshification,’ where the more common the sign becomes the less value it holds. Nike responded by redesigning their branding strategy using terms like NikeID, Nike+ and most recently Nike5. Von Borries (2004) raises another concern using the terms ‘brand sabotage’ and ‘Swooshtika.’ The latter derogatory term represents the powerful hegemony the business has in global marketing, where an illustrative swastika made up of brand ‘Swooshes (See Figure 1)’ attempts to conjure an image of a conditioned consumer society. Figure 1 - Swooshtika: Just Do it!2.2. A strong marketing mix is important for an organization to thrive; it will help match customers’ needs with Nike’s product range, helping create a competitive advantage. McCarthy’s (1964) framework is undoubtedly the most popular form of measuring and controlling marketing elements, with four key strands; product, price, promotion and place. • Product: As already mentioned, Nike offers a diverse range of high quality sporting goods. They recently collaborated with Ipod to produce a Nike+ product, a strategic alliance with such high potency that it facilitated the pooling of marketing skills, consumer preferences, innovation and technology (Varadarajan & Cunningham 1995; Farrelly & Quester 2005). Page No. 3
  4. 4. MA Sports Management Philip Barnes Price: A premium product commands a premium price, whilst the Company also compete heavily with their main rival Adidas; according to Beech & Chadwick (2007, p.231) both companies can impose such cost on the consumer due to the ‘association of their brands with successful sports or organisations.’ Promotion: The business has a rich history and bright future using sponsorship to generate brand authenticity in their markets. Nike sees advertising as ‘a vehicle for articulating a brand’s sign value (Goldman & Papson 1998, p.2).’ Currently they sponsor a wide range of elite sporting players worldwide including Tiger Woods, Ronaldinho and Rafael Nadal; however one has to question whether poor performance or injury (See Section 2.4) can damage potential marketing success as there is no apparent literature regarding this impact. Place: Nike is a truly global corporation seeking to further segment its current markets and increase its impact in China, Russia, Brazil and India in particular (AR 2007).2.3. For a company to realise and achieve their marketing goals and objectives it is essential they undertake thorough planning (Jobber 2007; Schwarz & Hunter 2008; Kotler 2009). This creates a framework for development, sets performance expectations and encourages the organisation to plan towards the future. Prior to even contemplating recommendations, we must further examine Nike’s marketing strategy in the form of a SWOT and PESTEL Analysis (Appendix 1 and 2). A legal threat to the Company was identified as being the ‘Sweat Shop’ working conditions which have been criticised worldwide (See Figure 2). Page No. 4
  5. 5. MA Sports Management Philip Barnes Figure 2 – Sweat Shop Internet Campaign Such campaigns have the potential to damage Nike’s marketing activity and general business success; however its impact is hard to measure and little literature is available on the area. For Nike to improve its image, it must continue to work with the charity ‘No Sweat’ and perhaps inform their consumers on the changes they have made to create better working conditions.2.4. According to Tripodi & Sutherland (2000, p.412), ambush marketing is an Olympic event; ‘perhaps the premier place for companies to showcase their brand(s).’ Taking the Beijing 2008 Olympic Games as a prime example, Herbert Hainer said in 2007 ‘the Olympic Games will be an Adidas event;’ Adidas paid an estimated $100 million to win the Beijing Olympics sponsorship. However in a slightly controversial manner, Nike opened its first Chinese retail store in Beijing, used high profile Chinese athlete Liu Xiang in advertisements (both before and after he got injured and withdrew from the games)2 and made subliminal Olympic references in coloured shoes and ‘innocent’ wishes of good luck to the American Olympic teams (Figure 3).2 An advert showing Liu Xiang hurdling to 1st place was withdrawn after the athlete got injured andcouldn’t participate. A follow up marketing campaign ensued: Love the Glory, Love the Pain. Nike. Page No. 5
  6. 6. MA Sports Management Philip Barnes Figure 3 – Olympic ‘Good Luck’ Gesture Ambush marketing is an attempt by corporations to mislead the public into believing that they are supporting a sports event (Meenaghan 1994; Retsky 1996; Payne 1998). Nike succeeded in creating a connection in consumers’ minds between its brand and the Beijing Olympics, counteracting their main rival’s substantial investment. Shani & Sandler (1998) even suggest that ambush marketers often surpass official sponsors’ marketing impact. Despite Nike being very creative at ambushing sports events, the unethical aura surrounding the topic could spread to consumers who could become more aware of such attempts, whereas their actions may devalue sports sponsorship as a whole. In addition the UK Government is preparing a law that will prevent any business making reference to the 2012 Olympics in its promotions, unless it is an official sponsor, therefore Nike must diversify their marketing strategy. A threat is also apparent that other companies may ambush events Nike may sponsor, thus perhaps they should stand up and pioneer a code of ethics to ensure sports sponsorship remains ‘an international communication tool of commerce (Wise & Miles 1997, p.418).’2.5. One threat identified was losing awareness of consumer preferences. ‘Failure to respond to shifting trends and customer preferences in a timely and adequate manner could have an adverse effect on our sales and profitability; Page No. 6
  7. 7. MA Sports Management Philip Barnes this is a continuing risk (AR 2008).’ Nike emphasise the importance of relationship marketing, exchanges between parties in the marketplace or on the internet (Grönroos 2000), where the business improves its knowledge on, develops and strengthens relationships with loyal/new consumers. A good example of the application of this strategy was through the ‘Nike Human Race3,’ which was “coincidentally” held seven days after Beijing 2008 to profit from and re-stimulate the Olympic afterglow. Nike’s strategy made watching the Olympics a much less exciting prospect than actually participating in a global sporting event where athletes could join an online community and compare, compete with and challenge each other; a strategy that ‘spoke directly to the consumers with whom Nike most wanted to build relationships, with a precision and intimacy not available in television or print ads (Vollmer & Precourt 2008, p.3).’ Section 3 - Recommendations3.1. Formula One draws an incredible estimated 6 billion television viewers per season as opposed to the Beijing Olympic Games attracting 4.7 billion. According to global market research group Mintel (2009), the British nation are gripped by the ‘Lewis Hamilton effect’ with over 55% of women watching races on the television compared to 75% of men; thus an incredible platform to target a large mixed population. China has now become the sports biggest audience with a total of 119m watching the races during the season, whilst India and Russia are also strong followers and a move into the sport could help Nike make an even greater impact in these markets.3.2. Ansoff’s matrix (1979) is a tool that helps identify five key growth areas for Nike’s product and market strategic direction (Appendix 3);  Market Penetration – Increased relationship marketing and segmentation to maximise consumer satisfaction (Mullin, Hardy & Sutton 2007)3 Nike Human Race – 1 Day Event Featuring 1 Million Runners competing in 24 Cities Worldwide. Page No. 7
  8. 8. MA Sports Management Philip Barnes  Product Development – Relationship marketing can have the most impact in the market by giving consumers what products they want and appealing to customers’ physical and psychological needs (Deng 2009)  New Market – China, Russia, India & Brazil all potential ‘multi billion dollar markets (AR 2008)  Market Development – Formula One will increase Nike’s presence in these new markets with China and Brazil hosting races and India represented on the grid with Force India Racing Team.  Diversification – Such diversification into the unknown can constitute ‘real strategic growth by providing entry into a new market (Thompson 2001, p.569).’ An element of high risk exists where a product and market are unknown thus high quality research is mandatory for success according to Shank (2009).3.3. It is no coincidence that Nike, the market leader for sportswear products, is also the marketing leader in terms of innovation, creativity and brand awareness. They have an almost impeccable brand image which links a top product with a high price; however they need to be aware of overexposure, an ambush marketing backlash and criticisms of their factories’ working conditions. Apart from these threats, Nike is a perfect example of marketing best practise, ‘moving from the flash of a brilliant tagline and a memorable logo to a focus on consumer experiences (Vollmer & Precourt 2008, p.4).’ There are great opportunities for future growth worldwide and Nike have the capability, motivation and strength to diversify further; as Philip Knight suggests, ‘we invent markets (AR 2000).’ Page No. 8
  9. 9. MA Sports Management Philip Barnes ReferencesAnsoff, H.I. (1979) Strategic Issue Management. Strategic Management Journal,1(2):131-148Beech, J.G., Chadwick, S. (2007) The Marketing of Sport. London: Pearson.Beech, J.G., Chadwick, S. (2007) The Marketing of Sport. London: Pearson.Deng, T. (2009) “Just Done It” – Nikes New Advertising Plan Facing GlobalEconomic Crisis. International Journal of Business and Management, 4(3):102-105)Farrelly, F., Quester, P. (2005) Investigating Large-Scale Sponsorship Relationshipsas Co-Marketing Alliances. Business Horizons, 48(1):55-62Goldman, R., Papson, S. (1998) Nike Culture. London: SAGE.Grönroos, C. (2000) Service Management and Marketing, Chichester: John Wiley &SonsInterbrand. (2008) Best Global Brands. [Online]. Available: [15th March 2009]Jobber, D. (2007) Principles and Practice of Marketing. Maidenhead: McGraw-Hill.Kotler, P. (2009) Marketing Management. London: Prentice Hall.McCarthy, E.J. (1964) Basic Marketing: A Managerial Approach. Homewood:Richard Irwin Inc.Meenaghan, T. (1994) Ambush Marketing: Immoral or Imaginative Practice? Journalof Advertising Research, 34(5):77-88Mintel. (2009) Nation Gripped By “The Lewis Hamilton Effect.” [Online]. Available: [24th March 2009]Mullin, B.J., Hardy, S., Sutton, W.A. (2007) Sport Marketing. Leeds: HumanKinetics.Nike Inc. (Various Years) Annual Reports. Oregon: NIKE Inc.Payne, M. (1998) Ambush Marketing: The Undeserved Advantage. Psychology andMarketing, 15(4):323-331Retsky, M.L. (1996) One Person’s ambush is Another’s Free Speech. MarketingNews, 30(14):14-25Schwarz, E., Hunter, J. (2008) Advanced Theory and Practice in Sport Marketing.Oxford: Butterworth-Heinemann. Page No. 9
  10. 10. MA Sports Management Philip BarnesShani, D., Sandler, D.M. (1998) Ambush Marketing: Is Confusion to Blame for theFlickering of the Flame? Psychology & Marketing, 15(4):367-383Shank, M.D. (2009) Sports Marketing: A Strategic Perspective. New Jersey: PrenticeHall.Toolness. (2009) Sweatshops. [Online]. Available:[24th March 2009]Varadarajan, P.R., Cunningham, M.H. (1995) Strategic Alliances: A Synthesis ofConceptual Foundations. Journal of the Academy of Marketing Science,23(4):282-296Vollmer, C., Precourt, G. (2008) Always On. Maidenhead: McGraw-Hill Professional.Von Borries, F. (2004) Who’s Afraid of Niketown? Rotterdam: Episode Publishers.Wise, S.L., Miles, M.P. (1997) Corporate Sponsorship of Events and TaxImplications: Is there an Opportunity for Global Co-ordination? InternationalMarketing Review, 14(3):183-195 Page No. 10
  11. 11. MA Sports Management Philip Barnes Appendix Appendix 1 – SWOT Analysis Strengths Weaknesses• Innovative Design & • Overexposure Technology • Reliant on Retail Stores?• Market Leader • Reputation – Sweat Shops• High Quality Products • Underperformance of Sponsored Stars• Strong Sponsorships• Long History• Ambush Marketing• Strong Subsidiaries & Staff• Distribution Proficiency Opportunities Threats• Motorsport • Competitors• Research & Innovation • Fashion Trends• Nike ID in Shops • Losing Awareness of Consumer• Ultra Global Preferences• Ambush Marketing • Ambush Marketing• South Africa 2010, London 2012 • Intellectual Property – Mimic/Copy Appendix 2 – PESTEL Analysis Political Economic Socio-Cultural• Striking Workforce • ‘Credit Crunch’ • Fashion Trends• Political Unrest Global Recession • Increase in Female• Terrorism • Consumer Choice – Participation• Work Conditions Limited to Value • Diverse Range to • Increased Suit Consumer’s Manufacturing Costs Style Technological Environmental/Ethical Legal• Perishable Product in a • Recycling? • ‘Sweat Shop’ Time of Constant • Sustainable Business Employment Innovation • Climate Change • Ambush Marketing• Research Capabilities• Contemporary Marketing Campaigns Page No. 11
  12. 12. MA Sports Management Philip Barnes Appendix 3 – Ansoff Matrix (1979) Page No. 12