How the legendary brand blew up its single-slogan approach and drafted a new playbook for the digita...

1. Nike’s new marketing mojo
How the legendary brand blew up its single-slogan approach and drafted a new playbook for the
digital era.
Few outsiders have visited the third floor of the Jerry Rice Building at Nike's headquarters. Even
most Nike employees know little about just what the staffers working here, on the north side of the
company's 192-acre campus in Beaverton, Ore., actually do. A sign on the main entrance reads
RESTRICTED AREA: WE HEAR YOU KNOCKING, WE CAN'T LET YOU IN, and it's only partly in jest.
Inside, clusters of five or six employees huddle in side conference rooms where equations cover
whiteboard walls. There are engineers and scientists with pedigrees from MIT and Apple. Leaks are
tightly controlled; a public relations man jumps in front of a visitor who gazes at the computer
screens for a little too long.
Once upon a time, the hush-hush plans and special-access security clearance would have been about
some cutting-edge sneaker technology: the discovery of a new kind of foam-blown polyurethane, say,
or some other breakthrough in cushioning science. But the employees in this lab aren't making
shoes or clothes. They're quietly engineering a revolution in marketing.
This hive is the home of Nike Digital Sport, a new division the company launched in 2010. On one
level, it aims to develop devices and technologies that allow users to track their personal statistics in
any sport in which they participate. Its best-known product is the Nike+ running sensor, the
blockbuster performance-tracking tool developed with Apple AAPL . Some 5 million runners now log
on to Nike NKE to check their performance. Last month Digital Sport released its first major follow-
up product, a wristband that tracks energy output called the FuelBand.
But Digital Sport is not just about creating must-have sports gadgets. Getting so close to its
consumers' data holds exceptional promise for one of the world's greatest marketers: It means it can
follow them, build an online community for them, and forge a tighter relationship with them than
ever before. It's part of a bigger, broader effort to shift the bulk of Nike's marketing efforts into the

2. digital realm -- and it marks the biggest change in Beaverton since the creation of just do it, or even
since a graphic design student at Portland State University put pen to paper and created the
Swoosh.
Nike's new digital
hook: the Nike+ logo; the new Nike FuelBand; and the Nike+ SportWatch GPS
Just try to recall the last couple of Nike commercials you saw on television. Don't be surprised when
you can't. Nike's spending on TV and print advertising in the U.S. has dropped by 40% in just three
years, even as its total marketing budget has steadily climbed upward to hit a record $2.4 billion last
year. "There's barely any media advertising these days for Nike," says Brian Collins, a brand
consultant and longtime Madison Avenue creative executive.
Gone is the reliance on top-down campaigns celebrating a single hit -- whether a star like Tiger
Woods, a signature shoe like the Air Force 1, or send-ups like Bo Jackson's 'Bo Knows' commercials
from the late '80s that sold the entire brand in one fell Swoosh. In their place is a whole new
repertoire of interactive elements that let Nike communicate directly with its consumers, whether
it's a performance-tracking wristband, a 30-story billboard in Johannesburg that posts fan headlines
from Twitter, or a major commercial shot by an Oscar-nominated director that makes its debut not
on primetime television but on Facebook. Says Jon Bond, co-founder of Kirshenbaum Bond Senecal
Partners who now runs a social media agency: "Clearly they think they can get by without big
television campaigns anymore."
The reason for the shift is simple: Nike is going where its customer is. And its core customer, a 17-
year-old who spends 20% more on shoes than his adult counterparts, has given up television to skip
across myriad online communities. Not only does Nike think it can do without the mega-TV
campaigns of old, it says the digital world allows the brand to interact even more closely with its
consumers -- maybe as closely as it did in its early days, when founder Phil Knight sold track shoes
out of his car in the 1960s. That's a major change, Nike CEO Mark Parker explained to Fortune
during a recent interview in his tchotchke-filled office in Beaverton. "Connecting used to be, 'Here's
some product, and here's some advertising. We hope you like it,' " he says. "Connecting today is a
dialogue."

3. Of course, it's impossible these days to find a Fortune 500 company without an app or a social media
strategy. But Nike has been lapping other blue-chip marketers in this domain: It spent nearly $800
million on 'nontraditional' advertising in 2010, according to Advertising Age estimates, a greater
percentage of its U.S. advertising budget than any other top 100 U.S. advertiser. (And Nike's latest
filings indicate that that figure will grow in 2011.) It's hired scores of new engineers to make
technology for online communities (Digital Sport has grown from 100 to 200 employees in the past
six months and has moved into a larger space on the outskirts of campus). And the brand has
overhauled its $100 million-plus campaigns around major events like the World Cup and Olympics to
focus on online campaigns first. The result? Before, the biggest audience Nike had on any given day
was when 200 million tuned in to the Super Bowl. Now, across all its sites and social media
communities, it can hit that figure any day.
That's all the more impressive given that Nike shouldn't be good at this. After a decade of growth, its
sales have reached $21 billion, making it the world's largest sports company, a full 30% bigger than
closest rival Adidas. But biggest is rarely best in the brand game, where niche players routinely run
circles around lumbering giants, especially in the new digital world. Hot upstarts like Under Armour
UA and Lululemon LULU have established fast-growing, cultlike followings, while smaller players
like Quiksilver ZQK and Vans are already going after next-generation tweens. Even Adidas's 2006
merger with Reebok has created a new formidable global foe.
None of this is lost on Parker. "My fear was that we would be this big blood bank of a company that
was dabbling across all these areas and wasn't seen as cool, as interesting, as relevant, as
innovative," he says. Not too long ago Parker sketched a big Swoosh being eaten by a dozen Pac-
Men to demonstrate how easily competitors could overtake Nike.
Just market it: 7 of Nike's notable campaigns
Like almost every large company, Nike stumbled early in the digital world. In the late '90s it
celebrated the start of NCAA March Madness on its home page in every country. Europeans had no
idea what was going on. But it improved over the years. Around 2005 its then-revolutionary Nike iD
online store, where customers could design their own shoes, became a surprise hit, reaching $100
million in sales within a few years.
In 2006 it started experimenting with social networking and online communities, partnering with
Google GOOG for a World Cup-related social network called Joga. Then came Nike+. After Nike
engineers started noticing everyone on the Oregon campus using iPods, teams at Nike and Apple
met to hash out a simple idea: synchronize jogging data with an iPod. Steve Jobs loved the idea
(Apple CEO Tim Cook serves on Nike's board, but Parker also had a good relationship with Jobs).
Powered by a sensor inside running shoes, the service both monitors a runner's performance and
provides digital coaching. A voice lets runners know how much farther they have to go; the

4. PowerSong function generates a musical blast for extra motivation. At the end, it logs details of the
workout onto Nikeplus.com, where users can store and analyze the data, get training tips, and share
workouts with friends. Whereas Nike's digital campaigns communicate the brand image, the Nike+
platform creates an intimate conversation and a laboratory that lets the company study its
customers' behaviors and patterns. The company won't offer financial details about Nike+, but
analysts say the 55% growth in membership last year was important in driving sales in its running
division up 30%, to $2.8 billion.
Two years ago a group including Stefan Olander, 44, a longtime marketing executive (and Matthew
McConaughey look-alike) formally pitched Parker on the idea for Digital Sport, a cross-category
division that would take the Nike+ idea -- chip-enabled customer loyalty -- into other sports. Up and
running a month later, the Digital Sport division now works across all of Nike's major sports.
A massive digital billboard in Johannesburg asked
fans to submit messages.
For all its success, though, a follow-up blockbuster to Nike+ has been elusive. The company has high
hopes for the FuelBand, a $149 wristband that measures movement and calculates its user's
exertion levels throughout the course of the day. Like Nike+, users sync to the Nike platform online
to analyze their results. At the FuelBand's official unveiling in Manhattan -- a splashy event emceed
by Jimmy Fallon -- Parker compared it to the launch of Nike Air or the first Air Jordan shoe.
While Digital Sport is crafting gizmos, Nike has also been revamping its giant advertising bursts
around major events like the World Cup and Olympics. The highlight of its 2010 World Cup
campaign, for instance, was a commercial produced by Nike ad agency Wieden + Kennedy and shot
by Babel director Alejandro González Iñárritu. Called "Write the Future," the ad featured Nike
soccer stars Wayne Rooney and Christano Ronaldo imagining the riches that come with winning the
cup. But instead of making its debut on-air, the ad launched on Nike Football's Facebook page.
Wieden and other agencies spent months cultivating a base of 1 million "fans" and teasing the ad's
debut. When it aired, it whizzed around blogs and wall posts at warp speed, gathering 8 million
views in a week to set a viral-video record.
For decades Nike's closest partner in reaching the masses was Wieden + Kennedy, the famously hip
place whose 30-year collaboration with Nike is one of advertising's longest and most prolific. But
Nike's digital shift has had reverberations here too. In 2000, Wieden handled all of Nike's estimated
$350 million in U.S. billings. Now those campaigns are increasingly split between Wieden and a host
of other agencies that specialize in social media and new technologies. In a closely followed dustup
in 2007, Nike dropped Wieden from its running account reportedly because the agency was behind
in digital efforts. Wieden has added more digital positions to its Nike "platoon." (Wieden reclaimed

5. the running account just 13 months after losing it.) But it now splits billings with agencies like R/GA,
AKQA, and Mindshare. "Collaboration is the new thing," says Dan Sheniak, Wieden's global
communications planning director on Nike, maybe trying to look on the bright side.
Perhaps the biggest impact of Nike's shift falls to the people whose names adorn every building on
its campus: superstar athletes. Consider the controversies that Tiger Woods, Michael Vick, Lance
Armstrong, and LeBron James -- Nike endorsers all -- have sparked over the past five years. Industry
insiders say the effect is difficult to measure in the short term. But as the marketing mix becomes
less about hero worship and more about consumer-driven conversation, they say, Nike is insulating
itself from an era of athlete endorsements gone wrong. "Everybody's realized there's not the same
one-to-one relationship as in the past: When Jordan's hot, his shoes are hot," says a former Nike
executive. "I don't know if hero worship is the same as it used to be."
To be sure, marquee athletes haven't disappeared: Kobe Bryant is arguably the biggest sports
celebrity in China, Nike's second-largest market, and Michael Jordan's brand remains one of the
company's most powerful franchises. But for the first time in its history, Nike isn't wholly reliant on
a handful of superstars to move merchandise.
So is it working? Is Nike's massive digital push a true replacement for its marketing past? Its
unconventional approaches have won accolades from insiders. "They have their finger on the pulse
of what their customer is looking for," says David Carter, executive director of USC's Sports
Business Institute. Institutional investors who pay close heed to Nike's subtlest moves have voted in
favor of the changes: The company's stock has returned 120% over the past five years as the SP 500
index (SPX) has returned just 2.5%.
That's not to say everything has been a slam dunk. Nike shut down its Joga network after the last
World Cup game in 2006, confusing the million-plus members who'd signed up for it. Its Ballers
Network, meanwhile -- launched in 2008 as an app that let basketball players organize street games
-- recently had less than 300 users in the U.S.; a recent wall post was a teenager complaining he
couldn't get it to work. And critics say products like the FuelBand and Nike+, while dazzling, are
more about keeping Nike's retail prices high than innovating.
In public Nike executives will protest this characterization. But if running shoes continue flying off
the shelves, they won't blink at the criticism. That's exactly the kind of shrewd marketing attitude
that drove Nike's past success. After perfecting the art of big branding, it's moving on to a world in
which its consumers want to be told less and just do more. Which, when you think about it that way,
might not be such a big change after all.
This article is from the February 27, 2012 issue of Fortune.