Table of Contents
- Executive Summary
- Research Objective
- Statement of Research Problem
- Key Terms and Concepts
- Literature Review
- Brand Promotion: The Fitness Boom
- Celebrity Endorsement
- Flagship Store
- 2015 Global Strategy
- Discussion and Analysis
Case Study: Scott Bedbury and the BSM
Case Study: Michael Jordan/Air Jordan
Letter from CEO
This study has been undertaken to determine the efficacy of Nike’s brand promotions. Using the descriptive model of the qualitative method of inquiry, this paper has identified and explained five important and effective promotional tactics employed by the company through the years. It was found that, besides their individual merits and successes, the manner in which they have worked closely together has enabled the Nike brand to dominate the global consciousness, not just in terms of its association with the footwear or apparel industry but also in the sporting field as well. These tactics are: the role of Scott Bedbury and his Brand Strength Monitor or BSM; the exploitation of the Fitness Boom; Diversification; Sporting Events Sponsorship; Star Athletes’ Endorsements; the Flagship Store; and, its International Growth Strategy. The degree of control on these brands promotion strategies as well as the way they synchronize and complement has assured Nike’s dominance in its industry today.
Along with Coca-Cola, Disney, and Microsoft, the Nike brand name and the swoosh emblem are among the most well-known around the globe. Its goods are extremely effective, and the company is currently the market leader in its field. According to the most recent industry survey, Nike is well ahead of Adidas, its nearest rival, with 36 percent worldwide revenue compared to 21.8 percent for the latter. (2008, MSNBC) Willigan (2009) attributes most of Nike’s popularity to the reality that the company is a master identity maker, with phrases including “Bo Knows,” “Just Do It,” and “There Is No Finish Line”—among others—moving past advertisement and through public expression, highlighting the magnitude of Nike’s infiltration into many people’s consciousness and how it has developed.
Nike’s history demonstrates a development and emergence of a quintessential company. It was started by Philip Knight in his mother’s bathroom back in 1962 with the name Blue Ribbon Sports. From then until 1971, the “start-up” company was a fledgling player in the shoe industry. The year after, however, would radically change the fate of the shoe manufacturer. When William Bowerman, then a running coach at the University of Oregon, presented to Knight how a piece of malleable rubber on a waffle iron could actually enhance running performance, Knight took this presentation to heart, and Nike was born. Pinxten and Preckler (2006) chronicled this pivotal presentation:
By attaching such a cushioning piece of rubber to the sole of the shoes, they would become both lighter in weight and more durable. In twelve years sales rose from $2 million in 1972 to $919 million by 1984. (p13)
From the earliest stage of Nike’s history, promotions have been a fundamental part of its operations. This is best represented by the choice of Nike – the name of the Greek winged goddess of victory – as well as the swoosh logo, which, for its part, was designed largely for aesthetic purposes. This was, according to Gereffi and Korzeniewicz (1994), an innovative strategy instantly differing from, say, the Adidas logo, which though later became promotional, the distinctive three-stripes served mainly as a functional design as it provides additional bond between the upper and sole. (p254)
Nike would also adopt and maintain a strategy that would tie its name to major sporting events, such as collegiate sports championships. This is included in its major innovations in terms of marketing and distribution of its products. To quote Lechner and Boli:
Between 1976 and 1984, Nike was shaped by (and helped to shape) the “fitness boom” – the phenomenal growth of jogging, running and exercise as a common activity by millions of Americans. Nike was part of this phenomenon by implementing a strategy that involved the development of a vast and visible network of endorsement contracts with basketball, baseball, and football players and coaches. (p254-255)
The Activities of Nike – with its innovative brand promotions in tandem -with an impressive distribution network and control over subcontractors and production costs- have successfully enabled the company to capture the largest portion of the American market as well as the world. From $919 million in the 1980s, sales jumped to over $3 billion in 1991. (Pinxten and Preckler p13)
As per Nike’s outline of its products, the following are the categories in the context of the brand overview. As one will find, the categories are characterized by segmentation wherein products are specifically produced promoted to a particular niche market.
Action Sports – The Nike Brand’s fastest-growing division, which includes NIKE 6.0 and NIKE SB, is made of NIKE 6.0 and NIKE SB. By 2015, the company expects to have doubled its existing revenue of $390 million.
Athletic Training – began with the introduction of NIKE cross training more than 20 years ago. With core technologies including NIKE Pro base layer clothing and the Trainer 1 shoe, this $1.4 billion company continues to redefine success.
Basketball – began with the introduction of NIKE cross training more than 20 years ago. With core technologies including NIKE Pro base layer clothing and the Trainer 1 shoe, this $1.4 billion company continues to redefine success.
Football – with NIKE Brand Football revenue of approximately $1.7 billion, the Company is launching its largest-ever presence at a World Cup including new footwear, national team kits, and NIKE Football+.
Running – Nike’s initial category, which generates $2.1 billion in sales, continues to be the foundation of crucial technologies such as Flywire, Lunar Cushioning, and Nike+ enabled sneakers. With over 3 million active members, Nikeplus.com is the world’s biggest running party, and Lunar Glide aims to extend the category’s development potential.
Sportswear – With a market capitalization of $4.9 billion, the Company’s biggest category continues to use fresh performance concepts from the six sporting categories, as well as franchise brands like the Air Force 1 shoe (which sells 15 million pairs a year 25 years after its debut).
Women’s Training – A new wave of NIKE Free footwear – engineered to support the body and boost health by stimulating the heart – in concert with the Company’s best ever clothing portfolio continues to fuel momentum in this segment, with approximately $740 million in revenue and the number one spot in women’s training footwear in the top five European markets and the United States. (2010, Nike)
The above classification of Nike products is under the umbrella of the consolidated global strategy to further cement Nike’s leadership in the industry and achieve its target $27 billion revenue by 2015.
Statement of the Research Problem
In contrast to the majority of the big players in the apparel and associated sectors, Nike’s overall corporate approach – from product creation to distribution and promotions – is exceptional. An exclusive investigation of the organization’s case will yield an in-depth insight in regard to the innovative strategies that characterize not just the organization, but the whole industry today. And so, although a comparative study with other companies such as Adidas or an analysis of the entire industry holistically would unarguably reveal important strategic differences, focusing on Nike will have the benefit of comprehensively identifying specific innovations and the business model that have made Nike as a brand a success. In addition to this, wrote Lechner and Boli (2004), studying Nike’s strategy exclusively can highlight the relevance of the world systems and commodity chains theory as well as other significant dimensions, such as those important in the study of economic and social processes at a micro level of observation. (p169)
The objective of this study is to investigate the efficacy of Nike’s brands strategy within the context of a increasingly globalized economy. Nike is currently the leading brand of the shoe and sports apparel industry which creates a parallel industry for its promotions to function with. How was it able to achieve this feat given the fact that the company was established later than previous industry leaders such as Adidas and Reebok? To answer this research problem, this paper will describe Nike’s brand promotions and marketing campaigns and how it complemented the production of good-looking and great performing products to successfully achieve for the organization a remarkable competitive edge and captured for it its sizable market share. The branding strategy followed some of the immutable laws of marketing that allowed it to grab a large share of the industry. For this purpose, this study will:
Outline Nike’s history and growth as a global brand in order to understand genealogical transitions;
Identify and define Nike’s product line in order to determine its product positioning strategy;
Identify and explain Nikes brand promotions strategies as a means of determining how they differ from their competitors; and,
Determine their effectiveness by citing Nike’s market performance through the years as these strategies were implemented while citing consumer responses and reactions.
Key Terms and Concepts
In order to better understand the content of this study, it is important to define key concepts:
The first of these concepts is brand. Lewis and Stowell (2008) explained that it is “a name, symbol or design that helps set a product apart from its competitors.” (p20) In the case of Nike, there is the Nike name, derived from the Greek goddess of victory, as well as the swoosh symbol. Both of these constitute the core elements of the Nike brand as an athletic footwear and apparel company. Belk gave his version of the definition of the brand, but this time it is in the context of the notion of brand equity wherein the value that is equated with the brand name or its image relegates other factors and product attributions that distinguish the brand in the market. From the perspective of the market as characterized by activities by competing players to capture the hearts and minds of their customers, the brand was defined as “system of signs and symbols that fulfil, in the imaginary/symbolic realm, consumer needs for intangibles such as emotional experience, a relationship or a sense of belonging in an increasingly fragmented and confusing world.” (Belk 2006, p33)
An integral variable in branding is the so-called brand image – an identity or a visual/textual representation designed to attract a specific market that is composed of individuals or groups targeted for the specific brand. An image may contain a picture, a theme, an audio, a logo and a slogan, among other elements that could be used repeatedly during brand promotions. Identity also has a meaning of its own. As stated by Saren (2006), identity is the definition of an individual or a thing; a definition that constitutes what makes a brand different and distinct from others. In Nike’s case, it is grounded on “the company’s 30 years of experience in the sports and fitness business and its evolution as a global company. As a worldwide known company, Nike shapes its identity based on the core purpose and mission ‘to bring inspiration and innovation to every athlete in the world.’” (p207)
Then, there is also the need to define promotions. This has been briefly mentioned in the Literature Review section. Promotions, as used by this study, are not related to sales promotion activities, which is concerned with influencing the customer’s awareness or attitudes by intruding directly at the decision-making and purchasing stages. Schultz, Robertson and Petrison (1998) explained that it is only able to change behaviour directly by altering the price/value relationship that the product would eventually bring the buyer. (p6) Therefore, this kind of “promotion” is short term and a minute activity in a wider marketing strategy. The promotions or brand promotions concept used by this study is more akin to advertising or marketing in a sense that it is more general and wider in scope, because it is concerned with the integrated brand promotions. To explain further, the definition of O’Guinn, Allen and Semenik (2008) would be used. According to them, brand promotions “is the process of using a wide range of promotional tools working together to create widespread brand exposure.” (p11) The tools mentioned in this meaning can include sales promotions, among other advertising and marketing activities that make use of the media in order to achieve widespread exposure of the brand and other related objectives.
At this point, it is important to state that the this study will only investigate brand promotions and other related variables such as advertising and marketing and would not dwell anymore with other core elements that have equally contributed to Nike’s overwhelming success. Namely, they are the company’s excellent distribution capability and cost-effective production strategy.
This Literature Review section outlines two categories of previous related studies on the subject that contain concepts and information to be used in this paper. The first are those concerning brand strategies; particularly by products related to the sports field. The second body of literature consists of research previously undertaken investigating the case of Nike’s brand success. The examination of the extant literature on the subject is more of a background and related section to the secondary data to be examined, since this study’s research methodology is qualitative. Theories may be discussed but not in the context of formulating a theoretical framework since, as Lichtman (2009) explained, the research objective is to describe, understand and interpret and not to test hypotheses. (p127)
Understanding brand strategy is fundamental in this paper’s objectives. It will help in the development of a framework from which Nike’s own brand promotions will be analyzed. It will also help to underscore branding’s placement and role in the overall advertising and marketing strategy of the company. O’Guinn, Allen and Semenik’s work on the subject is quite important in this area. They were able to document several cases of branding strategies by organizations coming from different industries. These cases provided in-depth discussions on the principles behind the successes and failures of strategies employed to build brands. An important theory that emerged out of these case studies was the so-called Integrated Brand Promotions. This model emphasized that successful brand strategies require a highly structured and coordinated, multi-pronged promotional campaigns that seamlessly work together in order to achieve a collective goal. This theory was also explored by Light and Kiddon whose book called, Six Rules for Brand Revitalization (2009), emphasized that all brand promotions activities should be cohesive, clear and with a consistent voice that enables the brand to be elevated to a higher level, which eventually is translated to growth and profitability. Their argument is that today, many brand promotions are actually out to demote the brand and not to promote because many companies adopt “activities that drive the brand’s sales at the expense of the brand reputation, all to the detriment of the long-term health of the brand.” (p121) This criticism on modern, greedy and short-sighted drive for more sales highlights the beauty of the cohesive and meticulous branding promotions that Nike has adopted for years. As this study will confirm, Nike has embarked on various promotional activities, which though diverse, were all controlled and integrated in order for the initiatives not to dilute the brand’s potency simply for easy or short-term profit.
Brand Promotion: The Fitness Boom
One of the consequences of the Business Service Management (BSM) model, was Nike’s active involvement in the emergence of the so-called “fitness boom” during the 1980s. The company, certainly exploited this phenomenon’s exploitation to its advantage. The latter part of the 1970s saw people becoming more health conscious and those fitness activities such as running, jogging, as well as exercise started to become popular. It was as if Nike’s founding was at an opportune time because the demand for athletic shoes suddenly soared. What it did was outperform its competitors by adopting a promotional strategy that would emphasize performance and quality in its identity. To achieve this, Nike embarked on a major marketing and reorientation of its products, with the aim of shifting its customer base from what Strasser and Becklund (1991) called “running geeks to yuppies” (p267-268) The strategy was to diverge away from the original focus on using amateur sports personalities in its brand promotions and the increase in the signing of professional athletes and coaches in order to check Reebok’s resurgence with its successful run in the aerobic-fitness market. For instance, in 1979, Nike pulled off a promotional coup by having Larry Bird, then a star in the NCAA tournament, wear Nike shoes in a Sports Illustrated cover, which was published in March 26, 1979 (see image below).
By 1980, wrote Gereffi and Korzeniewicz, “a Nike representative had signed over fifty players in different baseball teams – as well as eight players in the Tampa Bay team that made it to the 1980 Super Bowl.” (p255) From then on, several prominent personalities from various sporting fields would be signed in to subtly or directly endorse the brand, gradually earning for the brand its desired identity in its target public. While some have doubted the usefulness of Nike’s trademark promotional strategies, they still actually paid off. Background information provided by Funding Universe for Nike stated that when the fitness boom waned:
Half of the running shoes bought in the United States bore the Nike trademark. The company was well insulated from the effects of a stagnating demand for running shoes, however, since it gained a substantial share of its sales from other types of athletic shoes, notably basketball shoes and tennis shoes. In addition, Nike benefited from strong sales of its other product lines, which included apparel, work and leisure shoes, and children’s shoes. (“Nike, Inc.” 2010)
Russell Belk contributed to the body of research on brand promotions in his book called, Meaning in the Marketplace. Here, he discussed comprehensively the concept of the brand equity – the value attached to the brand name, image or logo. His theory is that this brand equity is the most important aspect of a product when it comes to the competition in the marketplace. He believes that it is what primarily gives a product the competitive advantage over the competitors. His point: “brands enhance or even define use-value in terms of image value, with properties of significance that vary widely from status, playfulness, intelligence, masculinity and femininity, to refinement, frugality, defiance and sexiness.” (p33) This focus on identity is relevant for this study because it successfully explained the psychology behind how people identify with brands. Nike, certainly, displays very potent brand equity and Belk’s work explains such phenomenon.
Bedbury and Fenichell (2003) offered an intensive study and insider account on Nike’s experience in brand development and promotions. Their discussion on basic branding and related marketing information is quite insightful because it was made in particular reference to the shoe and sports apparel industry. In this context, brand was explained as:
The sum of the good, the bad, the ugly, and the off-strategy. It is defined by your best product as well as your worst product. It is defined by award-winning advertising as well as god-awful ads that somehow slipped through the cracks, got approved, and, not surprisingly, sank into oblivion. It is defined by the accomplishments of your best employee – the shining star in the company who can do no wrong – as well as the mishaps of the worst hire that you ever made. (p. 15)
For the authors, a brand is analogous to a sponge, because it sucks in content, images, the fleeting feelings of people and they eventually coagulate into the idea that are stuck in the minds of the consumers. What this author found helpful in this discourse is the way it stressed how branding cannot exclusively be controlled or co-opted and that what can be done is to guide it and influence it according to an organization’s objectives.
There is also an important piece of interview by Geraldine Willigan (2009) with Nike’s founder Phil Knight. This valuable literature is contained in the book, Advertising Management and was originally published in Harvard Business Review. In this interview, Knight talked about when marketing and promotions took a major role in Nike’s operations. It was particularly emphasized that this aspect is crucial in their innovative strategies that have driven Nike’s astounding success. At one point, which probably summed up the importance of the entire interview for this paper, Knight was quoted answering:
Understanding the consumer is just part of good marketing. You also have to understand the brand. That is really the lesson we learned… without focus the whole brand is at risk. Just because you have the best athletes in the world and a stripe everybody recognizes does not mean you can take that trademark to the ends of the earth… Ultimately, we determined that we wanted Nike to be the world’s best sports and fitness company and the Nike brand to represent sports and fitness activities. (p392)
Lynn Upshaw (1995), for her part, has collated an impressive amount of information, anecdotes and personal experiences of those who have, in one way or another, worked for or connected with Nike and its branding promotions through the years. What these cases demonstrate was the firm and solid control of the organization over its branding strategy that allows it to be a formidable player, not just in the sports footwear and apparel industry, but in the field of sports as well. An entire section of the book labelled, Cases I: A Shoe, A Mouse, Brands around the House, has been devoted to Nike and its experiences as told by many resource persons. It is a treasure trove of information for any researcher interested in Nike as a brand and how the Nike organization worked hard to build, maintain and empower it.
Martin Roll’s (2006) work on brand promotions is an excellent resource on how to build brands. What makes this research unique is that it was able to provide extensive documentations on the Asian market, particularly, in regard to how products have been marketed specifically for this region. What is relevant in this work is the demonstration on how geographical and cultural distinction shape the approaches companies such as Nike employ to effectively communicate their brand image and develop their promotional campaigns in such a way that it presents an identity that is acceptable, identifiable and marketable to a specific public. An interesting account provided was the market dynamics of China and how the major footwear manufacturers like Nike and Adidas scrambled to adapt according to its requirements. After investigating the profile of its target niche in the country, Nike used Tiger Woods and Cristiano Ronaldo as endorsers because the desired customers were both golf and football enthusiasts. Roll explained:
Traditionally, Nike has not been known for its products in either golf or football. Had Nike chosen the conventional marketing way of entering these segments, it would have taken some considerable time. Instead, by signing on the most famous golfer in the world, and the leading sports personality, who plays for one of the most famous football teams in the world, Nike has been able to shorten the time needed to make an impact. (p75-76)
With regards to the body of work that are specifically devoted to Nike and its brand promotion experience, this author found that it is quite extensive. The story of Nike as a brand in the context of its development from a small to a multinational company, was properly documented by Melewar in his book, Facets of Corporate Identity, Communication and Reputation (2008) An interesting account of Nike’s history, particularly during the stages when the company is experimenting on the kind of brand it will eventually adopt is contained in. For instance, it was found that:
The origins of Nike’s philosophy can be traced back to 1971 and to the design of the Waffle outsole… At the same time, graphic designer Carolyn Davidson was busy creating the wing-like Nike swoosh. Her brief was to design a logo that reflected movement and which could be featured on the company’s footwear. The result… [is] a universal beacon for athletes from all walks of life who wish to embrace physical performance. (p72)
The statement above is part of Roll’s interesting discourse on celebrity endorsements on sporting goods, which will also be tackled in this study, because it eventually played the dominant role in Nike brand promotions until today.
The work of May, Cheney and Roper (2007) devoted a significant portion of their book to the negative aspects of Nike’s operations that have been addressed by effective and aggressive promotions campaigns. A case in point is how Nike responded to accusations of worker exploitation in sweatshops in Third World countries. In addition, “its CSR practices… had often been closely associated with its response to problems and controversies, this created additional problems and controversies, and this created grounds for suspicion about the company’s real intentions.” (p306) What this criticism revealed was Nike’s ability to reverse adverse circumstances into windows of opportunity. The authors identified one promotional tactic that Nike used to offset the negative effects of these variables on its brand: “Nike claimed to be a socially responsible and responsive company that championed the disadvantaged, particularly women and racial minorities, in the area of sport and physical fitness.” (p306) The result was favourable.
A detailed account of Nike’s advertising strategy, particularly the budget allotted to it, can be read in Irazabal’s (2005) own study on Nike along with her discussion of Nike’s facilities and its role in corporate identity and culture. This piece of work has comprehensive financial data on promotions expenditures that could prove important for this study’s attempt in quantifying the importance of promotions and advertising in Nike’s operation especially in comparison with other business strategies. The study also provided several approaches in quantifying the performance of advertising campaigns, such as, whether the investment on a particular promotion has yielded the expected results and, eventually, translated into profits.
There are also available online materials, especially those that are more recent informations released. An excellent example is Nike’s website, HYPERLINK “http://www.nike.com“www.nike.com. Particularly, the Investor Relations section is a mine of financial information, annual reports, current strategies and news of Nike brand promotion activities across the globe. One of the important data gathered from this source is Nike’s 10-year financial history, which demonstrated the upward trend of its profitability.
All the information that has been collected from the various sources was gathered through qualitative research approach. In this regard, Neergard and Ulhoi’s (2007) work on the subject proved invaluable as a guide on choosing efficient and comprehensive techniques so that materials used are credible and authoritative. The author’s discussion on qualitative theory is especially important when this was done in the context of research on entrepreneurship topics. In one of Neergard and Ulhoi’s (2007) arguments for this method, it was stressed that this approach becomes crucial when a study wants to go beyond the mere description at a highly generalized level in the empirical investigations. (p5)
Unarguably, the corpus of literature that discusses Nike’s brand promotions initiatives is quite numerous. From all aspect of these promotional processes, there are available resources for those bent on investigating any of its dimensions. However, the review of these research and studies demonstrate the fact that they are quite fragmented in their treatment of Nike as a subject. The fact is that there is a lack of available work that exclusively devotes itself on Nike’s experience – Nike as a brand, the company’s strategies, its status in the market and its successes and failures.
According to Davis (2010), what makes a brand development strategy successful are the multiple products and brands involved – ranging from the corporate umbrella product to the individual brands and sub-brands – because it allows an organization to pursue numerous growth strategies in different market segments at the same time. (p162) Although such synchronicity depends still on the characteristics and needs of each market and the company’s own capability to adapt to them, Nike’s experience has proved that this is possible, this is effective and this has been translated into competitive advantage and profitability.
There are four quadrants in the above illustration. The first contains the existing product offerings of Nike, which are already known to many people, most especially its customers. This product line has been the core of the Nike brand, and their respective and clearly defined loyal and established following that has driven the company to profitability. In itself, it already demonstrates the kind of specialization that has been required by a segmented population. This diversification has characterized Nike promotions strategy since the 1980s and up to now, customers patronize the product and expect them to be offered by the company.
Looking at the quadrant B, one will be arrested with the products that have been developed by Nike as innovation-products: with Nike Air and Nike Zoom Air, featuring the unique mid sole cushioning; then, the Nike ID is all about customization, the line that allows customers to personalize their shoes under the category; finally, the Nike+ sells new shoes (including tools) in order to help improve training.
Quadrant C simply contain the definition of Nike ID’s customer profile, which, as stated, is the market segment that are more inclined to be self-expressive, creative and individualistic. This aspect becomes important as Nike seeks to further expand to uncharted territories, especially abroad, wherein culture can be quite different and unpredictable. This quadrant depicts an aspect of Nike’s product development and branding strategy, especially in adding brand features in order to appeal more to its customers.
Under quadrant D, the products recently acquired by Nike are listed. Here, there are the Converse, Hurley, Umbro and Cole Haan product lines. Now these products are entirely different in orientation and brand images from the Nike products. One can say that Converse is not too far removed since it is also an athletic brand. However, this cannot be said in the cases of Hurley, Umbro and Cole Haan. What quadrant D represents was the most extreme diversification path for Nike as a footwear manufacturing company. Even though, this particular aspect does not have any bearing with Nike as a brand, they still reveal how Nike as an organization is willing to follow extremely divergent growth paths in order to sustain its profitability and market leadership by covering as much ground as possible.
Davis summed up the above organizational strategy to strengthen Nike as a profitable brand:
Choosing diversification means that growth is expected to come from developing entirely new products for entirely new markets and is achieved through two ways:
- Related. This means the company pursues new products sold to new markets but within the same industry, carefully avoiding to dilute or erode the company’s current brand position or detracting from other marketing efforts; and,
- Unrelated. This is pure pioneering work in both new products and new markets. It is the highest risk growth choice of all. (p161)
It is clear from the above points that diversification is entirely designed and adopted in order to expand and acquire new market. For Nike, this is not about crowding the different and existing customer base by providing alternatives or edging competition out by overwhelming the market with different products of the same brand. Essentially, this has been proven effective in the way the original Nike shoes were segmented to cover the requirements of the “basketball,” “football,” “running,” and “golf” publics. A more specific example is the Air Jordan brand, which belongs to Nike’s basketball product line. In the 1990s, Nike introduced Air Flight and Air Force under this Jordan brand and still avoided diluting the brand image because the promotional slant successfully differentiated the two for separate markets: “Air Flights were for lighter, faster players and Air Forces were for bigger players pounding hard in and around the basket. This avoided many of the risks of brand stretching and helped Nike extend its lead in the basketball category.” (Davis, p78)
With all things considered, Nike has been careful in its diversification by not diverging too far from the Nike brand lest it lose its credibility and attractiveness to consumers as they have learned when they ventured on making products that were marketed as casual shoes back in the 1980s. However, Nike has been quite clever by successful coming up with various strategies and promotional distinctions that effectively captured or created markets without relegating the positions of the products catering to a related public/consumer segment.
In order to reinforce the Nike brand’s status as a powerful communicator and icon in sports, Nike has consistently figured prominently in sports sponsorships throughout the years. In fact, this strategy has been stretched to its limits by the company. The company used sponsorship in propping up its brand because the platform of this strategy allows Nike and its products to be positioned as the equivalent of excellence. The sponsorship strategy is one of the techniques responsible why the company was able to transform the sports footwear from merely being a fashion accessory to a lifestyle necessity.
As mentioned elsewhere in this paper, the company started with collegiate teams, players, and coaches – amateur sports events. This is still true until now. The Nike swoosh is ubiquitous in the uniforms of students in high school and colleges as well as in club teams throughout the world. As this succeeded in achieving for the brand the desired image, it was taken further into a higher level by sponsoring professional sports events and even the Olympics.
The importance of sponsoring sporting events is mainly due to the benign attitude of consumers towards this kind of promotional strategy. Many studies have shown that sponsorship does not elicit as much cynicism from consumers as much as traditional advertising campaigns. One of these is the work of Hughes and Fill (2007) who cited, for instance, the British experience wherein sports sponsorship is worth more than $1.5 billion while the global estimate places the figure somewhere between $20 and $24 billion. (p68)
Further on, Rein, Kotler and Shields (2006) have stated that since the domestic market today is no longer growing, the trend or, in a more stronger term, the big opportunity, is to go international. Nike has hitched into this bandwagon and currently leads the pack. What made such move quite successful was the employment of the same kind of branding promotions that made Nike a household name. Sponsorship plays an important role here, particularly in times of market penetration. Nike has seized this opportunity by making huge sponsorship deals such as the Indian national cricket team (signed in for a whooping $44 million dollars over 5 years) and the 21 Chinese sports federations, a strategy that enabled Nike to successfully counter the increasing competition posed by Adidas and Reebok. (p207) The objective here is to further push aggressively the Nike’s brand and its strategy through the powerful messages and influence into sports performances by its star athlete-endorsers. This proved to be effective because, as with the case of the reaction to Nike of the American customer base, “fans see the Nike brand in action and can identify with the athletes who wear Nike shoes by purchasing and wearing the same pair.” (p207)
Although it is difficult to quantify the outcome of the sponsorship or to link actual goods sold as a consequence of the investment, its objectives are actually measurable and assured with expected returns. According to McDonald (2007), these could include:
- Expected media exposure and audience figures;
- Increases in awareness, image, affinity, etc.;
- Levels of association;
- Attendance at sponsored events. (p561)
The level-of-association variable is particularly interesting. This is represented best by Nike’s employment of Michael Jordan and such relationship’s association with the National Basketball Association. Nicholson (2007) explained this better:
Jordan’s success in winning six National Basketball Association (NBA) championships with the Bulls enhanced the corporate synergy between the two brands and helped to increase the return on Nike’s investment. Furthermore, the success of Jordan and the global advertising campaigns developed by Nike increased the cultural, social and commercial profile of the NBA in America. In turn, the global promotion and advertising by the NBA, that either did or did not feature Jordan, helped to promote both Jordan… and Nike, as a major player in the basketball footwear and apparel, either by direct or indirect association. (p 170)
To take this issue further, below is a table of Nike’s impressive profitability from 2000 to 2010. These figures demonstrate how Nike’s brand promotions have effectively driven the consistent trajectory of its growth. This can be understood with reference to the previously mentioned specific promotions strategies. For instance, the years 2004 and 2008 were the years the Olympics have been held in Athens and in Beijing respectively and the sponsorship and endorsement strategies involved therein have yielded excellent returns. Notice how the revenues jumped 2 billion more from the previous years’ figures.
|Revenues||$948 million||$989 million||$10 billion||$12 billion||$13 billion||$14 billion||$16 billion||$18 billion||$19 billion||$19 billion|
Table 1: FY10 10 Year Financial History (Nike 2010)
As previously mentioned, signing up the best professional athletes in various sporting fields has been a core element of Nike’s brand promotions. This is especially true in the company’s advertising campaigns that take advantage of the increasingly pervading coverage of the media, which allows the company to reach a wide expanse of its market. The rationale for this strategy is quite simple: in Nike’s effort to gain market share and market leadership, it sought to build a kind of relationship with its customer base wherein the latter consciously and subconsciously identify with the product. Martin Roll argued that a brand endorsed by a celebrity “seems to establish a connection with customers, as many relate to or aspire to emulate their personalities.” (p76) Roll pointed to the fact that in order for a brand to gain strength, it is imperative that it should offer the customer some sense of identity, which is most likely in the form of the personality of the endorser – who for his part embody a personality that the customers can relate to and represents their values, beliefs and aspirations. Roll emphasized, “Using a celebrity to endorse a brand provides one such channel for the brand to associate itself with the unique identity and personality of the celebrity. At another level, a celebrity endorsement also helps the brand to achieve wider awareness and better recall.” (p76) For Nike, celebrity athletes were not merely endorsers in sense that they merely smile in TV ads and talk about the product and smile some more. For Nike, the endorsers function as brand ambassadors, who are given specific roles to play in promoting the brand. Nike’s promotions strategy in this context is essentially about combining the Nike brand with the product advertisement, as well as the endorser in order to produce one personality.
Celebrity endorsements has been so important for Nike that it has created a separate department within the organization called Nike Sports Management, a division that is exclusively charged with the offering of management contracts that include endorsements, career guidance, and marketing advice to its roster of endorsers. Because of this, Nike has empowered “its” athletes to earn significant leverage in negotiating with sports team since endorsing Nike means an exorbitant amount of pay that assures financial independence. Upshaw recalled:
Basketball star Alonzo Mourning once sat out until the fourth game of the season before signing with Charlotte (N.C.) Hornets because, he said, “The Hornets knew I really didn’t have to take anything… I work for Nike.” (p229)
What this dimension to celebrity endorsements reveals is that it allows Nike sufficient power over its star athletes that are used to diminish or quash the presence of other competing brands or products. For instance:
In 1991, Nike ordered its athletes to withdraw from a portion of the NBA’s licensing agreement for goods bearing their likeness. In 1993, Nike beat out the league for the rights to Michael Jordan T-shirts. At the time, NBA Deputy Commissioner Russ Granik said, “In marketing, Nike is far more powerful than the league.” (Upshaw p229)
Previously it has also been cited that the in the most recent Olympics held in China, many athletes were forced to wear Nike because of the company’s sponsorship with the Chinese sporting federations that they belonged to. This is despite the fact that some of the players endorse brands such as Adidas and Reebok. The strategic sponsorship has significantly allowed Nike some promotional victory over its rivals because the company rendered them powerless by specifically targeting strategic organizations and individuals that have the power and influence to achieve the desired result and impact. This kind of brilliant strategy in the area of sponsorship has been aggressively pursued in the Nike branding promotions. There is a wealth of experience available and undeniable ties to the major players of the sporting world that Nike is able to manipulate these variables to their advantage. Even when it seems that competitors have achieved a seemingly competitive edge, Nike is always able to gain the upper hand, resulting in quantified successes for the brand.
Another pioneering brand promotional initiative was Nike’s building of its flagship store, NikeTown. In most respects, this flagship store, functions as some form of brand theatre wherein customers can experience for themselves the brand in an environment of contrived sets, props and players that all work together in order to highlight and enhance the brand from the end of customer experience. The success of NikeTown would launch similar other flagship stores from other giant companies such as Sony, Warner Brothers, Disney, and Polo Ralph Lauren, among others.
According to Morgan and Foges (2003), the flagship store was not a retailing venture and instead, it was a promotional project that celebrates sports-based culture that Nike has created around its products. (p99) Indeed, if one goes to NikeTown, he will experience not just a showcase of Nike product lines but an audio-visual treat, as well as events that highlights and heighten Nike’s desirability through the subtle exploration and promotion of various products’ attributes. In Chicago, the NikeTown occupies a sprawling 70,000 square feet of selling space on three floors, using eighteen individual product pavilions to showcase the total Nike line. (Aaker and Joachimsthaler 2000, p179) However, the store’s purpose, emphasized McCarthy (2001), is not about distributing Nike products for sale but that it is to repeatedly reinforce the idea of the Nike brand image as a commodity itself as has been demonstrated in the flagship store in New York City:
Every 20 minutes the building’s central atrium is transformed, with screens descending over the windows to dim the light so that visitors’ attention is focused on videos about the brand. (p169)
If one examines this strategy closely, one would immediately identify an authoritarian approach in the way the environment forces the people within it to view the Nike commercials in the video screens. McCarthy likened this strategy to an Orwellian propaganda wherein certain faceless forces compel all the visitors within to look at the screens and focus their attentions in it at precisely timed moments. (p169)
The benefits of the flagship store, wrote Aaker and Joachimsthaler, is that it does not only provide the “ultimate commercial opportunity by immersing customers in a brand experience, it also lets those inside the organization see the brand identity and its implementation come together.” (p182) Specifically, the following advantages have enhanced Nike as a brand through its NikeTown:
The achievement of a clear brand identity since all elements and aspects of the store stem from the brand identity. “The integrated synergistic impact of the store, combined with other brand-building efforts, creates the real payoff.” (Aaker and Joachimsthaler, p182);
Create customer value by having the flagship store a resource for consumers who may be hungry for information and entertainment by creating an environment wherein they could explore, learn, and have fun besides testing, examining and experimenting with the various Nike products available; and,
Reinforce the Nike brand by bombarding consumers with all the aspects and representations of the brand within the store. Here, the so-called brand assets -the symbols, colour, music, history and innovations demonstrated in the product lines- can, for instance, be highlighted and presented as much and often as possible.
2015 Global Strategy
In May 2010, Nike released its global growth strategy for the year 2015. The objective of this strategy is generate a revenue of $27 billion by the end of such fiscal year from its sale of its entire product line, which includes recent acquisitions, Converse, Umbro, Hurley, Cole Haan and the Jordan brand. For the Nike brand, the specific target is to have it aggressively “grow in all six of its geographies including driving mid single-digit growth through broader expansion in its developed geographies (North America, Western Europe, and Japan), targeting an additional $3.0-3.5 billion of annual revenue by the end of fiscal 2015.” Nike is also looking forward in aggressively pushing its brand in emerging economies such as China, Eastern Europe and other emerging markets.
In the global strategy, there was no emphasis of any radical changes in brand promotion strategies. This means that existing tactics such as sponsorships, endorsements, diversification, among others, will remain as core elements of strengthening the Nike brand. The only strategy emphasized was the increase in the direct-to-consumer strategy by planning to open about 250-300 Nike-branded stores worldwide. To this end, Nike reported that it has earmarked a budget of $500-600 million in capital over the next five years. This aspect in the strategy resembles the NikeTown flagship store in terms of branding function.
Yes, this information is available in many books, journals and articles from every publishing platform. However, they are quite extensive and the sheer number of fragmented references lack the kind of cohesion and clearness of one single body of work, with Nike as the subject. It is in this area wherein this paper seeks to be relevant.
This study primarily used qualitative methodology. To explain qualitative methodology and give light to how this study would be approached, Denzin and Lincoln’s (1994) definition has been taken into account that qualitative research is:
Multi method in focus, involving an interpretative, naturalistic approach to its subject matter. This means that qualitative research study things in their natural settings, attempting to make sense of or interpret phenomena in terms of the meanings people bring to them. Qualitative research involves the studied use and collection of a variety of empirical materials. (p2)
What this means is that all the data were gathered from the extensive body of literature available and presented accordingly in order to show a credible and authoritative picture that would satisfy the research objectives. The specific qualitative research framework to be employed is descriptive research, which according to Monsen and Van Horn (2008), is effective in obtaining information used in devising hypothesis and proposing associations. (p5) It is important to underscore that this qualitative research method cannot test, verify, or evaluate hypotheses. The need for verifiable information concerning consumer reactions has forced me to include information concerning the psychographic identity of nike customers. The collected information will be presented in the form of case studies and discussions that contain published in-depth interviews and observations that can be found in the appendices.
It is must also be underscored that since this is a qualitative study, the overview and breadth of the available literature as has been reviewed in Part II of this dissertation plays a fundamental part in the entirety of this study. The information gather from the qualitative in-depth review gave me adequate information concerning the psychographics of nike consumers. This process of data collection involved in-depth interviews with individuals who use nike brand products. Moreover, the letter from the CEO provides adequate information on the organizational attempts to capture their demographic. The background information provides insight into the business decision methods of the CEO.
In terms of the focus group that I conducted, it was fairly simple. I gathered 6 males who ranged from age 18-21. Two of the participants were 18, one of the participants was 21 while the remainder were 19 years of age. I asked 4 simple questions regarding their interest and response to nike brand advertisement. Additionally, I interviewed them all at separate times so as to ensure that their answers were not impacted by the answers of another. After conducting the focus group I concluded my findings. For the complete information on the focus group, see appendix VI.
Critics of the qualitative approach point to the fact that authors of secondary sources are, at times, guilty of errors in the transmission of information. Therefore, the corpus of literature may not be as reliable, at least, without serious and intense scrutiny. To address this, this study has taken pains in collating as many sources as possible on a particular fact, point or argument in order to corroborate or crosscheck the validity of information and data presented. Finally and ultimately, this paper, as has previously stated, will extensively use primary sources from Nike as well as materials recorded from people who have worked for the company and participated in Nike’s policies and strategy development.
Discussion and Analysis
This section is an analysis of the important elements in Nike’s brand promotion strategy previously discussed herein: the exploitation of the Fitness Boom; Diversification; Sporting Events Sponsorship; Star Athletes’ Endorsements; International Growth Strategy; and the Flagship Store;
The 1980’s fitness boom was a crucial for Nike. They were able to exploit people’s new found interest in becoming healthier and more fit because the demand for athletic shoes exploded. They were able to outperform their competition by reorienting its products to the everyday person, not just athletes. In this, they were able to sign professional athletes to compete with Reebok on its own turf. By 1980, wrote Gereffi and Korzeniewicz, “a Nike representative had signed over fifty players in different baseball teams – as well as eight players in the Tampa Bay team that made it to the 1980 Super Bowl.” (p255) It was easy sailing for Nike from there. They were subsequently able to sign on athletes from a variety of sports, earning the identity that the brand desired with the public. Some people doubted that Nike’s promotional strategies would work, but they were wrong in that assumption. And after the exercise craze died down, Nike was already on half of all running shoes sold in the US. However, the firm was well shielded from the impact of stagnant demand for running shoes, as it derived a significant portion of its revenue from other forms of athletic footwear, including basketball and tennis shoes. In addition, Nike’s other product categories, such as clothing, work and recreation accessories, and children’s shoes, had good revenues. (“Nike, Inc.” 2010)
Once Nike had made its name for itself during the 1980’s, they needed to diversify and expand. Thus, the creation of Nike Air, Nike Zoom Air, Nike ID, and Nike+. In creating these new types of shoes, Nike was able to customize their line further, to fit a wider spectrum of consumers. This allowed for broader appeal and ultimately higher sales. This, in turn, led to the acquisition of Converse, Hurley, Umbro and Cole Haan. This acquisition is extraordinary, as Hurley, Umbro and Cole Haan are not athletic shoes. They are stylish, casual and desired by a different market of consumer than Nike has ever targeted in the past. Converse is the exception, as it remains an athletic type shoe. Nike chose to do this because that is the primary definition of diversification: new and different. Nike decided to pursue these new markets to expand and acquire a new customer base. Although this was a very high risk for the brand to take, it turned out to be very effective. They chose to create shoes for the specific purposes of individual sports, such as basketball, golf, football and running. It was a huge risk, but this diversification paid off. Nike has successfully expanded its customer base without losing credibility or diluting the Nike brand name.
Now Nike needed to reinforce it’s product as a household name. Although they consistently figured in sports sponsorships, they needed and wanted more. So, through sponsorships, they were able to prop up their brand to be perceived as the equal of excellency. They transformed a simple running shoe into a lifestyle and fashion necessity. It started with collegiate coaches, teams and players in amateur sports events. The Nike swoosh is omnipresent in high school, college and club teams world-wide. Nike chose to do this because there have been many studies that show sponsorship does not incite as much criticism from the consumer as does traditional advertising. In terms of the interview, individuals involved in the focus group alluded to the fact that they believe Nikes brand promotions is far less invasive when compared to other brands. Nike then decided to go international as well as professional in its endorsements. This strategy allowed them to contend more competitively with Adidas and Reebok. It is likely that Nike incorporated potential media exposure, increased awareness of self in the consumer base, association of the consumer to the endorsee and sports attendance in coming up with its endorsement strategies.
Nike’s successful diversification was also in part due to its signing of celebrities for endorsement of their products. Endorsements allow the brand to adopt acceptance by followers of the specific individual who receives the endorsement. With the ever growing television market, it allowed them to reach further than ever before. This required Nike to come up with a plan to build a relationship with its consumer base, without ever meeting them face-to-face. Nike understood and capitalized on the fact that people idolize their favourite athletes, so they would likely be drawn to the same products or services that the athletes partake in. This celebrity endorsement seemed “to establish a connection with customers, as many relate to or aspire to emulate their personalities.” (Roll, p76) This allowed people to personally identify with their idols and in some way impart their likeness onto themselves. “Using a celebrity to endorse a brand provides one such channel for the brand to associate itself with the unique identity and personality of the celebrity. At another level, a celebrity endorsement also helps the brand to achieve wider awareness and better recall.” (Roll p76) This lent itself to people creating new personality features through their idolization of these celebrities, thus wanting to be more like them. This is especially emulated in Michael Jordan’s endorsement with Nike. As mentioned in the many commercials of the 1990’s, people truly wanted to “be like Mike.” (helium.com)
These endorsement deals have been so profitable to Nike, that they have created a separate department, Nike Sports Management, whose sole purpose is to offer contracts to big name celebrity sports figures. This in turn has allowed the celebrities not only to make a huge amount of money from Nike, but to give them more leverage in negotiating with a sports team. A good example is the case previously mentioned that involves Alonzo Mourning. “The Hornets knew I really didn’t have to take anything… I work for Nike.” (p229) This power has given Nike the ability to suppress their competition as NBA Deputy Commissioner Russ Granik stated, “In marketing, Nike is far more powerful than the league.” (Upshaw p229) It has also been mentioned that in the China Olympics, many athletes had to wear Nike because of Nike’s sponsorship of Chinese sporting federations, although many had signed endorsement deals with Nike’s competition. This level of marketing, manipulation and dictatorship is a large player in what has not only made Nike famous, but kept it at the top of the marketing game.
Nike’s flagship store, NikeTown, was so successful that it helped ot launch other flagships stores from other marketing giants. “The flagship store was not a retailing venture and instead, it is a promotional project that celebrates sports-based culture that Nike has created around its products.” (Morgan and Foges, 2003, p99) This is found to be true in a visit of Chicago’s NikeTown. It showcases Nike’s products in 18 different pavilions on 3 floors, (Aaker and Joachimsthaler 2000, p179) whereas in New York City, every 20 minutes screens descend over the windows to get its visitors to focus their attention on videos of the brand. In looking at it more closely, this authoritarian approach has clearly worked, as this sort of propagandizing reiterates Nike’s presence in the world. In so doing, according to Aaker and Joachimsthaler, it provides the “ultimate commercial opportunity by immersing customers in a brand experience, it also lets those inside the organization see the brand identity and its implementation come together.” (p182) Through the creation of NikeTown, the brand has created an identity all its own, created a customer base that thrives on the information and entertainment provided in NikeTown and reinforces Nike as a global brand name by its presence and in demonstrations in the store.
Nike has grown into an extraordinarily large, profitable company. Its name and respective swoosh logo are household names, but Nike has continued plans for growth. According to their 2015 global strategy, they want to create a revenue of $27 billion from its entire line. Their target is for expansion and growth in North America, Western Europe and Japan, but they are also going to push the brand in China, Eastern Europe and other markets around the globe. They currently do not have any plans to change their promotion strategies, only to increase the number of stores worldwide. Since NikeTown is such a huge success, Nike is implementing a similar strategy for their 2015 plan.
Their brand is really being implemented on the consumer level in terms of the consumers interactions with the employees at the company. In the interview that is located in appendix 1, the manager indicated that he has a lot of young individuals who come in and want a job. The problem he then indicated was the fact that those individuals would have to be able to maintain composure at all times even when the customer is in the wrong. This brand is one that is friendly and puts the interest of their consumers first. Specifically in the situation where the woman entered the store and wanted shoes customized to her teams colors. The company already had a protocol in place that allowed her to place an order for it. This allowed the employees to be more capable on delivering the benefits sought by the consumer.
It would appear that Nike’s name is so well known, that even in its infancy, it was considered one of the “best”. Their name and brand are known worldwide, and are doubted by few and touted by many. Whether an employee or customer, Nike is loved everywhere. Aside from the job itself, employees of Nike tend to be fans of the products because it’s what they have known all their lives, and anything new seems odd and out of place. (Appendix III)
With Nike’s experience, it is easy to understand how “brand” addresses the requirement of the customers for identification with the product(s) it is offering. The success of Nike is largely dependent on the way its products rely on the brand, because of the high degree of identification present in the relationship between the company and its customers. With this in mind, it is imperative to consider another dimension in the area, which is the fact that the relationship and the way identification is fostered constantly change. This is the reason why Nike had to hire not just marketers, but also researchers in order to collect data and information necessary to monitor and nurture identification This is the reason why Nike has to continuously diversify by adding more product features, improving product lines and introducing new and innovative output in order to address the changing requirements and movements of its consumers, and finally, this is the reason why multiple promotions strategy and business models have to be employed just so the company and its products maintain its relevance and competitive edge in the market.
Moreover, in terms of the consumer, the company can predict the level of loyalty within males based on their interest and activities. As I discovered in my focus group session, males who engage in sporting or athletic activities are more likely to own a pair of nikes. Next, each brand of nike has a sect of followers who begin to self identify with the collection of new releases from a product line (Appendix VI).
What the above variables underscored is that there is no single promotional initiative that exclusively can lay claim to the success of Nike as a global brand. Nike’s successes and failures have taught those who studied its history that in order for a promotional initiative to work effectively, a host of other factors must work with it as well. For Nike, in some instances it was the fitness boom that allowed them to take the forefront as they have as a brand, and continue to go with it. They have made great strides in their endeavours to create a brand and a name that is known around the world, and despite some setbacks, they are stronger than ever.
Further on, if Nike will continue to produce great quality products and employ proven brand promotions that are tightly integrated, focused and that collaborate in order to present a cohesive message and brand identity, they can never go wrong. The processes that characterize Nike’s brand promotions development and implementation reflect the best practices in the industry that even its rivals try to emulate. A case in point is the Bedbury-developed BSM framework, which requires a systematic development of promotional campaigns. In Appendix I, there is a great example of this. Then there is the great importance given on endorsement, which takes advantage of the permeation of the mass media – the tactics primary platform. Mass media has allowed Nike to seduce more customers than any other form of advertisement available. With mass media, sponsorships and athletic endorsements, Nike has become a giant.
The amount of time that has lapsed and the degree of sophistication Nike has acquired in their years of experience that are characterized by successes and failures, have allowed for the certainty and somehow institutionalized excellence entailed in the way they promote their brand. An excellent illustration of this is the existence of Nike Sports Management division. Here, one can see that there is an explicit desire to make all its priority promotional tactics systematized.
The collective promotional tactics pioneered and maintained by Nike to build, strengthen and further expand its brand is crucial especially today that it is currently in an aggressive drive to secure dominance in the global market. The profile of the global consumers is not only characterized by constant changes but also intense diversity – economically, politically, socially and culturally. The Nike brand’s success can also spell success in the international arena. Nike is aware of this, and that is why they are systematically going to introduce new stores around the globe. This marketing strategy will only strengthen their hold on the world athletic shoe market.
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Case Study: Scott Bedbury and the BSM
In order to explain the process by which Nike develops its promotions strategy, one turns again to the interview with Nike’s founder, Knight, who intimated how they were able to develop their strategy to promote the Nike brand to women:
We spent three or four years trying to understand what motivates women to participate in sports and fitness. We did numerous focus groups and spent hundreds of hours on tennis courts, in gyms, and at aerobic studios listening to women. Those efforts paid off in our recent Dialogue campaign… The text and images try to empathize and inspire. One ad explores a woman’s relationship with her mother; another touches on the emotions of a girl in physical education class. Even there it was risky to use such an intimate voice in the ads, but it worked. (Willigan p395)
Before the above sort of best practice process, Nike has been lacking in brand strategy and marketing basically working on the premise the good performance, good quality and workmanship in their products, as well as traditional, generalized advertising, would suffice. However, this has resulted in the significant erosion of Nike’s performance in the market. In its low-performing years, which were during 1980s, Nike was being trampled by Reebok in the United States and supplanted by Adidas in the global premier footwear and apparel company. It is during this period that Nike developed its killer brand promotion strategy that eventually gained for its brand a competitive advantage it enjoys up to this moment. The crucial strategy that would steer the brand’s success was developed with the help of one man: Jerome Conlon. This has been emphasized by Scott Bedbury in a book he wrote about his experiences with Nike as its advertising director. Bedbury is the man responsible behind the wildly successful Nike slogan, “Just do it.” in the book, he detailed:
To me, it was clear that we would have to get to know – intimately- a different group of consumers if Nike was ever going to reclaim its number 1 position in North America from Reebok, much less overtake Adidas… We would have to understand that fitness and sport, though related, were distinct concepts with quite different drivers behind them. Nike despite its embedded wisdom, did not own a single piece of paper that suggested that it knew the first thing about how to broaden its base of customers to include aerobic enthusiasts or women who liked to walk during lunch break. (p42)
This realization – the need for consumer market research suddenly found Conlon, who was then the company’s product development information officer and charged with consumer research, as a major player in a brand strategy later labelled as Brand Strength Monitor or BSM. Here, a methodology was developed that featured in-depth surveys conducted throughout the United States, every quarter, annually, or specifically during the company’s key selling seasons: back-to-school, holiday, and spring. (p. 44) The more exact explanation for this shift is the emergence of the requirement for market research and the generation of information and data done according to the specific needs of Nike – the organization and its products. In his discussion of the BSM, Bedbury explained:
One critical way in which our Brand Strength Monitor deliberately departed from the mould of traditional market-research methods was that Conlon and I were more interested in developing a methodology that kept us in touch with perceptions of the Nike “brand”… we craved more information about how certain key consumer groups viewed a number of burning issues – as opposed to specific ideas – that might greatly impact our business. To take just one obvious example, cracking the code with the women’s market could not possibly be based on the intuitive insights of our senior management team, given that every member of it shaved his face each morning after breakfast. (p43)
The result of Conlon-Bedbury collaboration was the so-called brand-centric feedback loop that was developed to determine “how deeply the Nike brand resonated with specific group of customers.” (p43) The consequence of this development is that Nike was able to extend its existing knowledge of its core consumer base, develop new ones to cover uncharted markets and, henceforth expand considerable, making the product lines diverse, catering to various needs of an equally diverse target markets. One important result of the strategy is the finding that there is a sheer level of unrequited demand for Nike.
To demonstrate how Nike responded to the market based on the BSM:
In 1993, when we began to detect a slight softening among teen males, we were able to discover that the brand was losing edge and increasingly being viewed as “hype” and lacking substance… As a direct result of these findings, we dialled up the edge meter by signing basketball stars Dennis Rodman and Charles Barkley; Barkley was given the equivalent of an open microphone. “Role Model” was our working title for a commercial inspired by a passage in Barkle’s book Outrageous! (p45)
A more recent example of this slant in brand promotions was the Nike strategy pushed during the 2005 Olympics. In a report by Van Riper (2008) for Forbes, this was sufficiently covered especially in the context of the Nike-Adidas rivalry. To quote:
“The problem for Adidas is that, while it’s staked out its turf as an official sportswear partner, Nike has more top athletes. They include Swiss tennis ace Roger Federer and Australian track star Craig Mottram, along with old standby basketball legends Kobe Bryant and Lebron James… In addition, to make local inroads, the company has signed up 22 of China’s 28 sports federations to outfit most of its athletes. That means even Yao Ming, the Chinese marketing sensation who plays for the NBA’s Houston Rockets, will be outfitted in a Nike basketball uniform despite a personal deal with Adidas’ Reebok unit.”
As demonstrated with the BSM and the overall brand strategy at Nike, Bedbury is widely acknowledged as a marketing guru, specializing in creating Nike as a living brand. During Scott’s tenure in the organization, which was about seven years or so, he developed and launched the widely successful “Just Do It” branding campaign that was implemented on a global scale.
According to Kotler, Pfoerstch and Michi (2006), the campaign was responsible for Nike’s increase in revenue from $70 million to $5 billion by the time he left the company back in 1994. (p287)
Case Study: Michael Jordan/Air Jordan
Michael Jordan is an excellent example of how Nike has practiced the celebrity endorsement strategy to its fullest potential. In the 1990’s the company launched Air Jordan, a campaign that saw a production of a line of shoes specifically for the brand to be carried by Michael Jordan.
Initially, Air Jordan was created in order to check the growing popularity of rivals, Converse and Reebok, in the athletic shoe sales. Back in 1985, the very first commercial for this campaign was launched and it featured Jordan executing his trademark slam dunk as the tag line was first proclaimed: “who said man was not meant to fly?” Andrews and Jackson (2002) observed that this clever commercial took advantage of Michael Jordan’s identity, exploiting it by depicting him as a “rugged individual, an athlete whose athleticism suggests an uncanny ability to remain suspended in air, as if in flight.” (p22) Jet (1997) magazine, following the launch of the Air Jordan product line, quoted Michael Jordan as saying: “I have been involved in the design of everything I have worn from Nike since we began our relationship in 1984. The launch of the Jordan brand is simply an extension of that process. It is an exciting and challenging opportunity to express myself and connect with the next generation.” (p51)
Michael Jordan as “Jumpman,” the symbol that became almost as popular as the swoosh. (source: Kim 2009)
Unarguably, Air Jordan and Jordan’s endorsement have cemented the Nike brand as a popular global icon. The result of Michael Jordan’s involvement is highly successful. It was, in fact, the most successful athlete endorsement in history, with more than $100 million worth of Air Jordan shoes being sold in just one year. (Master Alexis, Barr and Hums 2008, p45)
Currently, the Jordan product line at Nike is still one of their bestsellers. The promotions for this campaign have been rigorous and meticulous, underscoring how the powers-that-be at Nike put importance in this aspect of their business process. In an interview, Knight, the founder of Nike, related how the placement of Air Nike in the Super Bowl and how such statement captured the essence of Nike’s dedication to its branding strategy. To quote:
The Hare Jordan, Air Jordan commercial that aired during the 1992 Super Bowl represented a big risk from both a financial and a marketing standpoint. It showed Michael Jordan teaming up on the basketball court with Bugs Bunny. We invested in six months’ worth of drawings and a million dollars in production costs to show Michael Jordan, probably the most visible representative of Nike, paired with a cartoon character. (Willigan, p395)
Many authors have analyzed and deconstructed how Jordan’s involvement have translated into a wildly successful product line that has significantly augmented the Nike brand’s status as the global leader in the industry. Aaker and Biel (1993) are just two of these. They observed that the Nike Air Jordan became analogous to the symbolic “religious artefacts that serve to reify intangible constructs that are sacred in religious sense”. Nike’s Air Jordan achieved some semblance of that effect, but this time in a secular sense. The reason for this, according to the authors is that the product enabled the consumer who purchased it to engage in what they call a “hoped-for dream of high status“, that is:
Transcendence of the desperate conditions of inner-city slums and association with a glamorous star athlete.
Membership in an exclusive, elite and privileged “club” of those who own “the best” – something not just anybody can have. (p105)
Indeed, people seem to consider ownership of the Air Jordan shoes and apparel as akin to a sacred experience because Jordan personified a kind of modern-day hero and using the product he uses and actually has been involved in crafting is an extraordinary experience not unlike the religious blessing that elicit a sense of ecstasy. Aaker and Biel, stressed: “Other shoes, costing much less, could deliver equal or superior functional performance. However, no other shoe in 1989 could deliver as much meaning.” (p105)
- Tell me about yourself. How did you become a manager here at NikeStore [Covent Garden]?
“Well, I started out as a floor person, just trying shoes on people all day long. But, I was never late to work or missed a day without good reason, and that was appreciated. So, in my first year, I went from a floor person to shift manager and the opportunity arose that there was a managerial position open and they wanted to hire in-house if they could. So, it was myself and [name omitted] who applied, and I got the job. I was thrilled since I really didn’t think I would be able to beat out [name omitted].”
- That’s really great. So, what are your strengths and weaknesses do you think you have in your position?
[Laughing], “Well, I like to think I’m a pretty easy going guy, easy to work for. I try to let my employees make their own decisions on things, ‘cause that seems to allow them more independence. It also gives me more time to do other things here. They seem to appreciate it, as my shift tends to make more sales than the others do. As far as weakness, well, I think that the fact that I’m so easy going is a bit of a weakness. I’ve had a few employees try to take advantage of it, especially when I first moved up to manager. It still happens here and there, but I’m better able to deal with it.”
- How do you deal with it?
I don’t panic or freak out on them if they do something wrong, or take advantage of my being nice. I just pull them aside and tell them quietly about what I see, get their point of view, and generally we can come up with a solution that works for everybody.”
- Can you give me an example?
“I’d rather not.”
- No problem. So, can you tell me what you like about being a manager here at NikeStore?
“The money. [Laughing] No, the money isn’t that good. I enjoy the challenge of it. Being responsible for other people, trying to get them to do things a different, better way than they’re used to. I get a lot of young kids that come in and want a job, but for the most part, they just aren’t driven enough for it. This isn’t a job where you can sit on your butt and watch TV. or play video games. You have to move around, talk to customers, help them find what they want and help them try things on. Except for the clothes, of course. I mean shoes. Most importantly, you have to be polite. There have been a few customers that I’ve had where the saying “the customer is always right” was way off. I have interviewed a few that I’ve hired. Not all of them still work here, but I guess that’s the nature of the game.”
- When was the customer wrong?
“Oh boy. Often. I think the worst was I had a woman come in wanting a pair of our new Mercurial Miracle, and she wanted them to match her team’s colours. Well, I completely understand that, but I had to tell her that I can’t just make them the colours she wanted right that moment. Nike has to make them to her specifications, not me. Well, she had herself a regular temper-tantrum right there in the middle of the store. She was telling me that [name omitted] could sell them to her, and they were cheaper than this explicative store, just going on like a mad woman. All I could do was apologize and continue to explain how Nike’s ID works, but she was having none of it. She finally had enough and left. I haven’t seen her since.”
- Wow. Don’t things like that make you want to go somewhere else?
“No, because it’s the same thing everywhere nowadays. “
- Why Nike? Why not another store, like Footasylum? They sell all different brands. “Well, I feel committed to Nike. I used to be a track athlete when I was in high school, and my folks always made sure I had good shoes. They thought that Nike was the best, so that’s what I got. I don’t know for sure if it’s the brand itself so much as it is how they make them. I don’t entirely understand how they come up with the designs they do, and I have to say some of them are a little wild for my taste, but I like them. They’ve never done me wrong. I’ve tried other brands like [names omitted], thinking, ‘oh yeah, Nike isn’t all that great. I’m going to try these.’ And I always ended up being disappointed. So, I stick with what I know and trust.”
- You seem to be in good shape, are you still a runner?
“Yes, I am actually. Not as much as I used to, I’m getting too old for that. But I still try to run at least 10 miles a week.”
- I couldn’t walk 10 miles. What type of Nike shoes do you wear?
[Laughing] “I wear their Air Impel while I’m working. They’re a nice, comfortable shoe for walking around. And they have a classic look that I like. They’re not way out there as far as style goes. When I run, I like my Zoom Vomeros. They seem to absorb more impact than some of the others.”
- What do you mean when you say “the others”?
“I tried the Zoom Equalons and the Free Runs, and with the Equalons they were okay, but didn’t absorb as much impact as my old bones need. As for the Free Runs, well, lets just say they made me feel a little too naked. I need all the support I can get.”
- One last question and I’ll let you go.
- Do you have any recommendations that you think Nike could make to improve their line?
“You know, I don’t think so. They’ve always been good to me, and I try to return the favour. They’re a great company to work for, and they make great shoes. What more can I say?”
- That’s great to hear. I’m glad you’re happy with where you are, and what you’re doing.
“Oh yes. I don’t see me going anywhere until I retire. Unfortunately, that’s not going to be for a while yet.”
- Well, I truly appreciate your time, I hope you have a great day.
“You’re welcome. Have a good day yourself, come back soon.”
September 1, 2010
How Nike’s CEO Shook Up the Shoe Industry
By Ellen McGirt
“It still has moon-dust on it.”
Mark Parker sounds like a happy kid as he points to an astronaut manual from the Apollo mission inside his glass-topped desk at Nike’s Beaverton, Oregon, headquarters. Over his shoulder, Keith Richards, at least the version of the Rolling Stones guitarist by German artist Sebastian Krüger, feigns a boozy disinterest. “And here,” says Parker, swinging around in his chair, “is Jimi Hendrix’s guitar.”
It is astonishing to see this shoe designer turned CEO in his natural habitat, surrounded by artwork he has commissioned or collected, mixed in with bits of Nike history, such as the boots Michael Keaton wore in the 1989 hit Batman. Next to Keith Richards is a bas-relief by Missouri sculptor Kris Kuksi. Parker owns three of his pieces, one a blank-check commission. “He just said, ‘Do something huge,’ ” says Kuksi, who met Parker at a gallery show in Philadelphia.
“Being a designer,” says Parker, “a lot of the people I hang out with are creatives. I like the eccentricity, to be surprised.” Whether artists or athletes, he says he’s attracted to people who are “intense, maybe even obsessed.” He regularly hosts dinners for about 25 artist friends to just talk and kick around ideas. One that emerged from a get-together at his friend Lance Armstrong’s house was “Stages,” a recent show of more than 20 commissioned artworks that he and Armstrong cocurated in Paris to benefit the Lance Armstrong Foundation. Another friend, artist Tom Sachs, delighted the crowd with “Lance’s Tequila Bike for Girls,” a modified Trek bike that dispensed tequila in scatologically named shot glasses. “Irreverence inspires me,” smiles Parker, sounding decidedly un — CEO — like. And no, he doesn’t check Nike’s share price daily, fret about 10-Qs, or try to game the news cycle, no matter what messes his athletes get into. Obsessed people make messes. It goes with the territory.
Obsession comes naturally to Parker. As a champion teenage marathoner, he routinely modified his own running shoes in search of better performance. Now, the designs he once called his “delicate creations” are so deeply embedded in the success of the company that he’s lost track of the number of patents he holds. One is for Visible Air technology, which he created as a side project; it helped catapult Nike out of the doldrums in the mid-’80s. John McEnroe, Kobe Bryant, Olympic athletes, and your high-school’s cross-country star — he’s shod them all. Bryant, fresh from the Lakers’ play-off victory and his MVP award in June, describes meeting Parker, then Nike copresident, in 2003 and watching him whip out his notebook to sketch while they talked. “I knew right from that that we were on the same page,” Bryant says. “He’s not doing things just for innovation’s sake. He truly wants to optimize my performance.”
Parker isn’t an attention-seeking sort of CEO, so until now it has been hard to get a sense of him. But the imprint he is making as CEO is turning out to be as meaningful as his design work. Putting his stamp on Nike as forcefully as the much splashier cofounder Phil Knight did, Parker has reorganized the company into units based on particular sports, “a conscious decision to sharpen each piece of the business so we’re not some big fat dumb company,” he says; reshuffled its regions to put new emphasis on China and Japan; streamlined the reporting process and removed regional middle management; handled a rare round of layoffs; and weathered yet another scandal involving a high-profile endorser. The company came out of the recent downturn with strong revenue numbers and earnings up 53% for the most recent quarter.
I met with Parker in Beaverton just a few weeks after he and his executive team impressed shareholders and analysts in their first public investor meeting in three years. Parker used some big talk — “Nike’s infinite marketplace” — to set some big goals: increase sales by more than 40%, to $27 billion by 2015; meet a set of equally ambitious sustainability benchmarks; grow earnings 7% a year; and keep 33,000 employees thinking as nimbly as possible. “It’s like a framework as opposed to a process. We need that organic-ness to be an innovative company that’s continually challenging itself,” he says. He characterizes his challenge as a struggle to mix his right- and left-brain strengths: “It’s about balance.”
But the sketchbook is never far away. “Always, always, the elite athlete” — the Jordans, the Bryants, the Armstrongs, whose unparalleled abilities make them ideal lab rats for new products — “still leads our design. What we learn from them is who we are,” he says. Mark Parker, collector, CEO, cobbler to the gods.
Parker is sitting in on a product meeting in Nike’s secretive Innovation Kitchen, a think tank for designers where athletic ambition, art, and a bit of mad science are cooked into the stuff that has made Nike the dominant player in sport shoes and apparel. The Kitchen is a free-range creative playpen, with every type of tool, material, machine, toy, instrument, software, game, and inspirational image at the ready. Nike Free, the training shoe that mimics the benefits of running barefoot, was born here. So was Flywire, the ultralight thread system inspired by a suspension bridge that has changed the way shoes are constructed. The Kitchen is so secure that most employees aren’t allowed in. The Kitchen and its earlier R&D iterations are also where Parker spent most of his time before he became CEO. “I think his heart is still here,” says Michael Donaghu, director of footwear innovation. “He still likes to just pop in and start talking to people about stuff that’s on their desks, particularly their side projects. He can’t help himself.”
On the table in front of Parker is an abundant display of shoes, sandals, gear, and what might be a digital Etch a Sketch that you stand on; at the head of the room, under a drape, waits a shiny prototype of a new image-transfer gizmo that will allow the swift customization of shoes at retailers and special events. Unveiled, it lurches to life after a few false starts; a mildly acrid smell fills the room as the machine’s mother shyly explains the process and affixes some art to a sneaker. “It looks like the fortune-teller machine from Big,” someone jokes. It does. Parker and the team applaud good-naturedly when the demo actually works. Although the alarm on his watch prompts him to leave after an hour, Parker continues to listen raptly to each presenter, asking questions and studying their wares. Afterward, as I continue the Kitchen tour, I spot him, now very late, perched on the desk of a designer, chatting happily and poking through a pile of midsoles and uppers. “I told you,” says Donaghu.
Though Parker later tells us that not everything he saw at the meeting will get a green light, he’s careful not to shut people down at meetings. “I prefer to let people share what they’re working on. And I don’t like to embarrass anyone.” He repeats a mantra I hear early and often: Edit and amplify. “I’m trying to amplify the innovation agenda further, and short-list the things that will make the biggest difference. That’s an art and a science.”
Back in 2003, Phil Knight passed over Parker for the top spot, bringing in an outsider, William Perez, from S.C. Johnson. It was a move that was widely misread as a snub. “It didn’t upset me,” says Parker, who was part of the team that vetted CEO candidates. “It wouldn’t be honest to say that I didn’t think about it, though. I trust and respect Phil, so I decided to learn from it.” Knight explains that he thought it was time for an outside look. “I’d been CEO for almost 40 years. The company worked around my idiosyncracies so much that they didn’t know that they were idiosyncracies anymore.” But Nike’s unique culture chewed up Perez in less than 18 months. Sandy Bodecker, now VP of Nike global design, was so unhappy on Parker’s behalf that he says he “made a vow never to actually meet the guy.” They once presented on the same stage — Perez exiting left as Bodecker entered right. They even stood shoulder to shoulder at the urinals in the men’s room. “I chose not to introduce myself,” Bodecker smirks. Ultimately, Knight says, “Yeah, it was a mistake. We’re not for everyone.”
Parker came by Nike honestly, the way that all the early employees got there, as a “running puke” — “even more extreme than a running geek,” he says — lured by the siren song of an unlimited supply of revolutionary shoes. In the mid-’70s, he was a champion runner for Penn State, part of what was then one of the most scientifically managed track-and-field programs in the country. At 6-foot-4, Parker brushed the scales at 130 pounds. “I looked like a praying mantis,” he says. He customized his own shoes by cutting the soles and experimenting with foam and homemade sock liners. He turned, ironically, to sheets of Nike-made waffle-sole material that he got from local shoe-supply shops. “I might run in an Asics Tiger shoe and put a waffle bottom on it,” he says. “The cushioning was so much better.” He sounds wistful as he recalls his first pair of Nikes. He got them by mail order. “Waffle trainers, red with the white swoosh. I put them on and …” he trails off.
The fourth of seven kids, Parker grew up in a busy household in Stamford, Connecticut. His father was a lifelong IBM engineer, his mother a psychiatric nurse. “I was a pretty independent kid,” he says, but not particularly artistic. “I thought maybe I’d be a veterinarian or an environmental lawyer.” After he graduated from Penn State in 1977 — he majored in political science because “I had to pick something” — he was hired by Jeff Johnson, Nike employee No. 1, and “took what was basically an avocation, design, and turned it into my life.” He worked in the company’s dusty R&D facility in Exeter, New Hampshire, testing products and enjoying the brotherhood of athletes cum shoe dogs, trying to figure out what they and Nike were going to be when they all grew up. Bodecker, the now legendary codesigner of Flywire, was a broke ski racer in 1980 looking to get his hands on cutting-edge training shoes when he agreed to try the only pair available, two-and-a-half sizes too small, to get into Parker’s testing program. (“I had no idea the shoes didn’t fit,” says Parker.) Former pole vaulter Tinker Hatfield was working as an architect at Nike when Parker spied some sketches of shoes on his desk and pointed him toward R&D. Hatfield is now the father of some of the most iconic shoes ever made, including the Air Jordan.
Parker’s own success at Nike has had much to do with his philosophical alignment with the company’s other cofounder, Bill Bowerman, the very first cobbler to the gods. In 25 years as track coach at the University of Oregon in Eugene, Bowerman had only one losing season and trained 31 Olympic athletes. Subjecting his athletes to rigorous study in the service of making the perfect sneaker, he famously cooked up shoe soles using his wife’s waffle iron. His sketches, brought to Japanese manufacturers by his new partner and former student Phil “Buck” Knight, became the first Nikes. His quirky, bespoke creations were worn by Nike’s first famous elite athlete, Steve Prefontaine, the explosive three miler who broke all existing records before he broke hearts with his early death in 1975.
Bowerman was famous for brutalizing young designers bearing prototypes, whipping out a scale and mocking the weight or construction. He greeted interlopers from Nike’s East Coast outpost with rugged bluntness. russia has siberia, nike has exeter read a sign over his desk. Parker largely escaped Bowerman’s wrath, partly because he was an actual athlete, but mostly because he was that good.” I witnessed more of the brutality than felt it,” says Parker. “There was no filter from his brain to his mouth. I found it really refreshing to know what he was thinking.” Parker’s unusual ability to remain calm in the face of passionate exchanges has helped him thrive in an environment filled with highly competitive people driven to succeed. But Bowerman’s coaching technique — he created personalized training programs for each athlete, unusual back then — informs Parker’s management style to this day. “I spend a good deal of time coaching executives now,” he says. “Each person needs something different to succeed. It’s a Bowerman approach.” He also mentions Margaret Wheatley, author of Leadership and the New Science, a meaty exploration of Newtonian physics, chaos theory, and business: “Her premise is that the energy in an organization is a product of the relationships between people” — not creating an org chart and then putting people into the boxes, which “I think is exactly backward.”
The ’80s were a mixed bag for Nike. Parker describes the early ’80s as a frantic time, with the company going through “some choppy water within a general industry malaise.” Knight puts it more starkly. With net income down 75% year over year in 1985, “Reebok had just gone by us in a fairly big way,” he says. “It was serious. We didn’t like that.” And Nike wasn’t the high-tech R&D emporium it is now. When Parker arrived from Exeter’s Siberia in 1981, it was more of a shoe shop. Donaghu, then a college runner, interned for Nike in 1988. He remembers joining a small team that relied on mimeograph machines and still telexed handwritten instructions to the factories in Asia. “I finally brought my little Apple that I used in college just for documents,” he says. “It was the first computer in the design part of Nike.”
With Reebok breathing down the the company’s neck, Darwinian battles were waged for resources and support. While the company cast about for ideas, Parker, Hatfield, Bodecker, and a few others hunkered down to skunk-work a new generation of shoes. Their nickname inside Nike was the “Speed Group,” but Parker recalls, “We also called ourselves the SWAT Team.” Working under spartan conditions, Parker pulled off a miracle — a technology called Visible Air. The concept was simple on paper: Take the cushioning element embedded in Nike’s existing Air series and cut a window in the sole so that people could actually understand the effect. The trouble is, the window kept popping. “I was working on it as a side project,” says Parker, along with developing a cross-training shoe with Hatfield.
By 1986, Parker had a prototype ready, and Knight let him show it to the board. In 1987, a suite of shoes called Air Max — running and basketball models and Parker and Hatfield’s cross-training shoe — debuted at a trade show to tremendous buzz. “Parker made a terrific product,” Knight says. That same year, Nike teamed with ad agency Wieden+Kennedy to make a splashy ad called “Revolution,” set to the original Beatles song. The choppy, fast-cut black-and-white commercial mixed images of everyday people and Nike athletes, and outraged Beatles purists. “But it really made a complete campaign,” says Knight. “Nike Air relaunched the whole brand. It was a huge moment for the company and for Parker, too.”
At the same time, an unexpected audience for Nike was developing. Hip-hop artists, DJs, designers, and other influentials were using the shoes that Parker and his team were creating to compete for nothing else than style points. The Air Force One, which arrived in 1982, turned the heads of uptown scenesters. “It looked different from any other basketball shoe, white on white,” says Dan Cherry, currently the managing partner and director of brand strategy for the marketing firm Anomaly. (While at Wieden+Kennedy, Cherry worked on the 25th anniversary of the iconic Air Force One.) Then came the Air Jordan series. In 1985, the shoes were such a colorful deviation from the basketball norm that Michael Jordan was fined $5,000 by the NBA for wearing them. A cult following was born, expertly stoked through marketing. In 1988, Mars Blackmon, director Spike Lee’s alter ego, started appearing in a funny series of ads starring Michael Jordan and directed by Lee. The next year, Lee referenced the fierce earnestness of sneaker culture in Do the Right Thing when a character melts down after his spotless Air Jordan Cement IVs are defiled by a clumsy Celtics fan. By the time Jordan dazzled on the 1992 Olympic Dream Team, the world wanted to be like Mike.
There was no one better poised to amplify the sneaker’s aesthetic appeal than Parker. “That was part of Mark’s genius,” says Cherry. Parker found a natural source of inspiration in his artist network, including graffiti artists Stash and Futura 2000, artist and toy designer Kaws, and even rapper Kanye West. The company began churning out artist retakes of classic Nike shoes, all highly collectible, deftly creating scarcity by meting out limited supply to small specialty stores and ultrahip fashion retailers. Parker’s own top-shelf designs for HTM, a collaboration with Hatfield and Japanese designer Hiroshi Fujiwara, can sell to collectors for as much as $1,000 a pair. As the rich, famous, and fashionable began to sport colorful Nikes, clothing designers began to retool their collections to accommodate the sneakerhead lifestyle. Fashion designer Alexander McQueen owned 150 pairs.
The relationships with artists that Parker has built as a collector and fan have had an added benefit. For the better part of this decade, Nike had been trying to make inroads into action sports, particularly the highly insular skate market. “Our reps, especially, kept hearing from people that we couldn’t be relevant here,” admits Parker. Acquisitions — Hurley for surfing in 2002 and Savier for skateboarding in 2004 — were not enough. “The mom-and-pop specialty shops in particular had a tough time believing a big corporation had any business there. And we struggled, and it embarrassed me. We weren’t authentic.”
To build credibility with skaters, Bodecker and Parker tapped artists such as the Los Angeles graffiti-and-tattoo-design star known as Mr Cartoon to design limited-edition shoes, logos, and apparel. “I used to fly to Japan in the ’90s to buy the Air Forces and Jordans you couldn’t get here,” says ‘Toon, who has inked Eminem, 50 Cent, and Christina Aguilera. “And now I make them.” Nike has allowed him to create a platform, holding specialty events in the United States that advocate design and self-discovery to Latino youth. “We did 50 last year alone,” he says. Os Gêmeos, twin Brazilian street artists, painted huge murals in Europe for the 2006 World Cup for Nike and created limited runs of shoes. Their work appeals to the very crowd Nike is trying to impress. No overpriced marketing grunt could pull off this kind of authenticity. “It’s not the kind of thing where you say, ‘Get me something cool to debut for the tattoo community in the third quarter,’ ” says Cherry. “Mark gets the irreverent beauty of real artists and real subcultures.”
Parker refuses to take credit for Nike’s hipster appeal. “I think it goes back to Hayward Field,” he says, referring to the early days when Bowerman’s home track at the university was the best R&D lab Nike had. “We used to make the wildest-looking shoes that you couldn’t buy,” he recalls, and people would crowd around the athletes as they queued up for a race to ask about their shoes. To this day, he says, athletes understand the psychological advantage of the aesthetics of what they wear. “It’s what people wanted then — to feel like they were special. And that’s grown into a whole global culture.”
For all the hush-hush design thinking and fashion lust its products generate, Nike has had some not-so-secret problems, among them disgraceful working conditions, including child labor, in the Asian factories that produce the goods. Add on energy use and carbon inefficiency, and the need for innovation is clear. Parker ticks off a laundry list of opportunities, all related to design: “Materials, componentry, construction methods, manufacturing methods, the whole digital revolution. Knitting technology that allows you to make completely sustainable design and footwear without any cutting and stitching, without any archaic manufacturing processes. We’re embedding all that thinking into the product.” But never at the expense of performance. “The entire process becomes sustainable; it’s not just a ‘green’ footwear line.”
Hannah Jones, Nike’s vice president of corporate responsibility, is Parker’s frontline commander, sitting a few doors away and reporting directly to him. Her first audit discovered some $800 million a year in wasted materials. Working with Parker and product designers, Jones and her team — which now numbers some 130 — examined all processes for efficiency, toxicity, energy impact, and safety. What has emerged is an evolving series of metrics, the Considered Index, that helps determine the environmental impact of each item Nike makes. The company is now focusing on the supply-chain and manufacturing elements that impact working conditions in the 20% of its contractors’ factories that produce 80% of its goods. By 2011, Parker has promised, all shoes will meet a minimum standard. “But it’s a never-ending challenge,” he says. “There’s no finish line.”
Nevertheless, he is delighted that the index has inspired a new creative tension inside Nike. A software tool based on the index allows designers to see the environmental impact of their design choices and gives them a benchmark to shoot for. They compete with one another as they work. “We’re not creating a green product for the sake of doing it,” he says. “We’re creating a whole new way of design.” And the company is sharing what it is learning. In 2005, Nike debuted a sneaker without the toxic solvents long used to bind the sole to the shoe; the formula for the new adhesive is now available through the Green Exchange that Parker announced at the World Economic Forum in Davos this year. And in 2006, after a decade and a half of research and millions of research dollars, the company removed a greenhouse gas known as SF6 from its famous Air pockets. There was no announcement.
Parker has become a visible champion for sustainable thinking and a quiet star at Davos, leading conversations with CEOs from giants such as General Mills, Kaiser Permanente, Renault-Nissan, Swiss Re, Telstra — even Facebook and Hunch. “Populations are exploding. Emerging markets are getting more power,” says Parker. Disruptive change is on everyone’s mind. “There’s this internalization of how critical it is to deal with sustainability. As we’re out here trying to wave the flag, it’s very satisfying to see that.”
“And why the blankety-blank are you now in the MP3 business?” Parker is telling stories at dinner, this one about a call he got from Apple’s Steve Jobs. We are in a private dining room at one of Parker’s favorite Portland restaurants. The waiter, also a bit of a pal, pops in periodically to check on us. And to chat up Parker. The waiter has six marathons under his belt, and he’s feeling hinky about the seventh. “San Francisco next month,” he pauses. “Hills.” He feigns a shudder. Parker smiles. That his world shifts easily from waiters to Mr Cartoon to Lance Armstrong and back says a lot about the man. He is open, curious, and wanting to connect with people doing their thing. “You’ll do great,” he says. They talk strategy.
Facing Jobs, however, Parker conceded defeat. Nike had partnered with Phillips in 2003 to make an MP3 player that would help connect a runner with music and his or her own workout stats — distance, speed, calories, and so on. “Nobody remembers it, but it was a best seller at the time,” says Parker. (One look back at the online reviews explains why nobody remembers it.) Jobs called Parker and didn’t mince words: “Why are you doing this? It’s not your core business!” Parker flew down to Cupertino for a face to face; what resulted from the meeting was Nike+, a nifty sensor that goes in the bottom of a running shoe and feeds workout stats to an iPhone or iPod and through social networks. Today, says Trevor Edwards, Nike’s VP of marketing, social features allow millions of people to feel they’re part of the planet’s largest running club. “We now have 3 million members who have run 182 million miles,” he says. It took 18 months, and Nike spent a rumored $1.6 billion on the launch.
But Parker saves the best part of the story for last. Jobs — a New Balance wearer who typically shows up for only his own product extravaganzas — joined Parker onstage for the Nike+ debut in 2006. “Oh, he wore Nikes,” says Parker. He smiles.
When the conversation turns to Tiger Woods, though, Parker gets serious. “I learned about it the way everyone else did,” he says of the messy swirl that became Woods’s downfall. Parker, part of the Nike full-court press that recruited Woods as he turned pro, clearly likes him. “He sat right there,” Parker says, pointing to my chair. “I knew his dad.” Still, when the news broke, Parker trod lightly. “We made efforts to connect with him. He went really quiet, shut himself off from everybody; so it was difficult.”
Ultimately, he says, Nike handles issues like this on a case-by-case basis. “What does what’s happening mean to what we should be doing? And, yes, character also matters.” But, he says, “we didn’t want to convict him through the media.” And as Woods reemerged into his professional life, Parker didn’t shy away. Nike released an ad with a silent and contemplative Tiger and a voice-over from his now-deceased father. It was instantly polarizing. “I knew that it would be controversial. Some people thought it was creepy,” he says. “It was the voice of the athlete, and we’re committed to that.”
For Parker, the elite superstar may be the lab rat of choice to start the design process, but his heart remains with the everyathlete. Paula Radcliffe, the British marathon star, describes watching the CEO and his wife, a world-class runner who is now a high-school track coach, at the national high-school cross-country championships that Nike hosts every year. Elite athletes are invited to race with the kids and spend the day mingling with them. Despite the rainy Oregon day, the Parkers eschewed the VIP tent. “They were going wild, and they seemed to know everyone by name,” says Radcliffe. “They were as inspired by the kids as they were by any of us.”
“There’s a certain energy and purity and passion in the relationships between the parents, kids, and coaches, and the love of team,” Parker says. In their way, these folks are as obsessed as a Kobe, or a Radcliffe. “It’s as important for me to be there as with record holders and Olympians. These are the people we’re serving.”
Parker has made sure that everyone knows that. Nine years ago, he recalls, “Phil wanted us to work on a new mission statement.” The previous one — “To be the No. 1 sports-and-fitness company in the world” — was old news. Parker’s choice: “To bring inno-vation and inspiration to every athlete in the world. (And if you have a body, you’re an athlete.)” He also put together nine maxims, quirky guiding principles for Nike. The one he thinks about most is No. 6, “Be a sponge. Curiosity is life. Assumption is death. Look around.” It’s a nod to his grandmother Helen Parker, who spent hour upon hour with her quiet grandson, walking in the woods, sharing her observations about the world. “She was engaged and learning new things until she passed,” Parker says. “That was always her advice to me. And it really worked.”
Letter from the CEO
Released to Public
First I was an athlete. Then a designer. Now a CEO. But I’m still an athlete and a designer. Like everyone, I view the world through the lens of my experiences. And so I’ll talk about a few things I’ve learned along the way and why I am committed to building a more sustainable company and future.
Designers are curious. They scan and observe and notice what is unique rather than what is obvious. Their curiosity often shows an object or process to suffer some deficit – a lack of function or performance or style or relevance – and they are compelled to improve it. Just as often, designers see not a flaw but an opportunity — and they feel compelled to seek solutions.
Innovators are composers. They see connections where others see only dots. It’s all about relationships and possibilities. They understand that the elements of invention are not the notes of the song but rather the spaces in between — new technologies, unique behaviors and unusual partnerships. And they have absolutely no fear of failure in exploring these possibilities.
Sports created Nike, but design and innovation made it grow. Our challenge — and our opportunity – is to use all three to help people reach their true potential.
We have always obsessed on performance – make it lighter, faster, tougher, more relevant — all to enhance the experience of sport for all. In the early days our “systems” consisted of only those things that helped us build better shoes and shirts, and ads and events. We are, after all, a consumer products company.
It took us a while, but we finally figured out that we could apply these two core competencies — design and innovation — to bring about environmental, labor and social change. We opened the aperture of our lens and discovered our potential to have a positive influence on waste reduction, climate change, managing natural resources, renewable energy and factory conditions. We saw that doing the right thing was good for business today — and would be an engine for our growth in the near future. With each new discovery and partnership, we willingly gave up old ideas to shift our thinking toward a better, smarter, faster and ultimately more sustainable future — financially, environmentally and socially.
There were many teachable moments along the way. I’ll offer six:
- In the early ‘90s, we came under intense scrutiny for labor conditions in our supply chain. Our critics were smart (and right) to focus on the industry leader. Our first reaction was to defend the practices prevalent in developing economies. Soon, however, we learned that the path to change that status quo is paved by collaboration with multiple stakeholders. We had a lot to learn, and there were people who could coach us. In those days the Internet was brand new, but we began to see the power of instantaneous information and new communities enabled on a global scale. We suspected that a new model was being born – one that would tap into the wisdom of diverse contributors, where collaboration was more important than proprietary secrets. We learned to view transparency as an asset, not a risk
- Another hard lesson came after years of pushing our suppliers with monitoring and policing tools. We thought that we could be a unilateral force for systemic change. Instead, we learned that meaningful reform was not going to come from external pressure alone. Awareness and monitoring of any mandated Code of Conduct had to be embraced and enforced at the local level. And it had to be based on real business-based solutions driven by strong market signals. If we are to enable systemic change, we can’t do it alone. We need partners. We need collaboration from industry, civil society and government. And we need to show the real benefits of lean manufacturing and human resource management
- For years we used SF6, a global warming gas, in our Air Soles. It was a legacy technology that had to change going forward. But it was incredibly difficult to engineer a solution that replaced SF6 with a benign gas without sacrificing the performance of our products. After much trial and error over several years, the Nike R&D team devised a way to replace SF6 with nitrogen, which virtually eliminated the release of CO2 equivalent and actually improved the performance of our Air Soles. It was a moment of clarity that showed us a risk could become an innovation. It launched us on a continual search for similar advances in sustainable technology and performance
- As we thought about how to reduce the environmental impacts of our products, we realized it had to start with our design community. So we worked back upstream from the finished product to the earliest stages of design and development. From the first glimmer of a product concept, we would consider everything involved in bringing a shoe to market – from raw materials sourcing to transportation – all aimed at minimizing our environmental impact. This gave birth to our Considered Index that measures the effective use and management of resources. The focus on design as a key enabler of system change taught us that, while retrofitting the past or the present yields significant benefits, prototyping the future can unleash disruptive and scalable innovation
- We have many tools to use in our commitment to a better world – our investment in the Nike Foundation and The Girl Effect, our policy advocacy work on climate and energy policies, LIVESTRONG and the fight against cancer, and the N7 Native American product line where revenue returns into the community to name a few. These successes prove that Nike can be a catalyst with significant ripple effect. We have ambitious goals around scaling environmental, social and labor-related change. But we know we can’t do everything, and we can’t do it alone. So we decided to focus on a few key areas where we know we can mobilize awareness and commitment – with our employees, our consumers, policy makers, civil society and among members inside and outside of our industry. And that has made all the difference
- And we continue to build and upgrade our facilities to leverage new technologies – solar arrays on the roof of our fitness center, windmills that power our distribution center in Laakdal, our LEED-certified daycare center, and much more. We’re continually investing in a smart, responsible and sustainable home for Nike around the world
This report is published at a tipping point. It’s time for the world to shift. All companies face a direct impact from decreasing natural resources, rising populations and disruption from climate change. And what may be a subtle effect now will only become more intense over the next five to ten years. Never has business had a more crucial call to innovate not just for the health and growth opportunities for our companies, but for the good of the world.
Ten years ago, few companies had a corporate responsibility team. Today, we’re evolving beyond the words corporate responsibility to a “sustainable business and innovation team.” We see sustainability, both social and environmental, as a powerful path to innovation, and crucial to our growth strategies.
I grew up in design and innovation. I grew up at Nike. And for all the athletic and cultural and financial successes of the company, I believe our work in sustainable business and innovation has equal potential to shape our legacy. For that to happen, we have to focus on the lessons we’ve learned:
- Transparency is an asset, not a risk
- Collaboration enables systemic change
- Every challenge and risk is an opportunity
- Design allows you to prototype the future, rather than retrofit the past
- To make real change, you have to be a catalyst
The challenges we face are huge, but the opportunity is even greater if we act now — new business models, new markets, new services and products — all based on our commitment to innovation.
There is now only one path and it leads to greater sustainability, equity, growth and prosperity.
President and CEO, NIKE, Inc.
Nike Brand Marketing and Promotions
March 21, 2011
Moderator (Insert Name)
The aim of this focus group is to see how Nike’s brand marketing strategy affects male college students aged 18 to 21. This is in order to determine the rate at which Nike’s marketing campaign can influence college students to purchase their products. This project used 6 participants 2 of which were 18, 3 were 19, and one was 21.
For the sake of this project, I will refer to the participants by their age with a number 1-3.
Focus Group Questions
- Do you wear Nikes?
- When your purchased your shoes, was it because of an advertisement that you heard/saw?
- What is your favorite Nike product?
- Do you consider yourself a loyal Nike costumer?
Focus Group Answers
Do you wear Nikes?
18 #1: Yes
18 #2: Yes
19 #1: Yes
19 #2: Yes
19 #3: Yes
21 #1: Yes
- When your purchased your shoes, was it because of an advertisement that you heard/saw?
18 #1: Yes, I purchased the new Air max’s the first day the came out.
18 #2: Yes, I bought the shoe that was being advertised in store at the point of purchase.
19 #1: Not at all, I really just wanted a shoe for a good price.
19 #2: Yes, I wanted the new Air Force brand shoe and had waited almost a year since their last release.
19 #3: No, I just needed some running shoes.
21 #1: Not really, the last time I purchased nikes was for my church basketball team.
- What is your favorite Nike product?
18 #1: I love their shoes! Air max’s to be specific.
18 #2: I like any of their shoes, I have recently developed an interest in their nike shox.
19 #1: I don’t have a favorite, per se, but broadly speaking, I would say their shoes.
19 #2: Air forces, I literally have a collection of almost every variation of the shoe.
19 #3: Their running shoes I guess. The shox that I have now work really well, so i guess the shox.
21 #1: Any of their basketball shoes I guess.
- Do you consider yourself a loyal Nike customer?
18 #1: By all means, yes. They should sponsor me to wear their clothes.
18 #2: Yes, I guess so.
19 #1: Not really.
19 #2: Yes, my friends all refer to me as a sneaker head.
19 #3: I wouldn’t go that far.
21 #1: Yes, specifically in terms of their athletic shoes.
From the focus group that I conducted, I have concluded that males 18-21 are very likely to own at least 1 pair of nike brand shoes. That becomes increasingly likely if the participate in sporting events. Additionally, males who follow the release of shoes, are likely to purchase and follow the release of shoes.