Nike Inc. (NIKE) is the world’s largest marketer, and distributor of athletic footwear, apparel, equipment and accessories for specific athletic use for men, women, and children (Nike, 2016, n.p.
). NIKE has some “cool” elements such as the trademark “Just Do It,” and symbol “Swoosh”. Before, the Swoosh symbolized a wing of the Greek Goddess Nike, now, its fat checkmark has a richer meaning inspiring devotion (Carducci, 2003). According to Lambe research (2011), Nike has a “strong product/service competitive advantage” (p. 42) built on product innovation that cannot be imitated by the competitors such as Adidas, Under Armour, others. These brands are regularly provoked by the new accomplishments of Nike that has the superior customer service skills, assets (patents, locations, technology) because it provides a unique product that is valuable to customers beyond the price (ibid).
In 1964, Bill Bowerman and his trainee Phil Knight founded a company called Blue Ribbon Sports (O’Reilly, 2014). It was the period of the irresolute end to the Vietnam war, economic “stagflation,” and the energy shortage. Nike’s success was due to the rise of physical culture in the 1970s (Carducci, 2003).
Bill and Phil realized the value of motivating people to participate in sports to start getting in shape regardless of their financial, social or geographical circumstances. The history of the company started by Knight’s thesis paper about innovation and the ways of competing against the German industry leader Adidas in the U.S. (ibid). He visited Japan and made an agreement with a low-priced but quality athletic shoe Japanese manufacturer to be the only distributor in the United States (ibid). In 1971 the name was changed to Nike, Inc. and was introduced at the Olympic Trials. In 1979, it won 50 percent of the U.
S. running market and by the end of the 90’s had become a global brand.NIKE’s value proposition addresses accessibility by offering a wide variety of superior products made of the best materials and with the latest technological innovation (e.g. “Zoom Air” running shoe-line) focusing on cutting-edge product designs, customization (NikeID, Shox), and brand partnering with the world’s athletes. With a mission to “bring inspiration and innovation to every athlete in the world”, at NIKE, it seems like there is no significant differentiation between customers (Nike, 2018, n.p.
). But demographically speaking, NIKE serves generally male and female with age range from 15-55, psychographically, it includes customers with an active lifestyle. Having objectives to increase sales growth annually, meet the demands and requirements of the target market (kids 7-12), make the sustainable development of product worldwide, and setting industry-leading standards, NIKE has a basis for measuring the success of marketing plan. The successful four Ps strategies have been carefully designed to satisfy the target audience.
NIKE’s four P’s strategies are as follows:Product: NIKE’s top-selling product categories are running, basketball, children’s, cross-training and women’s shoes as well as authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports (athletics, baseball, ice hockey, tennis, cricket, soccer, lacrosse, basketball), fitness activities under Nike, NikePlus, Hurley, Converse brands. Recently, they have released the Air Zoom Mariah Flyknit Racer iD shoes (vs Adidas Boost). They are breathable, lightweight, durable, supportive with a dual-density foam midsole and the soft and flexible outsole. Alongwith Apple joint venture, they developed iPod Sports Kit to redesign shoes that sync with the sensor. The data measured and recorded by the kit, allows Nike to expand its market share.
The Shox technology provides comfort to the heel. Through the creation of interactive choice boards, the customers can design the pair of running shoes with delivery, and price options (Winer, 2011).Price: NIKE’s marketing strategy consists of appealing style, attitude, premium quality brand enhancing athletic lifestyle in consumers’ minds. For the NIKE’s logo, the powerful brand representation and its brand association, customers are willing to pay higher prices (the Air Zoom Racer $170 vs Adidas Boost). All of these commands premium prestige pricing based on customer value to maximize profits by capturing the consumer surplus.Place/distribution: E-commerce has helped the company flourish thanks to the partnership with UPS to support online sales. NIKE has more than 15,000 retailers in the US, and more than 190 countries around the world (Soni, 2014). NIKE has used value-based pricing strategy that relies on outsourcing its product manufacturing to China, Japan, and Vietnam, while expanding the market share through its distribution channels: retail stores, Niketown outlets, NikeiD website (phone, email, and live chat).
Flagship stores shoppers can get notifications on their smartphones with information based on their personal shopping needs. In addition, exclusive products and services can be accessible only to NikePlus members offering one-on-one assessments by Nike Experts to “give personal shopping advice and tips on reaching athletic goals” (Stern, 2017, n.p.).
Such approach will promote loyalty and create an experience in a new way.Promotion: NIKE’s digital buzz marketing and advertising on social media, brand events, TV, print billboards, and “word-of-foot” (with the help of athletic champions) use emotional branding technique of Heroism. Although, “hero athlete” with a bad behavior in a real life, can be under fire (Kalb, 2013). It uses personal selling at retailers, direct marketing in colleges, sports teams, sales promotions (coupons, special offers), public relations (workshops, charity sponsorship).Originally, the company had used a cost-plus model but as of 2014, NIKE has taken a new consumer value model approach by increasing its prices because the customers are willing to pay more (MacLeod, 2015).
Innovative ability keeps its pricing power and competitive advantage. According to Nike’s 2014 annual 10K, the total brand revenue increased by 11 percent because footwear unit sales increased approximately 7% (Kota, n.d.
). For 2017, NIKE Brand footwear (mostly the Jordan Brand and Running) increased 8% due to price increase but in the fourth quarter of 2017, net income growth is (8.91%) (CSI Market, 2018). Unfavorable changes in foreign currency exchange rates decreased the gross margin (Kota, n.
d.). “Nike faces the risk of stagnation in key markets… (China, Japan, Europe, Brazil, and Russia)… that may impact Nike’s ability to continue with price-hiking strategies” (Zgonsalv, 2016, n.p.).
The fact that North America, as the largest market, shows flat sales growth; the announcement of selling direct to Amazon, and laying off 1.2% of global employees makes NIKE’s pricing approach questionable (Craver, 2017). Time, the amount of income, availability of substitutes, and price impact elasticity. The demand for Nike products is price inelastic because of the impact on the quantity demanded. Skimming pricing strategy eventually impacts the customer’s decision.The industry has reached a level of maturity, with the exception of trendy items influenced by technological advances that will also cycle much faster than traditional items. Having a more fierce competition at this stage, we would recommend to apply a discount pricing strategy and differentiate their product lines (as it was done by Adidas, Puma, according to Dalavagas, 2015) because of rapid changes in technology, NIKE’s success depends on consumer preferences and popularity of sports activities. Besides, using mascots in buzz marketing strategies instead of endorsements and sponsorships of “hero athletes” with a bad reputation (e.
g. Lance Armstrong) cannot damage the image. Technologically innovative product differentiation, competitive strategy and allow NIKE to effectively meet the needs and wants of the customers and maintain its niche while offering the recommended lower pricing approach on the quality products to capture a greater hold of market share.