Nike is among the top sportswear brands. The company was established in 1962 by Phil Knight. The company is also known for a wide range of sports gears and equipment, for instance, balls, rackets and many more (Goldman and Stephen 1). Nike’s popularity among the athletes has grown tremendously thanks to its exclusive collaboration with Apple Inc. The two companies have teamed up to develop products that can monitor athletes’ performance. The data is transmitted and stored in Apple gadgets, for instance, iPhones and iPad. The data can be downloaded and analyzed (Jones 1).
Since the 1980s, marketing has been a significant part of Nike’s business strategy. Phil Knight, the founder and former Chief Executive Officer of Nike Inc., recognized that savvy promotion was the only way the company could get in touch with the target market and position its brand in the global market (Neiderhauser 2). As a result, the company usually spends approximately a tenth of its entire proceeds on promotional activities every year. Out of this, a huge fraction goes to celebrity endorsements. The rest of the funds go to conventional marketing operations, for instance, advertising and sales promotion (Regani 4).
The company has a strong belief in the “pyramid influence”, which refers to the impact of a small fraction of celebrity athletes on the products and brand decisions. Therefore, Nike has contracted a number of top athletes from diverse fields to publicize and endorse their products (Jones 1). The company also puts a lot of emphasis on novelty and e-business. They two have contributed to the production of ultra-modern athlete footwear and online marketing portal (Kalb 1).
Merits of the Company’s Marketing Strategy
Marketing strategy and product design are among the most important elements in the company. So as to maintain its supremacy in the global market, Nike effectively responds to fashion trends and changes in customer behavior by modifying its marketing strategies and product mix (Katz 10). The company’s large volume of sales and revenue are largely attributed to its efficient distribution channel. Nike’s items are disseminated on diverse level premise. The premium products are distributed by contracted distributors, whereas the non-premium products are available in the local retail stores at discounted rates. The products can also be purchased directly through the company’s website. The direct sales through the company’s website circumvent the intermediaries by availing the products directly to the consumers at less cost (Jones 2).
The use of celebrity athletes to promote and endorse its products has created a high level of brand awareness among the consumers. The company also employs aggressive advertising campaigns through the mass media. The vigorous advertising and big name support have helped to improve the company’s brand equity. For instance, the Air Jordan line of basketball shoes, which is associated with Michael Jordan, has earned the company billions of dollars (Katz 14).
The company’s brand products are priced at the upper edge to match the general positioning of the company as a high-quality product and service provider (Regani 7). Therefore, Nike fundamentally targets customers who are more concerned about item quality and utility instead of the cost. The consumers who are swayed by quality and utility are always willing to pay whatever price quoted on the product. Therefore, Nike boasts of very loyal and dedicated customers who are willing to pay any price for its products, particularly the premium products (Regani 8). Lastly, the company’s high-status retail presence has been achieved through market segmentation. In fact, Nike is regarded as one of the leading market segmentation strategists. Market segmentation has enabled the company to reach a large number of consumers through a wide range of product lines (Jones 1; Regani 12).
Demerits of the Company’s Marketing Strategy
Despite the fact that Nike’s marketing strategies have had positive ramifications for the organization, they also have disadvantages. Some of the disadvantages include high cost, the negative influence of celebrities and less diversified strategies. Nike’s advertising and promotional strategies are very costly (Jones 1). As a matter of fact, the company spends nearly 10 percent of its global revenue on marketing and promotional activities. As a result, the company has been forced to increase product prices and engage in cost cutting measures to fund its marketing operations. For example, there were allegations that Nike was using child labor in Cambodia to curtail the overall production cost, which had a negative impact on its brand image (Jones 2).
Nike relies on celebrity athletes to promote and endorse its products. However, these athletes can either influence consumers positively or negatively. The activity and state of mind of the selected brand ambassador could have a critical effect on consumers’ choice or inclination. For example, if the athlete is idolized by many people, he/she could influence more people to buy the company’s products. On the contrary, if the brand ambassador is caught up in a scandal, it could adversely influence Nike’s deals and incomes (Kalb 3).
To wrap things up, Nike’s showcasing system is less differentiated than its rivals. For instance, Nike targets mainly youths, whereas Adidas targets everybody (both adults and children). As a result, Adidas tend to attract more customers than Nike (Kalb 3). Furthermore, Nike pays more attention to the U.S. market, while Adidas focus on the global market. Therefore, the company needs to pay more attention to other regions in order to attract more clients and position its products in the emerging markets (Kalb 4).
Uncertainties Associated with the Company’s Marketing Strategy
Nike confronts various risks as an aftereffect of its marketing techniques. These risks are attributed to both internal and external factors. The risks may negatively affect the company’s future advancement, for instance, global market share, overall status, and consumer allegiance. Some of the risks include ever-changing market trends, rapid introduction of new products and overseas expansion (Kalb 2). So as to maintain its status in the global business, Nike needs to be aware of the business sector patterns and customer tastes and inclinations.
However, the company is at a risk of not keeping up with the fashion trend when the changes are taking place at a faster rate. On the off chance that the organization can’t take after the emerging design patterns, it risks losing its market share (Kalb 3). Similarly, the introduction of new products in order to maintain the existing clients and attract new customers can have a negative ramification if the process is so hasty. For example, Nike is known for the production of athletic goods. Rapid introduction of a new product that does not fall under this category may bring confusion. Lastly, Nike is planning to increase its presence in the global market. Global markets come with its risks, for instance, fluctuating currency exchange rates, global economic recession and political instability (Kalb 5; Neiderhauser 7).
How Adidas Inc. can contend with the company
One of the problems Adidas is facing currently is excessive expenditure on traditional advertising and promotional activities. In order to compete with Nike, Adidas should also embrace the use of local and international athletes to endorse and promote its products. However, this calls for massive investment. Moreover, Adidas can enter into partnership with domestic and global sports entities and clubs. This will not only attract new customers, but also generate interest in sports and market the brand.
In addition, the Adidas group should put more focus on rebranding the image of its acquisitions such as Reebok Company. Since the acquisition, Adidas has benefited massively from Reebok and more gains can be realized from its efforts to rebrand Reebok to a highly fashionable line of products for multiple use and active lifestyle. Rebranding will help Adidas to encroach untapped market segments. To wrap things up, the organization ought to present new product offerings that fuse propelled innovation to enhance the performance of athletes. For instance, introducing athlete shoes with implanted chip to screen, measure, and give information on the competitor’s body, landscape and body sway. Cost should not be an issue since Adidas has already developed Adidas 1, which incorporates a microprocessor.
The current promotional techniques used by Nike have merits, demerits and risks. Despite demerits, and risks, Nike’s marketing strategy still remains one of the best in the industry. However, the company should not be contended. Instead, it should constantly improve its marketing strategies to offset the above risks and weaknesses.
Goldman, Robert and Stephen Papson. Nike Culture: The Sign of the Swoosh, Thousand Oaks, CA: SAGE Publications, 1998. Print.
Jones, Steve. A marketing Case Study on Nike. 2012. Web.
Kalb, Ira. One of the Nike’s Core Strategies is in Danger. 2013. Web.
Katz, Donald. Just Do It: The Nike Spirit in the Corporate World, New York, NY: Random House Inc., 1994. Print.
Neiderhauser, James. “How Nike’s Leadership Affects Brand Image Internally and Externally.” Journal of Undergraduate Research 15.1 (2013):1-10. Print.
Regani, Shirisha. Nike-The ‘Goddess of Marketing’, Nagarjuna Hills, Hyderabad: Centre for Management Research, 2003. Print.