Nike Case Study Analysis Psychology

Photo: Vivan Mehra

Executive Summary: Constant innovation has been the byword for Nike's success. This case study analyses the ever-evolving marketing strategies adopted by Nike to become a global brand.

Founded in January 1964 as Blue Ribbon Sports (BRS) by University of Oregon track athlete Philip Knight and his coach Bill Bowerman, the company was initially a distributor for the Japanese shoemaker Onitsuka Co and their brand Tiger. In 1966, it opened the first BRS retail store in Santa Monica, California.

In those days, Bowerman would often rip apart the Tiger brand shoes to see how he could make them lighter and better. He used to take help from university runners to test his creations and collect their feedback. By 1971, though BRS revenue had touched $1 million, the business relationship with Onitsuka was turning sour. So, they moved on from being distributors of athletic footwear to designers and manufacturers of athletic footwear and took full control over their value chain.

In 1973, they called their brand Nike after the Greek goddess of victory. A design student Carolyn Davidson created the famous 'swoosh' logo for $35. Today, the estimated market value of Nike is about $10.7 billion.

In 1973, BRS signed its first endorsement pact with Ilie Nastase, a professional athlete and ATP tennis star. Endorsements have ever since been an essential part of the marketing growth of Nike.

The Innovation Curve:

The company's innovation debut was in 1979 when it introduced air cushioning technology. The shoes featured gas-filled plastic membranes that could be inserted into the sole for comfort during running. Invented in the mid 1970s by a NASA engineer, it kept up the revenue of Nike for long. But in mid 1980s the revenue started dipping mainly because the management did not take note of the aerobics boom. Nike's competitors had by then developed their business in this segment.

In a bid to regain its edge, Nike, in 1987, launched a new product called Air Max. The shoes had two interdependent bags with compressed air inside. This helped in absorbing shocks during running and jumping. The bags can be seen by the athletes (users) through a 'special window' in the heel or toe shoe. Nike also customised the product to suit individual needs by inserting bags of different size depending on the height and pressure exerted by users. This made it easy for a person involved in a particular sport to choose his/her shoes.

The marketing campaign for this product was supported by a memorable TV ad in which the Beatles' Revolution was the soundtrack. It was for the first time that a Beatles song was being used in a TV ad. Riding on the success of this campaign, Nike, a year later, launched an even more empowering series of ads with the tag line "Just do it".

The series had three ads featuring young sportsman Bo Jackson who campaigned on the benefits of a new cross-training pair of Nike shoes. Almost every year after Nike launched its air cushioning technology, it released new versions of Air Max. Currently, Nike has nearly 40 models under this brand name.

Shoes + Technology:

In due course, even the hi-tech Air Max technology was found to be inadequate to entice customers. And it was time for something that would differentiate Nike in the long run. It had to be at once very distant from the core business and also very appealing. The focus was on digital gadgets. It had less to do with shoes and more to do with athletes. Nike's sales philosophy - if you have a body, you are an athlete - had enticed everybody who wanted to think of himself/herself as an athlete or wanted to get more athletic.

Fast forward to May 20, 2006. On this day, Nike introduced its first mass produced gadget, Nike + iPod Sports Kit, in the US market. It was a tool to measure the distance and speed of a run or a walk and was built on a virtually flawless partnership strategy.

Nike was cashing in on the most technologically advanced portable device that could do all the tech work brilliantly. What was it that Nike did for the partnership? It brought the idea and developed it into a business. The company was actually selling just a small electronic chip that had to be inserted in the shoe (preferably a special one, but even a regular shoe would do) and a wireless connection device that had to be plugged to an iPod. All the rest (calculation, storage, integration) was done by the iPod. But it was Nike's product. It paved the way to a truly innovative future of the company.

An upgraded product, Nike + Sportband Kit, was released in April 2008. It no longer needed an iPod and could be connected to the computer directly to download the results. All the next products were an enhancement of this concept. The chip in the shoes was integrated with the iPhone, enhancing the possibility to view, manage and share the tracking results through iTunes.

A Nike + Sportwatch was also introduced in combination with the chip. In September 2010, Nike introduced a running app to be used in the latest iPhones. The app used the phone's accelerometer and so there was no need of a chip in the shoe. Going miles ahead of its competitors with a user community of more than six million people, Nike products were not just dressing up the athletes but also coaching the masses who wanted to be like athletes. Products like Nike + iPod for gym goers and Polar WearLink+ targeted specific needs of users.

The users of Nike+ can not only store and review their results in their computers or devices but also analyse and share them within the community. The whole evolution process has managed to change the concept of what a regular apparel seller is. Through apps, Nike has come closer to its customers and can study them and communicate with them conveniently. In contrast, a regular apparel seller even after spending huge amounts on advertising can only expect to meet a customer in the store when the customer has already made a decision to go and shop there.

Thanks to its technology leap, Nike, it is said, was able to cut down on advertising expenses by 40 per cent without compromising on efficiency and results. The latest Nike products released in end-2012 include Nike + Baseball and Nike + Training Shoes. Yes, it is back to shoes but with lots of electronics, including Nike Chip Skis.

Nike's tech growth was also accompanied by social media initiatives. In 2008, Nike created a Facebook account. Today, each Nike sub-brand has its own Facebook page, which runs product specific promotions and features events in a particular sporting activity. It also provides information on the latest game of endorsed athletes. For example, a Facebook user who wants to know more about the latest basketball shoes or game can turn to Nike Basketball Facebook page.

Nike pairing up with Apple Inc, another company known for its innovative products, was a way to bring into its fold the Facebook fans of the company. This helped the company to increase brand awareness and also reach out to customers who were still in two minds about choosing their brands.

The tie-up with Apple was Nike's realisation that most runners will use iPods or iPhones to listen to music while jogging. So now iPhones and iPods come pre-installed with Nike+ app. With this, iPhone/iPod users can map out their running route and later share it with their Facebook friends.

One of the company's latest products is Nike FuelBand, a wristband that calculates the amount of energy spent during a day. The band tracks the wrist movement, predicts the activity performed and the approximate amount of calories burned.

However, the number of calories spent is not a robust index of energy used because 100 calories burned by a person who weighs 100 kg is not the same as the same amount of energy burned by a person who weighs 50 kg. So, to create a platform where a group of people can compare their energy spent, Nike created a new index called Nike Fuel. This index was actually introduced in the era of Nike+ app but it was not actively promoted until Nike FuelBand was launched.

Compared to other specialised players like Jawbone's UP and Fitbit Flex, FuelBand is rather primitive. But its biggest selling point is the Nike + Fuelband Community on Facebook. The page on Facebook does not say much about the FuelBand. Instead it uses the social media site to motivate its users to get fit.

On this page, every week Nike sets a new challenge for its followers. And it is here that Nike Fuel comes into play. Users can compare the Nike Fuel accumulated and comment on the challenge, motivate each other, share their difficulties and get suggestions on how to improve the general level of fitness.

Conclusion:

Nike has been creative since the start. It has been pushing the technological boundaries of innovation to offer its customers new products and also differentiate itself from its competitors. Somewhere in its evolution, Nike also realised the importance of hi-tech gadgets in day-today lives. So it started to combine new products with hi-tech solutions to give unconventional capabilities to a customer of sportswear.

Nike was also quick to seize the opportunity offered by social media to engage with a wider customer base so much so that it is now able to link its new hi-tech gadgets to social media platforms. The power of such customer contact is phenomenal as it gives greater visibility in a single click, generates interactions among customers and gives the company an opportunity to collect info about customers' choices and preferences. It also gives endless chances for customer segmentation and product differentiation, the pillars of any marketing strategy.

Nike's success lies in its ability to understand how innovation can be used to reinforce brand identity: Simona Botti

'Nike's Move Towards Social Media May Be Potentially Dangerous'


Nike's success lies in its ability to keep the brand modern and relevant in an ever-changing marketplace. It also remains consistent with its original brand identity. The 'Just Do It' tagline epitomises the lonely, rebel runner who aggressively strives to overcome his/her physical and psychological limits.

The brand identity, therefore, is in sync with the ideas of individualism, aggressiveness, performance and empowerment. This helps Nike differentiate itself from its competitors. While Adidas's identity is built on team activities and community achievement, Reebok focuses on fashion and street credibility. Nike's latest hi-tech innovations such as Nike + FuelBand focuses on individuality as it helps users track and improve their athletic performances. But the move towards social media is potentially dangerous as the idea of sharing information and belonging to a virtual community may be at odds with the individualism and rebelliousness of the Nike brand.

Of course Nike cannot ignore the social media but it needs to embrace it in a way that does not impact its brand positioning. The stress on using social media as a platform in which individual achievements are celebrated seems to be the right way to go. The Nike consumer remains a self-focused warrior but one that is less isolated in his/her struggles thanks to Nike technology. Nike's brand management, therefore, is based on continuous revitalisation through gradual delivery changes in the brand's positioning. This approach is less risky than the intermittent repositioning efforts of other brands (for example Burberry Group).

Continuous revitalisation needs constant investment in consumer research with focus on development of brand image and the extent to which brand perception aligns with brand identity. The USP of Nike is not its ability to effectively innovate but in its understanding of how innovation can be used to reinforce its original associations.

Simona Botti, Associate Professor of Marketing, London Business School


Nike took a unique approach for its shoe manufacturing process and occupied the mind space as a maker of athletic shoe: Sunil Chandiramani

'Building models based on customer experiences
'

Innovation is the art of making hard things easy and creating viable business offerings. Innovation has become vital for survival, making it imperative for businesses to rethink strategies, become more nimble and adaptive, not just in product development, but also in building effective business models, processes and customer experiences.

Nike puts innovation at the heart of all its efforts. To run ahead of the competition, Nike took a unique approach for its shoe manufacturing process and occupied the mind space as a maker of athletic shoes. It not only developed new products that created and defined categories but also developed new business models aimed at enhanced performance.

Nike has smoothly overcome local and global challenges varying from sustainable evolution of existing products and markets to create new products, thereby expanding its outreach.

Sunil Chandiramani, Partner & Leader, Advisory Services, EY


Case study provided by the Superbrands organisation.

Market

Sportswear has been a thriving market in recent years. From the moment training shoes began to be seen on the streets in the 1970s, the sports share of the total footwear market has expanded steadily, reaching 21.5% in 1998. UK sports footwear sales in 1998 were £1.05 billion, and the figure is set to top £1.20 billion by 2002 (Source: Mintel 1998). Footwear accounted for an estimated 30% of the consumer sports goods market in 1998, with a further 52% accounted for by clothing, and equipment (18%) making up the balance.

Globally this is a market in which brand is all-important, dominated by 'the big three' -- Nike, Reebok and Adidas. These companies have succeeded in evolving their products into lifestyle icons for millions of consumers across the world. In emerging markets 'the big three' brands are aspired to as symbols of modern sophistication, but they remain equally desirable in the US, Western Europe and other highly developed countries.

Achievements

Nike's growth has been phenomenal. Globally it is a $9 billion company and the largest in its market, having started as recently as 1971. Europe has been the star region for Nike recently, with revenues growing by 23% annually from 1996 to 2000. Britain is Nike's second-biggest market and Nike is the UK market leader, despite being a company with American origins in a country which is obsessive about football. Possibly Nike's greatest achievement in the UK has been to bring a new dynamism to football marketing.

History

The roots of Nike are on a running track at the University of Oregon, which is where the two founders met. Bill Bowerman was the track and field coach there, and during his tenure Oregon produced no fewer than 33 Olympians. He was so determined to help his athletes excel that he made shoes for them by hand in his spare time. Phil Knight was one of his runners. Together they founded Blue Ribbon Sports, the company that became Nike. Initially they each put up $500 to buy some Japanese sports shoes which Knight sold at high school track events out of the back of a car. Their first major athlete endorser was Steve Prefontaine, holder of every US record from 2,000 to 10,000 metres.

The Nike name made its debut in the 1972 Olympic Trials. The company grew steadily until it held half of the booming US running footwear market by 1979. In that year Nike introduced AIR technology. It became number one in the US sports shoe market in 1981. The company grew rapidly as its basketball business took off and expansion took place in other areas such as tennis and baseball, spearheaded by high-profile athletes such as John McEnroe.

The mid 1980s were awkward times. The company had to overhaul much of its infrastructure and failed to take advantage of the aerobics boom. However it emerged stronger and more competitive. One reason for this was Nike's relationship with a young basketball star called Michael Jordan. His first signature shoe, the Air Jordan, was banned by US basketball authorities and became so prized that an unofficial secondary market developed with prices well above retail. 1987 was a momentous year in which 'Visible Air' was introduced for the first time, seen in a ground-breaking commercial set to the Beatles' song 'Revolution', which somehow caught the spirit of mass enthusiasm for playing sport and being physical. In that year Nike also introduced the first Cross-Trainers, multi-functional shoes for people with multiple sporting interests.

In order to be a truly global company, however, Nike recognised that most of the rest of the world was in love with football, a sport which wasn't particularly popular in the US. Nike's early football products lacked a real advantage, but as they steadily improved, supported by great athletes and good advertising, Nike became a dynamic major brand in football. In the UK the company's profile was boosted by its association with football stars such as Ian Wright and Eric Cantona. During the 1990s UK sales grew by 600% and in 1999 London got its own Niketown -- a superstore dedicated exclusively to Nike products.

Another important development, reflecting the fact that Nike is an athletic brand rather than a youth brand, was the company's expansion into golf. Nike began to work with Tiger Woods in 1996 and he won the US Masters by twelve strokes the following year.

Product

Since Nike was set up by someone who made shoes in his garage and someone else who ran in them, it is not surprising that product is important. The product goal is simple -- to enhance athletic performance. That simple goal has led to some impressive innovations.

The first highlight was the Waffle outsole. Inspired by his wife's waffles, Bill Bowerman poured rubber into a waffle iron. The resulting outsole was durable, light, well-cushioned, and had good traction. It was initially known as the Moon Shoe for its unique footprint.

In 1980 Nike Air arrived, courtesy of a former NASA engineer called Frank Rudy. His idea of using pressurised gas to cushion impact was pitched to a few shoe companies, but only Nike took it up. Shoes with air-filled urethane bags were tried out by Phil Knight and his staff on training runs. Initial scepticism soon evaporated as they realised that here was something that not only felt good, but really worked in preventing injury.

More recently, to obtain maximum performance, Nike shoes have used materials ranging from Kevlar to recycled old shoes manufactured in anything from silver mesh to shiny gold.

In clothing, one of Nike's technological advantages has been the FIT system, a four-fabric layering system that can cope with heat, cold, snow, wind, and copious amounts of sweat. People who have worn it rarely go back to cotton.

Nike equipment has also introduced innovations with real practical value. The Triax running watch gave runners numbers they could read and buttons they could find, in an asymmetrical format that sat better on the wrist.

Recent developments

Since Nike was set up by someone who made shoes in his garage and someone else who ran in them, it is not surprising that product is important. The product goal is simple -- to enhance athletic performance. That simple goal has led to some impressive innovations.

The first highlight was the Waffle outsole. Inspired by his wife's waffles, Bill Bowerman poured rubber into a waffle iron. The resulting outsole was durable, light, well-cushioned, and had good traction. It was initially known as the Moon Shoe for its unique footprint.

In 1980 Nike Air arrived, courtesy of a former NASA engineer called Frank Rudy. His idea of using pressurised gas to cushion impact was pitched to a few shoe companies, but only Nike took it up. Shoes with air-filled urethane bags were tried out by Phil Knight and his staff on training runs. Initial scepticism soon evaporated as they realised that here was something that not only felt good, but really worked in preventing injury.

More recently, to obtain maximum performance, Nike shoes have used materials ranging from Kevlar to recycled old shoes manufactured in anything from silver mesh to shiny gold.

In clothing, one of Nike's technological advantages has been the FIT system, a four-fabric layering system that can cope with heat, cold, snow, wind, and copious amounts of sweat. People who have worn it rarely go back to cotton.

Nike equipment has also introduced innovations with real practical value. The Triax running watch gave runners numbers they could read and buttons they could find, in an asymmetrical format that sat better on the wrist.

Promotion

Nike is famous for its advertising as well as its athletes. They are the twin pillars of Nike promotion. The company does not hire athletes simply as mobile posters. They are the brand as much as products, advertising, or the people who work at Nike. The Nike personality has received contributions from such diverse characters as Ian Botham, Marion Jones, Steve Ovett, Seb Coe, Ronaldo, Sonia O'Sullivan and the England rugby team. In this way a multi-faceted brand has been created. Instead of presenting one consistent, manicured proposition, Nike has over time delivered a wide variety of messages and exposed a number of different aspects of its personality. This is true to the athletic experience, and keeps the brand fresh.

Nike's advertising has been as diverse as its athletes. Much of it has featured top names, but not all. One of the commercials that launched 'Just Do It' featured an elderly runner in his 80s with false teeth. Ordinary athletes, people who might not even describe themselves as athletes, have found direct inspiration from Nike advertising. Nike adverts have featured celebrities as diverse as Dennis Hopper, Spike Lee and Bugs Bunny. A famous basketball star, Penny Hardaway, was given a puppet as an alter ego. The Brazilian football team was famously let loose in an airport during the 1998 World Cup.

Much Nike advertising appears to have been created without reference to marketing textbooks or batteries of research data. It frequently lacks an explicit product message, even a consistent endline, and has encompassed a wide variety of different advertising ideas. But the resulting 'post-advertising' has certainly struck a chord with a generation highly attuned to the tricks of the marketing trade.

In the UK, Nike has run advertising developed for a variety of intended markets, from London only, right through to global campaigns. Highlights have included some famously provocative posters, the 'Parklife' commercial celebrating the world of Sunday League football and the transformation of a Tube station into a tennis court for Wimbledon 1997. A year later, after England's traumatic exit from the World Cup, the company caught the mood of a shell-shocked nation with its 'Condolence' television advertisement.

Brand values

For a company which has such a strongly defined personality, it may be surprising that there is no single list of brand values that is given to new employees and used to judge all marketing activity. Things do get written down, but fundamentally the Nike values are passed on through an oral tradition. And they are company values as much as brand values. The Nike brand comes over as risk-taking, competitive, irreverent and overwhelmingly consumed by sport. This is reflected in the people who work for the company.

Things you didn't know

  • Nike is the name of the Greek goddess of victory. The name came to Jeff Johnson, the company's first employee, in his sleep.
  • The Swoosh logo was designed for a fee of $35 by a young design student in Portland, Oregon. Later, she was given some Nike stock.
  • The 'Just Do It' line was conceived by advertising copywriter, Dan Wieden.
  • One of Nike's most memorable and offbeat advertisements featured the endorsement of the fairytale characters, the Three Little Pigs.

    © 2002 Superbrands Ltd

  • 0 Thoughts to “Nike Case Study Analysis Psychology

    Leave a comment

    L'indirizzo email non verrà pubblicato. I campi obbligatori sono contrassegnati *