Nike Marketing Plan

2012

Nike Marketing Plan Marketing Management 55-439-02

Jennifer Schmit Anthony Sprick Jun Yang Chelsea Tillman Brenda Wade

Group 5 Northwest Missouri State University 12/4/2012

Table of Contents EXECUTIVE SUMMARY .................................................................................................................................. 2 SITUATIONAL ANALYSIS ................................................................................................................................ 2 Company Analysis ..................................................................................................................................... 2 Target Market ........................................................................................................................................... 2 Collaborator Analysis ................................................................................................................................ 3 Competitor Analysis .................................................................................................................................. 3 Context Analysis ........................................................................................................................................ 4 SWOT Analysis........................................................................................................................................... 4 Summary Statement of Problems ............................................................................................................. 5 Summary Statement of Marketing Objectives ......................................................................................... 5 CURRENT MARKETING PLAN......................................................................................................................... 5 RECOMMENDED MARKETING PLAN ............................................................................................................. 6 Overview ................................................................................................................................................... 6 Core Strategy Recommendations ............................................................................................................. 6 Marketing Mix Recommendations ........................................................................................................... 6 CONTINGENCY PLAN ..................................................................................................................................... 8 SUMMARY ..................................................................................................................................................... 8 Bibliography .................................................................................................................................................. 9 Appendix ..................................................................................................................................................... 10

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EXECUTIVE SUMMARY Nike faces many problems and issues with their marketing. Nike‟s marketing should be aware of problems that include widening product assortments, depth of product lines, ethic issue and product quality issue. Opportunities that Nike will seek could be association with popular event, and a new model of geographic segments. With Nike outsourcing almost all of the company‟s footwear production to third-party suppliers it has little control over the product quality creating a constraint for the company. The core marketing strategy to solve the issues and problems Nike has is to pursue a differentiation strategy. The time frame our group expects Nike to follow through with the marketing strategy is 6-12 months, by that time there should be enough awareness of the new products Nike will release

SITUATIONAL ANALYSIS Company Analysis Bill Bowerman and Phil Knight who turned their agreement into a partnership in 1966 founded Nike as Blue Ribbon Sports in 1964. The company was incorporated in 1967 as BRS, opening its first retail store in Eugene, Oregon. The company‟s Swoosh trademark and the Nike brand name were created in 1971. In the same year, the company introduced its first apparel product, Nike T-shirt. BRS launched Nike line of footwear for athletes during 1972. The company changed its name from Blue Ribbon Sports to Nike the following year. Since 1986, Nike began producing its apparel collection following the launch of Nike‟s „Just Do It‟ ad campaign. Nike Inc.‟s heritage is deeply rooted in innovation and they believe diversity and inclusion are key controls in continuing to drive creativity and innovation (Our Workforce, 2012). Nike is primarily involved in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. The company manufactures and sells its footwear for specific athletic use such as running, training, basketball and soccer generally through its retail stores and various distributors and licensees, in over 170 countries across the Americas, Europe, Middle East, Africa, and Asia Pacific. Nike's products are divided into four product lines: footwear, apparel, equipment and other. The company also manufactures and sells sports-inspired shoes and shoes for casual and leisure use. Nike‟s goal is to maintain its quality and make it easily available at every marketable place. They strive to reach all types of customers male, female, old and young (Marketing Plan of Nike, 2011).

Target Market Nike‟s target market would be a consumer 18-35 years of age that is physically active. Nike‟s target segment needs are durable shoes that are designed with athletes needs in mind. With Nike‟s celebrity endorsements such as Tiger Woods and LeBron James representing this group. TV advertising is done mostly during professional and college sporting events, primetime programs and late-night TV. Nike is one of the world‟s leading marketing and distributor of athletic footwear, apparel and equipment. The Nike mission statement is to bring inspiration and innovation to every athlete in the world, making it clear that their target market are athletically inclined individual, also stating that anyone with a body is an athlete (Our Mission, 2012). With our surveys we found that most of those surveyed have purchased shoes from Nike and have a positive experience with Nike shoes. For those surveyed, majority wear Nike at least once a Page | 2

week, if not more. Our surveys also showed that Nike‟s endorsers are well known athletes who show a good representation of the products that Nike sell.

Collaborator Analysis Nike has collaborated with many celebrities and companies since they first started in in the 1960‟s. Nike‟s most recent and biggest collaboration includes a deal to becoming the official sponsor or the National Football League beginning in 2012 (Akitunde, 2012). According to Akitunde, Nike is now the official uniform provider for all 32 NFL teams. This includes head to toe uniforms, all the way from the helmets to the specialty socks and brand new cleats. Before Nike, Reebok was the official uniform sponsor of the NFL. Reebok never really made the uniforms for the NFL as a major event, but Nike has been able to grab the attention of many consumers and die-hard football fans. This has let Nike grow even more as a company and it has definitely worked in their favor since the 2012 NFL season has begun (Akitunde, 2012). Nike has also collaborated with TomTom to produce a new SportWatch GPS that offers a new kind of running experience. During a run, the watch can deliver data about the runner‟s distance with high accuracy. It can also be personalized by featuring motivational challenges, run reminders, and audible sounds. Nike has also worked with Michael Schumacher, Maria Sharapova, Tiger Woods and Michael Jordan among many others (Rose, 2006). Through these people and their sports, they have been able to reach out to different kinds of consumers, proving them to be a proper and good enough collaboration. Although, current problems or issues related to collaborator relationships management include the fact that sponsors and endorsers are held accountable for Nike‟s company. Most of these people are in the media and if they do something wrong or unethical, that leads back to Nike. Nike becomes responsible for that person and they take that risk of becoming associated with them. It is all about how the consumer sees this company and if they hear one thing bad about it, it could truly alter their perception of it.

Competitor Analysis There really isn‟t that much of a threat for new competition against Nike shoes. You have the standard major competitors that are: Adidas, Reebok, Under Armour, and New Balance. Then there are smaller competitors like Vans, Asics, and Sperry‟s. There are opportunities for new competition, but Nike is such a huge company that it is practically impossible to become a major threat for them. The threat of substitutes is pretty high. As you can tell from just a few of the major shoe brands we listed above. There is also far more competitors that would be too much to write down. The substitutes can range from cheaper shoes to extremely high priced shoes. It depends on what the customer is looking for. There are also substitutes for more of a casual wear to athletic wear. Bargaining power of customers is low for Nike for one of the forces. Nike has a wide range of prices, so their customers are able to choose from the shoes they sell. They recently came out with LeBron‟s shoe, which costs about $300. Which means Nike is able to compete with the higher priced athletic shoes. Nike also has shoes that can go around $40, so that gives them the option to compete with lower priced shoes. Then there are all the shoes that are in between, which makes up for the other customers that want shoes at different prices. The bargaining power of suppliers is relatively low. Nike has the opportunity to choose from multiple suppliers, since the resources they need are basic materials that don‟t cost much. They are able to Page | 3

choose between the suppliers that give them the better cost, and there isn‟t much room for the suppliers to hike up prices for Nike. The level of intensity among competition is extremely high in the category that Nike is in. There are some customers that are very loyal to some brands like Adidas and Under Armour, but Nike also has the loyal customers that only buy from them. Adidas has a high intensity of competition with Nike on soccer cleats, since the majority of soccer players are loyal to Adidas. Nike is among the top on running and casual shoes though.

Context Analysis The political environment of Nike has been good in recent years. Nike, Inc. is helped by the U.S. government in the policies that it creates. These policies help Nike to have a general macroeconomic stability, low interest rates, stable currency, and to be competitive at the national and international levels. Next is the economic environment. We know that the economic conditions are tough in today‟s world and that this is trickling all the way down to Nike. Nike‟s products as you know are made in Asia and the sales from these products are decreasing. This is because of the economic recession in Asia that causes the prices of the materials and labor costs to increase. Next, is the social-cultural environment. We know that people are very conscious about their health in today‟s world, so Nike has adjusted their products to become more consumer friendly. More and more people are purchasing work-out clothes as a result of this health craze and luckily for Nike, their products have a lot to do with this. This facet has increased sales alone but the negative publicity of labor and factory conditions overseas has actually resulted in a decline in sales and customers demanding a more globally responsible company. Finally , the technological environment is an issue. Nike uses information technology in order to be more innovative, segmented and differentiated than its competitors. It can be said that Nike‟s leadership is a direct result of this well-applied technology, which is applied at every stage of the product, from the development to the distribution stage. Nike is by far the global leader in athletic footwear, which makes Nike able to control its environment with the best of their knowledge.

SWOT Analysis (See Appendix 3 for Details) Nike‟s healthy market position fused with strong brand equity speaks noteworthy competitive edge to the company in terms of scale and recognition. Widening product lines linked with strong marketing innovation has contributed to Nike‟s climbing market share in the global footwear market. However, intense competition could also lead to a loss of market share for the company. Nike outsources almost all of the company‟s footwear production to third-party suppliers to minimize production costs. Since the company gets its merchandise from foreign manufacturers, it has little control over the product quality creating a weakness for the company. Nike‟s opportunities include the fact that the company replaced Reebok as the NFL's licensed partner that is projected to increase Nike's earnings per share. The market for sporting goods is intensely competitive in the US and across geographies. Nike‟s threats comprise intense competition and availability of cheaper products that could put stress on the price of products and unfavorably affect Nike company margins.

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Summary Statement of Problems Nike‟s marketing should be aware of problems that include widening product assortments, depth of product lines, ethic issue and product quality issue. Nike occupied the major market share in the global footwear market, however, as the expansion of its product lines and assortments, the level of intensity among competition increase rapidly which could lead Nike waste a huge amount of resource and lost some market share in other market segments. Nike has a big number of subsidiaries in developing countries such as China, Malaysia and Vietnam. Nike outsource heavily relied on those independent third-party supplier, almost all of Nike‟s products includes footwear, clothing and sport gear. But the risk and problem is the product quality of its products since it has limited control and monitor. Opportunities that Nike will seek could be association with popular event, and a new model of geographic segments. The major part is Nike replaced Reebok as the NFL‟s licensed partner who is estimated increases 3% Nike‟s earnings per share in 2012. Associate with popular events like NFL give enhance on Nike‟s exposure and recognition while broadcasted to millions of fans across the world during important games. And the sponsorship increases the brand recall among football fans.

Summary Statement of Marketing Objectives The marketing objective for Nike is to enhance the range of products, such as going into different types of sports or activities to make shoes. This is somewhere they have been lacking, because they have not been going into some sports and activities that Reebok has already been in. Nike also plans to incorporate more social media into their advertising instead of traditional advertising like print and TV ads. One more objective that Nike needs to accomplish is creating brand awareness for their new types of shoes, once they create them. This they will need, because once they create these new shoes for different types of sports or activities then they need to create awareness for them.

CURRENT MARKETING PLAN In the past Nike has used well-known athletes and electronic media to promote the Nike brand and would sponsor events in the name of the brand (Marketing Plan of Nike, 2011). Nike‟s current marketing plans is decreasing advertising via TV commercial and print advertising in the U.S. although its total marketing budget is increasing and has hit a record last year. Digital Sport is how Nike is connecting with their customers (Cendrowski, 2012). Nike uses many tactics, but recently they have been straying away from TV and print advertising, and going in a more digital way to reach their target market. TV and print advertising has gone down 40% since Nike has gone to their new marketing strategy. Their total marketing budget for the year of 2011 was at a record high of $2.4 billion. Nike also spent an estimated $800 million on “nontraditional” marketing. (Cendrowski, 2012). Nike monitors and analyzes the macroeconomic environment when they carry out their marketing research, which help them to make appropriate response on elements like finance, inventory, strategy and even human resource. Nike as a global brand, if they operate in a recessionary environment, the consequences are that consumers will desire less to buy and consumer‟s buying power declines (Marketing Plan of Nike, 2011). Nike has implemented several very successful marketing strategies within their current and past marketing plans. The Page | 5

negative side to their success is the high costs incurred in producing and promoting the products. Costs such as handling inventory, designing, advertising and production as well as the raised costs of raw materials and transportation have increased. (A Marketing Case Study on Nike, 2012).

RECOMMENDED MARKETING PLAN Overview The recommended marketing plan that our group proposes is based on the information we got from the respondents from our surveys and from research on the Internet. We suggest a few courses of action to meet our marketing objectives and correspond with our core strategy and marketing mix.

Core Strategy Recommendations The core marketing strategy to solve the issues and problems Nike has is to pursue a differentiation strategy. Nike currently makes shoes for all major sports, but Nike is lacking in broadening their assortment to more sports and activities. Nike has the potential to create shoes for dancers like Reebok has. This would help Nike gain a bigger percentage of the market that they have lost from Reebok. In return Nike would see a higher profit and a better brand image, because they would be catering to specific customers. Another recommendation that we had for Nike would be to make shoes for different activities. Parkour also known as “free running” would be a great type of activity to make shoes for. With parkour Nike would need to make a lightweight shoe that had a really good traction for its soles. The next recommendation is for Nike to build brand awareness in their new markets if they tend to pursue them, and to build awareness in some of their markets they have already. Nike currently has a market called Nike 6.0, which is catered to more extreme sports like skateboarding and snowboarding. In our survey only 13% of the respondents were aware of this. Our group feels this is a big market that is growing, and Nike should take advantage of their big brand image to market towards it. We also feel that the parkour shoes could fit great in Nike 6.0, because it‟s a very intense and extreme sport like skateboarding.

Marketing Mix Recommendations Price The pricing strategy that Nike currently uses is the one that they should continue to use. Current customers indicated that they would pay what Nike currently has their products priced at to maintain the quality and service they receive from Nike. The prices are competitive to the industry. Based on the services that Nike offers, they can compare to competitors quality service and price to find that they are fairly priced.

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With our initial investment of $2.5 million our NPV would be $2,979,250 with an ROI of 19.17%. We feel this would be fitting because Nike is a well-established brand that could accomplish such a high Return on Investment.

Product Nike has a wide range of products like shoes, apparel, and gear, which can all be customized by the customer. Their products can also be used in many sports such as running, basketball, football, baseball, golf, and soccer. A lot of their shoes and apparel are made specifically for these sports. For many consumers, Nike is the go-to brand for anything athletic related. For Nike to improve on the kind of products they produce, they can broaden the types of shoes that they offer to the consumer. As we have said before, they can provide shoes for activities such as parkour and even aerobics. Nike has already provided many shoes for many different sports and by providing for even more, they can widen their customers to include those who participate in other, more recreational, sports. Place Currently, Nike sells its product to about 20,000 retailers in the U.S. and in almost 200 countries around the world. Nike plans to open up more stores and franchise to reach maximum buyers and targeted customer in order to expand long term Nike buyers. In the international markets, Nike sells its products through independent distributors, licensees and subsidiaries. In the situational analysis we mentioned that Nike outsourcing its products from developing countries in Asia such as China and Vietnam in order to reduce its cost. For example, Nike should expand its manufacture into inland China, not only coast areas of China since inland of China is developing well these years and able to lower more costs compare to coast areas. And since more and more business is doing online, Nike should expand their contribution channels toward e-commerce and online marketing, such as increase spending on online advertising compare to tradition media advertising. Promotion Nike has been doing a great job on their promotion. They are using social media and pushing it as far as they can. Nike has also been able to revolutionize outdoor media. They bought space on a 30-story building in Johannesburg, South Africa. This “billboard” was all electronic, and would update the headline from actual fans on twitter. If you followed Nike on twitter, then you could tweet them a headline and there would be a chance for it to be posted on the 30-story building in front of all Johannesburg (Marketing Plan on Nike, 2011). The thing Nike should change is to promote their new products more. Nike needs to use their social media to promote their Nike 6.0 series and promote their parkour and dance shoes. If they are able to use maxi media and advertise these new products like they did in Johannesburg then it could create brand awareness. The implication for the marketing ecosystem is that Nike is taking an online approach to marketing. This is making Nike cut back on TV and print advertising, and gearing more towards social media.

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CONTINGENCY PLAN If our groups core strategy recommendations fail, we want to give Nike another course of action to fix their marketing problems. The main solution would be to target active young adults with above average income. We recommend Nike to keep their price and quality the same, because they are doing well with both. Nike would have to use some minimedia like telephone marketing, E-mail, and online classified ads to reach the target market we discussed. Our group would also recommend Nike to enhance their direct-mail marketing. If they can properly use this then Nike will reach the target market they are aiming for with little waste in their marketing.

SUMMARY To summarize our marketing plan, we recommend that Nike focus their attention on a broader range of shoes. Nike is the biggest player amongst their competitors in the shoe department, but they are still lacking on certain types of shoes. With broadening their type of shoes and with strategic marketing like social media, Nike will be able to accomplish their marketing objectives.

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Bibliography A Marketing Case Study on Nike. (2012, May 15). Retrieved November 14, 2012, from ArticlesBase: http://www.articlesbase.com/international-marketing-articles/a-marketing-case-study-on-nike5907782.html Akitunde, A. (2012). Nike Nabs The Crown Jewel Of Sports Branding: The NFL. Retrieved December 1, 2012, from Fast Company: http://www.fastcodesign.com/1669444/nike-nabs-the-crown-jewel-ofsports-branding-the-nfl#1 Cendrowski, S. (2012, February 13). CNN Money. Retrieved October 22, 2012, from CNN: http://management.fortune.cnn.com/2012/02/13/nike-digital-marketing/ Marketing Plan on Nike. (2011, March 17). Retrieved November 14, 2012, from Marketing Mixx: http://marketingmixx.com/marketing-plan-2/164-marketing-plan-of-nike.html Our Mission. (2012). Retrieved December 1, 2012, from Nike Inc.: http://nikeinc.com/pages/about-nikeinc Our Workforce. (2012). Retrieved December 1, 2012, from Nikebiz: http://www.nikebiz.com/crreport/content/people-and-culture/6-1-0-our-workforce.php?cat=ourworkforce Rose, L. (2006). The World's Best-Paid Athletes. Retrieved December 1, 2012, from MSNBC: http://www.msnbc.msn.com/id/11961246/ns/business-forbes_com/t/worlds-best-paidathletes/#.ULvz-Erjku8

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Appendix 1. Evaluation of the key points of the survey. Question 1: What is your Gender?

Gender

Female Male

Question 2: Which Category Includes Your Age?

Age 18-20 21-29 30-39 40-49 50-59 60 +

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Question 3: How Big of a Role Does Fitness Play in your Life?

Role of Fitness

A Lot More yes than no Somewhat More no than yes

Question 4: What is your Favorite Type of Fitness Shoe?

Favorite Fitness Shoe

Walking Running Cross Training General Athletic

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Question 5: Of that Type of Shoe, Who Do you Believe Makes the Best?

Sales

Nike Adidas Aesics New Balance Under Armour Reebok Puma

Question 6: What Brand is Superior to Competitors?

Superior Brand

Nike New Balance Adidas Aesics Under Armour

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Question 7: What is the Highest Price you would Pay for a Pair of Nike Shoes?

Price

$0-$20 $21-$50 $51-$70 $71-$90 $91 +

Question 8: How High would you Rank Nike?

Ranking 35% 30% 25% 20% Ranking 15% 10% 5% 0% 1

2

3

4

5

6

7

8

9

10

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Question 9: Would You Recommend Nike?

Recommend Nike

Yes No

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2. Nike’s On-line Advertising With Nike‟s marketing going mainly to on-line sites like Facebook and Twitter help promote the brand.

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3. SWOT Analysis Strengths  Boosted importance on innovation as well as research and development. o Allows Nike to be more appealing to changing preferences. o Enhances Nike‟s competitive advantage and brand equity.  Employs wide distribution channels in the US and international markets. o Helps with on-time delivery of the products across the countries. o Aids Nike in managing its inventories. Weaknesses  Intense competition o Could lead to a loss of market share for the company.  Nike outsources almost all of the company‟s footwear production to third-party suppliers to minimize production costs. o Since the company gets its merchandise from foreign manufacturers, it has little control over the product quality. Opportunities  Association with NFL gives exposure and recognition. o Broadcasted to millions of fans across the world. o Sponsorship increases brand recall among consumer groups who watch these events.  Nike can further leverage on this identity to target consumers of such events and further consolidate its market share in the US. o With the opening up of single brand retailing in India, foreign retailers can own the stores entirely and they don‟t need to collaborate with an Indian partner. o Facilitates greater control over the operations and flexibility in projection of their brands. o Since, the company already has operations in India; it is at a competitive advantage to take quicker business decisions and therefore make more investments to expand its market presence in the rapidly growing Indian market. Threats  Contract manufacturers of Nike criticized for violation of labor laws. o In countries such as China, Vietnam, Indonesia and Mexico, in recent past. o Show that the company has limited control over its contract manufacturers. o Could damage the company's reputation.  Counterfeit products market has grown in the recent years driven by the Internet counterfeit market. o Abundance of counterfeit goods and accessories adversely affects the sales of branded products. o Counterfeits not only deprive revenues for the company but also dilute its brand image.

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