Boustani 1 Nike: Maintaining a Promotional Edge

Nike’s initial product advertising strategy of using professional athletes for raising demand through word-of-mouth provided good publicity. However, its selective-demand advertising was mainly focused on high-priced shoes for traditional sports, and ignored newly developed market segments such as aerobics and extreme sports, and new trends such as brown shoes and casual footwear (Etzel, Walker, and Stanton).

Nike launched a successful advertising campaign around its “Just Do It” catch phrase and “swoosh” logo. Nike increased its visibility through vertical cooperative advertising; expanding its product line to include apparel, equipment, and accessories, which led retailers to use the Nike brand to attract customers to their stores. Nike gained a high level of publicity and increased its appeal to both men and women when it signed famous athletes like Michael Jordan and Venus Williams (Etzel, Walker, and Stanton).

Further exposure was gained when Nike promoted its brand near major events, giving the impression that it partly sponsored the events. It also increased its sales promotion through the sponsorship of sporting events and collegiate teams. It gained exposure in extreme sports through cooperative advertising when it partnered with a skateboard manufacturer for the purpose of developing skate shoes (Etzel, Walker, and Stanton).

Public relations were negatively affected by allegations of child labor in third-

Boustani 2 world factories. However, the subsequent negative publicity increased the exposure for its online NIKEiD shoe personalization service. Nike is generating more selectivedemand advertising towards women to increase the revenue share for that market segment.

The market for high-priced performance shoes has been flat, while the market for casual and fashionable shoes has increased. Women and teenage consumers have not been targeted by Nike, but the focus has been on active males. The competition has been quicker to react to these changing trends, and have increased their market share in many segments that Nike is not involved in. The competition’s market share increased in size with the different market segments. Nike continued to release high-performance and high-priced shoes in a market that was more willing to purchase low-priced casual shoes (Etzel, Walker, and Stanton).

The allegations that most of Nike’s shoes were manufactured in third world sweatshops were a public relations crisis. Nike’s image and supply chain faced many challenges, and it was in the company’s best interest to quickly correct the matter. The Internet has added a new element to the supply chain by allowing consumers to customize their shoe purchases online. Furthermore, the product line expanded to include apparel, equipment, and accessories. This allowed Nike to serve different markets and the changing tastes of consumers while limiting the costs of liquidating their old inventories for new ones. It also allows it to compete with faster-moving companies that serve niche markets.

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Nike situated itself with traditional sports and athletes that appeal to an older demographic. By not signing athletes from the booming extreme sports industry and other celebrities that appeal to a younger demographic, Nike lost more market share to niche competitors.

Nike needs to recognize emerging trends more quickly so that it can take advantage of them before its competitors. Most of, or at least part of, its supply chain needs to be reconfigured to allow for a faster reaction to market changes, which is usually reserved for smaller competitors. It needs to better understand its customers and listen to its retailers so that new products can have the most impact in the market by giving consumers what they want.

With the expansion of its product line, Nike should continue to find creative, lowcost guerilla marketing methods; these can often appeal to a younger demographic, who Nike is losing in greater numbers. Acquiring small niche companies that are successful in emerging markets can make it easier to profit from shifting consumer demands. The expertise of the niche companies can help Nike penetrate segments that would have otherwise been difficult to market to. Furthermore, these high-profile acquisitions will generate publicity for Nike. Although expanding its product line to include apparel and equipment is healthy, it should also expand its existing offerings by creating more midpriced athletic wear; many consumers do not want to pay hundreds of dollars for athletic shoes, even if they are high-performance shoes.

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Nike needs to ensure the public that its manufacturing processes do not violate basic human rights, especially in factories located in third world countries. It should have information available, possibly on its Web site, about where its products are manufactured, by whom, and the conditions of the facilities. Its advertising could even include images or stories of some of the workers and what benefits the jobs bring to their impoverished families. A public relations firm can help show how Nike improves work conditions, introduces health benefits, and affects the lives of workers in developing countries.

The non-profit Nike Foundation was established to empower adolescent girls in developing countries to expand their opportunities, capabilities, and choices. Nike works with local, national and international partners to pilot new development models. The focus is currently in Bangladesh, Brazil, China, Ethiopia and Zambia. Programs include economic opportunity, health and security, leadership and rights, education, and social mobility (Nike Foundation).

Nike can create more specialized high-quality products for specific sports, the same as it has done for basketball and soccer. There are many popular sports that Nike may not have targeted, especially the extreme sports and those mostly played in countries outside of North America, helping its international expansion. More fashion-conscious items like the minimalist Presto design can be created, maybe even by holding a design contest that students can submit to, with the winning design going into production.

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Nike’s attempt to fix its supply chain problems with the i2 demand-planning software engine backfired at first. In 2000, the system ordered thousands more Air Garnett sneakers than the market demanded and thousands fewer Air Jordans than were needed. The system was said to be too slow, did not integrate well, had some bugs, and Nike’s staff were not adequately trained to use it before going live. However, Nike sells too many products (120,000) in too many cycles (four per year) to do things by intuition alone, so consulting a computer model and talking with retailers is necessary (Koch, 2004).

Nike’s current business relies on a 30-year old model. Because of this, its supply chain project aims to reduce the manufacturing cycle for a sneaker down from nine months to six months, which would match 90 percent of its retailers’ ordering schedule. This would convert its supply chain from make-to-sell to make-to-order, similar to what Dell has done with computers. The new centralized supply chain has been in development for six year, and is due to be deployed in 2006 at a total cost of $500 million. Better collaboration with Far East factories has already reduced the amount of pre-made shoes from 30 percent of Nike’s manufacturing units to around 3 percent (Koch, 2004).

Nike was swamped with revenue reports from its business units around the world, many using different reporting methods. The new Nike Business Intelligence Strategy was initiated to enable faster and more standardized access to its data worldwide. The

Boustani 6 3,000 reports generated by some global divisions will be standardized and reduced to 1,000 by fiscal 2008. The Nike BI will help analyze global sales of products more quickly; reducing the time it takes to supply markets with successful items, and reducing the guesswork (Kirk, 2006).

Nike has resigned basketball star Kobe Bryant, and is making its mark in the 2006 Winter Olympics by sponsoring controversial skiing star Bode Miller. Miller’s Nike ads encourage viewers to join “the bold, the brazen and the unintimidated” (Politi, 2006).

Works Cited Kirk, Jeremy. “Nike BI Project Seeks Standardization.” IDG News Service 6 Feb. 2006. 8 Feb. 2006 <http://www.itworld.com/App/103/060206nikebi/>. Koch, Christopher. “Nike Rebounds: How (and why) Nike Recovered from its Supply

Boustani 7 Chain Disaster.” CIO Magazine 15 June 2004. 2 Feb. 2006 <http://www.cio.com/archive/061504/nike.html>. Etzel, Michael., and Bruce Walker, and William Stanton. Marketing. New York: McGraw-Hill, 2004. Nike Foundation. Retrieved February 2, 2006, from http://www.nike.com/nikebiz/nikefoundation/home.jhtml Politi, Steve. “May Bode Go Downhill Fast.” The Star-Ledger 8 Feb. 2006. 8 Feb. 2006 <http://www.nj.com/columns/ledger/politi/index.ssf?/base/columns0/1139381885217310.xml&coll=1>.

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