Chapter 2 Marketing & Brand identity of Nike

Marketing plays a key factor in the development of a company as it can increase market
share, offer a competitive advantage by enforcing the image of the brand, create a product
identity or help secure loyal customers. The major players of this market have stopped
competing over pricing and focused instead on intensive marketing strategies which are also very
expensive. For example, Nike is annually investing between 10%-15% of its revenue to fund
marketing campaigns which leads, according to Reuters.com, to Nike having a ROI (Return on
investment) ratio of 24.41%. Nike has created a customer focused sportswear brand by providing
people the complete athletic experience as a result of the varied collections of products. Nike is
constantly entering and innovating every possible niche in order to claim customer loyalty and
maximize the usage of marketing strategies. Intensive marketing techniques by developed
companies have increased brand awareness in the global market; therefore, creating market
growth. (http://www.reuters.com/finance/stocks/chart?symbol=NKE.N, ).

Subchapter 2.1 Market segmentation

Sports outfits were designed of supporting professional athletes or simply active people
in daily physical activities such as running or going to the gym. They are designed for increased
comfort and agility which are critical in sports. The market has increased its demand over the last
years due to concerns regarding health and physical fitness through awareness campaigns. This
has encouraged individuals to lead a more active lifestyle by playing different sports therefore
expanding demand. Another reason would be the increased number of women who participate in
sports which supplemented the need for variety and development in this niche. U.S., specifically
the northern part, was the leader of revenue generating geographical regions in 2014 for the
global athletic-wear market. The latest researches indicate that by 2020 the highest revenue will
be registered in Asia Pacific, generating almost $62.7 billion due to an increase in disposable
income and health-awareness programs. (https://www.alliedmarketresearch.com/sports-apparel-
market, ).

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 Different aspects of market segmentation (Figure no. 1)

(Source: https://www.alliedmarketresearch.com/sports-apparel-market, )

The growth strategies adopted by players in the market to increase their market share and
expand their customer base were mainly consisting of partnerships and tendency of expansion.
Prominent companies, such as Nike, Inc., Puma and Adidas have adopted various growth
strategies to mark their signature in the sports apparels market while the smaller players focus on
nurturing efficient partnerships that would increase overall market share.

The sportswear market is segmented by three categories: geographical region, mode of

sale and end users. Furthermore, each category is split into different types. Firstly,
geographically the market is divided into 4 regions : Northern America, Europe, Asia-Pacific and
LAMEA which includes the rest of the world. Secondly, the athletic apparel market
segmentation by mode of sale consists of retail stores such as outlets or supermarkets and online
stores, which feature an increase in popularity among users, especially young ones. Last but not
least the market is also segmented by end user types such as women, kids and men.
(https://www.alliedmarketresearch.com/sports-apparel-market, )

Every target market suitable for a business’ activity, even the saturated ones, will offer
attractive opportunities that can be identified throughout strategic marketing planning.
Depending on the vision of the top tier management or the boldness of the marketing department

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this opportunity could turn into a breakthrough strategy or simply add up to the competitive
advantage that company has. A breakthrough opportunity will then allow the relevant
department to develop innovative strategies which will benefit the company and will stop being
useful when the competition deciphers said opportunity. In order for a company to be sensitive to
competitive advantage or breakthrough occasions, it has to be quick in identifying the customer’s
unsatisfied needs and developing a strategy around that unsatisfied need. A basic scheme aids the
marketing department in spotting and maximizing the importance of opportunities. (McCarthy
and Perreault, 1993:79).

Four basic types of opportunities (Figure 2.1)

(Source: http://blog.demandmetric.com/2008/08/06/target-market-selection-segmentation-and-
positioning, )

Nike focuses on utilizing this framework to its advantage and does not miss any
opportunity that would help consolidate their leadership status through innovation and research.
Market penetration consists of identifying the target group who has been actively buying the
company’s manufactured products and trying to be appealing to more customers who fit in the
described target group by tailoring your marketing mix to be more aggressive or understanding
the reasoning behind the customer’s purchase. ( McCarthy / Perreault, Basic Marketing, 1993,
page 79).

Nike is using market penetration by endorsing sports celebrities to feature the company’s
products while maintaining the customer’s interest for the current products and best-case

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scenario, encouraging some new, potential customers to buy. (https://hbr.org/1992/07/high-
performance-marketing-an-interview-with-nikes-phil-knight, ).

Even though today Nike means more than footwear, having created for themselves a
whole universe branded with the “swoosh” logo, the company had started by reselling running
shoes out the back of a trunk therefore the importance for this segment is self-explanatory. The
company creates new designs for footwear and apparel and launches them onto the market in
which Nike is already the leader. At the recent event organized in New York City called
“Innovation 2016” the CEO & President Mark Parker briefly described the new technologies
featured by their latest products such as “Nike Hyperadapt 1.0” and the “Flyknit” line. Along
with the fabric improvements, the company still tweaks the “Nike+” application which now
includes services, sportswear, music and workout tutorials. The application has the purpose of
creating a community around athletes, whether they are professionals or just amateurs.
(http://news.nike.com/news/innovation-2016, )

In terms of market development, as of 2014, Nike operates in approximately 120

countries all over the globe and owned 858 retail stores throughout the world.

(http://www.statista.com/statistics/250287/total-number-of-nike-retail-stores-worldwide/,
accessed June 2016)

From the four basic opportunities presented above, diversification is the least effective
one in Nike’s case as the enterprise had already expanded the spectrum of products along the
years as the company originally started as a footwear producer and later on manufactured apparel
and accessories..Also, their products are currently sold worldwide, eliminating the need of
accessing new markets. A recommended approach would be decreasing the risk by operating in
the existing markets. (McCarthy and Perreault, 1993:79)

Subchapter 2.2 Marketing mix

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 Nike is a company that stands by the words of famous Peter Drucker, a renowned
management consultant, who stated that “the only valid definition of a business purpose is to
create a customer.”. Everything that is part of Nike’s success and leadership is related to
customer satisfaction and brand loyalty. Along with marketing strategies, even the vision
statement :

"To bring inspiration and innovation to every athlete in the world. If you have a body,
you are an athlete." – Bill Bowerman, founder of Nike.

(Waite, 2015:248)

expresses customer-centricity. Albeit at a first glance it would sound like a logical goal for a
sportswear producer, the power of this phrase is given by the factit traces back to the original
founder Bill Bowerman. Mr. Bowerman and his student, a track athlete, Philip Knight started
developing shoes to improve athletes‟ performance. He was researching by asking for help from
university runners to test his creations and collect their feedback.
(http://www.fundinguniverse.com/company-histories/nike-inc-history/, ).

The statement is especially powerful since the mentality has not changed and the
aftermath of Bowerman’s good intentions to inspire and constantly push limits are the key
factors of Nike’s greatness today. Although healthy and sturdy goals can ensure tremendous
growth to a company it would be unfair not to acknowledge the brilliance behind this company’s
flawless marketing techniques. The aspects that differentiate Nike’s story from their competitors
is the hard-times the company has faced from 1975 until late 1980’s when the company has
registered a revenue decrease particularly because the management didn’t notice the aerobics
sales growth. Nike’s competitors had by then developed their business segment. The usage of
marketing techniques and the competitive edge brought in by globalization helped the giant
conglomerate regain and basically establish a top-tier leadership sportswear-wise.
(http://www.fundinguniverse.com/company-histories/nike-inc-history/, ).

The marketing mix is a core marketing process which refers to the 4 P’s: Product,
place, promotion and price and is used to encompass the main attributes of the business activity.
The marketing mix of Nike which features continuous improvement and aggressive branding led

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to an increase in profits and significant market share. Also they express the idea of a whole
sports experience brought to you by Nike, which actually boosts your confidence, knowing that
they provide equipment for your favorite athlete as well. Wearing this brand doesn’t necessarily
mean good quality apparel, it also means that you are part of an active lifestyle, a way of life.
((http://ca.complex.com/pop-culture/2014/01/nike-instagram-social-media-strategy, )

2.2.1 Products

Nike INC. started off as a footwear retailer which led to footwear producer and for almost
half a decade they have been developing and delivering the utmost and complete experience of a
sporting activity. Their products range from footwear to auxiliary gadgets which combined with
Nike gear can tech-up your athletic experience .The most famous categories of Nike products
are: Running, Air, Football, Basketball and aquatic activities. The most popular sports have a
celebrity athlete endorsing a special line of products such as “Nike Kobe” who are made in
collaboration with Kobe Bryant, all-around player for L.A Lakers. (http://news.nike.com/news/5-
game-changing-nike-innovations-of-2014, ).

In addition to footwear and sportswear the company also produces different models of
athletic gear such as watches, baseball bats, football knee-pads or biking helmets and goggles.
According to the CEO of Nike, “there is no value in making things anymore. The value is added
by careful research, innovation and marketing.” In the past, Nike was a product-oriented
company which invested more money in the R&D department in order to appeal to the customers
having a broader offer than the competitors. Since 1992, when Nike started subcontracting
different factories for manufacture throughout the Asian region, the product orientation strategy
was shifted towards marketing and branding supremacy while the production was being
outsourced. The main production of Nike is currently established in Asia and South America, in
over 40 countries that amass 663 factories and over 1 million workers.
(http://manufacturingmap.nikeinc.com/, last accessed in June 2016).

Cheap manufacturing permitted the product element of Nike’s marketing mix to develop
thus allowing a higher and versatile market presence by being able to address different needs on
different segments. Furthermore, Nike has a competitive advantage in terms of owned patents.

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One of their strengths relies in innovative cushioning which have made Nike, the preferred brand
of professional athletes. Currently, the giant conglomerate owns four technologies, each one
featuring its own production line.

Nike Air is the oldest one, launched first in 1987 designed by an ex-architect who
originally was working with infrastructure. (http://help-en-
us.nike.com/app/answers/detail/article/product-technology-air/a_id/34717/country/us, ).

The second one, Nike Zoom features a really thin sole which allows for better movement
and increased stability, regardless of the surface, being used extensively by tennis players.
(http://help-en-us.nike.com/app/answers/detail/article/product-technology-
zoom/a_id/56817/country/us, ).

Basketball players were not neglected in terms of technology by Nike as they created the
Air Max sneaker having a sole made of a mixture between fabric and large bags of air,
alleviating the impact resulted from jumping. (http://help-en-
us.nike.com/app/answers/detail/article/product-technology-max-air/a_id/35453/country/us, ).

The last patent owned by the firm is called Nike Shox and was originally applied on the
Nike football cleats as a result of the tough foam that would reduce the risk of injures caused by
physical contact. (http://help-en-us.nike.com/app/answers/detail/article/product-technology-
shox/a_id/34778/country/us, ).

2.2.2 Price

One of the four major components of the “4P’s” of marketing is price. Fixing a rate is one
of the biggest choices a business has to make because, in the long run, customers respond to this
variable more than to any other. Due to the fact that pricing has to comply to various laws that
regulate different aspects from fixing to anti-monopoly and discrimination, managers consider it
a sensitive issue and minimize it as a marketing variable. The strategy of product pricing breaks
down in two basic paths: demand-oriented and cost-oriented. (McCarthy and Perreault,
1993:542).

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 Companies must be aware of their target market, cost of goods, competitor’s pricing, as
well as many other things when deciding on a price point. Nowadays customers have their fair
share of knowledge of how pricing is established and due to increased savviness they realize a
product’s worth. Competitive markets will always require a player to understand the demands of
the clients and not just quantity-wise or availability related issues. The customers would be more
willing to invest a bigger amount of money in a product or a service, even if there is a cheaper
alternative available, if the assessed product’s qualities justify the price. (McCarthy and
Perreault, 1993:512)

Previous to 2014, Nike, one of the world leading manufacturers of sneakers, was using a
cost-related pricing stategy which implies assessing the production cost of an item from your
inventory and then adding a markup to determine said product’s price. The markup can be
expressed as an fixed amount or as a percentage. (McCarthy and Perreault, 1993:512)

In July 2014 the company started to raise its prices while the rest of the market was
lowering them. Their competitors were offering heavy promotional discounts to try to stay afloat
and convince customers to keep purchasing their “inventions”. Nike has taken a new approach to
their pricing strategy, using a consumer value model grounded on the analysis of how much a
consumer would be willing to spend on each product. (http://www.just-style.com/analysis/new-
pricing-strategy-pays-off-for-nike_id122400.aspx, ).

Their CFO Don Blair said Nike has “done quite a bit of work around its consumer value
equation.” Furthermore he added, “the strength of our brand and the innovation that’s in our
products means that there is a great consumer value proposition at higher price points.” (Annex
1)

The CFO also stated that upgrading their sneaker prices strengthened the consumer’s
perception of the product. This price policy is an efficient one since Nike was able to add $168
million to total industry dollars by raising their average selling. This model is straightforward as
one can approximate the cost of the products and then increase the product’s selling price in
order to achieve the desired profit. With a company like Nike, it is clear that the client is more
than willing to pay a higher fee for the products since they are viewed as an innovative and
technologically focused enterprise.

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2.2.3 Place and channel systems

Sursa (McCarthy and Perreault, 1993:79)

The common-sense marketing mix relies heavily on delivering a quality product with an
affordable price and the importance of this combination is undisputed. However, focusing on the
placement of a company’s products is often neglected. The availability of the produced goods at
the right time in high importance places can benefit the consumer perception about the brand and
also lead to a boost in sales. This strategy is then applied on directly to the customer or via
indirect channels such as middlemen, retailers, or facilitators. (McCarthy and Perreault,
1993:316-319).

Nike products are carried by multi-brand stores and the exclusive Nike stores across the
globe. Nike sells its goods to about 20,000 retail stores in the U.S. and in nearly 200 countries
around the world. When entering the international markets, Nike decided to sell its products
through independent distributors, licensees, and subsidiaries. Thus, Nike has contracted with
more than 700 shops around the world and has offices located in 45 countries outside the United
States. A good number of the factories are situated in Asia, including Indonesia, China, Taiwan,
India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia. Nike is reluctant to reveal
information about the contract firms it works with. However, due to harsh disapproval from

9
some organizations like CorpWatch, Nike has disclosed some facts and figures about its contract
factories in its Corporate Governance Report. (http://www.corpwatch.org/article.php?
id=12965, ).

2.2.4 Promotion in the marketing mix

Nike’s promotion mix involves advertising, personal selling, direct marketing, sales
promotions, and public relations.

In terms of advertising, Nike’s aim is to reach significant populations of target customers

with the greatest possible influence. Efficacious advertisements publicize the brand to customers
and improve their perception of the business. Advertising is typically pricy but when
successfully applied, could lead to Nike earning the rewards of having a strong brand image and
high demand for the produced goods. The advertising plan includes campaigns illustrated by tv-
ads such as “Endless Possibilities” which are designed to embody the idea your performance in
the preferred athletic activity is greatly increased when wearing the brand’s products.Moreover,
Nike focuses on every customer who has an active lifestyle and immerses him in the complete
professional experience, endorsed by his favorite athletes.( http://ca.complex.com/pop-
culture/2014/01/nike-instagram-social-media-strategy, ).

Nike uses celebrities to embody the ideal customer or user of the company’s products. In
most of the cases the advertisements present extremely popular personalities, such as
professional athletes. The target customers can see that their beloved celebrities use the
company’s goods. As a result, the customers are highly driven to imitate the behavior of these
public figures. (http://www.forbes.com/sites/robertpassikoff/2013/12/12/if-the-nike-brand-dont-
fit-lebron-cannot-commit-2/#1548b36967fa, last accesed June 2016).

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 Advertising expenses vs. Revenue ( Figure no. 2.2)

(Source: http://fortune.com/2012/02/13/nikes-new-marketing-mojo/, )

Nike’s personal selling efforts take place in their stores. Store personnel are coached to
deliver assistance to customers in understanding more about the firm’s products, and to convince
them to buy these. In some cases, sales personnel support the company through personalized
service that helps customers find the right Nike product.

Customer experience is enriched because of this educated assistance and power of

persuasion from the sales personnel. Customers get excited about the products they buy from
Nike, they also feel empowered in making knowledgeable decisions in buying these good. Thus,
Nike’s marketing mix uses personal selling to create superior customer experience and customer
relations, while promoting the firm’s products. (Percy, 2014).

Nike uses direct marketing to promote the latest products to the target market. These new
products are typically promoted powerfully. However, to make a greater impact, the firm reaches
out to salespeople in order to approach certain organizations or individuals in target market
segments.

Nike’s sales promotions usually exist under the form of coupons and special offers given
to target customers. The company uses sales promotions to influence new customers by
presenting them added values and advantages, such as the features of the products and the
savings they can make by exploiting discount coupons or special offers. Sales promotions in

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Nike marketing mix urge demand from new customers because their decisions regarding the
purchase of the firm’s goods are based on these perceived benefits.

Nike rarely uses public relations in marketing communications. The company uses public
relations to state social issues linked to the company, such as the use of eco-friendly technology.
In some cases, the firm uses public relations by funding charity events and similar activities.(
https://www.sec.gov/Archives/edgar/data/320187/000032018714000097/nke-
5312014x10k.htm, ).

2.3 Brand identity development strategies and legal issues

Kapferer’s brand identity prism (Figure no. 2.3)

(Source: https://tuesdaydigital.wordpress.com/2013/01/06/applying-kapferers-brand-identity-model-to-digital-
marketing/, )

One of the elements behind a company’s strategic plan is represented by the development
of the brand. This process creates a concept in the customers’ minds that is instantly recognizable
and contains their perception about the products and their loyalty towards the company. The
general approach for branding is made through brand values, which are usually reflected by the

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company’s vision and mission statement. Furthermore, ethical aspects of the business and the
overall customer experience also represent an important factor. The identity of a certain brand
can amass great benefits for the business and can be as useful as the marketing mix. The
emotional and practical value of a brand will contribute with an easier persuasion for consumers
to purchase and will reinforce a quality perception of the products. Also, it will help build a loyal
customer database allowing to connect loyal clients with the same hobbies together by
developing a community around the brand. (Kotler and Armstrong, 2013).

Nike has extensively invested in this strategy thus allowing the “Swoosh” logo to be one
of the most recognized symbols worldwide, and along with the color paterns and packaging
represents the physical characteristic of the aforementioned brand. The emblem of Nike appears,
at the first glance, as a rudimentary drawing made of two arched lines while it was actually
designed to suggest dynamism and speed. Furthermore, the brand’s logo features are associated
to a deity from the Greek mythology whose main attributes were victory, speed and the ability to
fly. Today, the meaning of Nike’s logo represents more than high velocity and the spirit of
victory. Firstly, it encompasses a multi-billion dollar athletic apparel company with innovative
strategies and intensive branding efforts from a financial point of view. Secondly, from a
customer standpoint it represents an entire history of sports evolution and athletic involved
community revolving around the company’s products. This can be achieved by outsourcing
production and intensifying the focus on customer loyalty.
(http://www.magneticstate.com/blogdept/what-does-the-nike-logo-mean/, ).

As part of their efforts in developing the business’ identity, Nike’s Brand Ambassador
title represents a strategy meant to create a deeper connection between customer and company,
emphasizing the idea of a community brought together by a common goal, performance and
professionalism in sports. This position can be filled by both worldwide known athletes and
regular morning joggers as the criteria are not sports related but more popularity related. Nike
chooses people with social media reach and impact over desired target groups, which the firm
endorses with sportswear and gear, involuntarily transforming them into free advertisement
channels. These ambassadors create the impression of a smaller gap between the customer and
Nike, inducing a feeling of belonging and thus remarkably increasing loyalty in relationships.
The list of famous people who have occupied this position features renowned athletes

13
such as Michael Jordan, Kobe Bryant, Maria Sharapova or Tiger Woods.
(http://ca.complex.com/pop-culture/2014/01/nike-instagram-social-media-strategy, ).

Another aspect of Nike’s brand strategy is to be perceived as powerful and to build

customer loyalty by resorting to feelings and heroic behavior. Their campaigns are tailored to
trigger self-contempt and also, equally, determination to evolve into a better self. The customer
is part of an experience where the external factors are not as relevant as the internal ones. The
whole athletic experience is manufactured by Nike, therefore the only aspect that will determine
the performance will be customer-related. Nike commercial campaigns are stories crafted around
a humble hero who will overcome all the obstacles, triumphantly. Heroism will motivate the
consumer to identify the internal negative factors and to achieve the success as the underdog,
with the aid of Nike products. Also, this technique is highly effective since popular professional
athletes are always depicting the characters in the company’s commercials. Using emotions and
heroism increases the number of loyal customers and marketshare by innovative brand
development. (http://602communications.com/2013/02/nike-brand-strategy-emotional-branding-
using-the-story-of-heroism/, ).

Despite of various positive factors that can greatly increase a brand’s value, a company’s
image can be shattered by different events such as unresponsive customer service, quality issues
or legal and ethical battles. Often, the outcome of these events is greater than expected and could
result in diminished loyalty from secured customers or a negative overall opinion about the brand
from potential customers. Nike is currently engaged in three lawsuits regarding infringements of
the copyright law and the other two are allegedly disputed over intellectual property.(
http://qz.com/365948/nike-is-fighting-three-legal-battles-to-protect-the-brands-design-soul/, ).
Furthermore, the giant sports apparel producer was involved repeatedly in sweatshop-related
problems, being accused of unethical behavior towards the employees in charge of
manufacturing. After 1990, when Nike outsourced the production in Asia the problems regarding
corporate social responsibility were decreasing the aggressive efforts of the company to appear
as a sustainable, eco-friendly, people-oriented company. However, after 2005 and various
lawsuits and public comments, the company addressed this issue by enforcing a different set of
rules, while being sensitive at the wage and working conditions which smoothened the

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perception in the consumer’s perception. (http://www.businessinsider.com/how-nike-solved-its-
sweatshop-problem-2013-5, ).

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