Marketing Management Case Study 1 - Nike

Nike hit the ground runningin 1962. Originally known as Blue Ribbon Sports,the company focused on
providing high-quality runningshoes designed for athletes by athletes. Founder PhilipKnight believed
high-tech shoes for runners could be manufacturedat competitive prices if imported from abroad.
Nike’scommitment to designing innovative footwear for serious athleteshelped it build a cult following
among U.S. consumers.

Nike believed in a “pyramid of influence” in which thepreferences of a small percentage of top athletes
influencedthe product and brand choices of others. From the start itsmarketing campaigns featured
accomplished athletes.Runner Steve Prefontaine, the first spokesperson, had an irreverentattitude that
matched the company’s spirit.

In 1985, Nike signed up then-rookie guard MichaelJordan as a spokesperson. Jordan was still an up-
andcomer,but he personified superior performance. Nike’sbet paid off—the Air Jordan line of basketball
shoes flewoff the shelves and revenues hit over $100 million in thefirst year alone. As one reporter stated,
“Few marketershave so reliably been able to identify and sign athleteswho transcend their sports to such
great effect.”

In 1988, Nike aired the first ads in its $20 million “Just DoIt” ad campaign. The campaign, which
ultimately featured 12TV spots in all, subtly challenged a generation of athletic enthusiaststo chase their
goals. It was a natural manifestationof Nike’s attitude of self-empowerment through sports.

As Nike began expanding overseas to Europe, itfound that its U.S.-style ads were seen as too
aggressive.Nike realized it had to “authenticate” its brand in Europe,so it focused on soccer (known as
football outside theUnited States) and became active as a sponsor of youthleagues, local clubs, and
national teams. However, forNike to build authenticity among the soccer audience,consumers had to see
professional athletes using itsproduct, especially athletes who won. Nike’s big breakcame in 1994 when
the Brazilian team (the only nationalteam for which Nike had any real sponsorship) won theWorld Cup.
That victory transformed Nike’s image inEurope from a sneaker company into a brand that
representedemotion, allegiance, and identification. It alsohelped launch Nike into other international
markets overthe next decade, and by 2003, overseas revenues surpassedU.S. revenues for the first time.

In 2007, Nike acquired Umbro, a British maker ofsoccer-related footwear, apparel, and equipment. The
acquisitionhelped boost Nike’s presence in soccer as thecompany became the sole supplier of uniforms to
over100 professional soccer teams around the world.

Nike focused its efforts on international markets, especiallyChina, during the 2008 Summer Olympics
inBeijing. Although Nike’s rival, Adidas, was the officialsponsor of the Olympic Games, Nike received
specialpermission from the International Olympic Committee torun Nike ads featuring Olympic athletes
during the games.

In addition, Nike sponsored several teams and athletes,including most of the Chinese teams and 11 of the
12high-profile members on the United States men’s basketballteams. That year, sales in the Asian region
grew15 percent to $3.3 billion and Nike’s international divisionsgrew to 53 percent of the company’s
revenue. Some believedNike’s marketing strategy during the Olympics wasmore effective than
Adidas’sOlympic sponsorship.In addition to expanding the brand overseas, Nikesuccessfully entered new
athletic footwear, apparel, andequipment product categories by using endorsementsfrom high-profile
athletes and consumer outreach programs.The Nike Golf brand, endorsed by Tiger Woods,has changed
the way professional golfers dress. Tiger’spowerful influence on the game and his Nike emblazonedstyle
have turned the greens at the majors into “golf’sfashion runway.” In addition, Nike has used the
superstarto help build its relationship with consumers. In 2009, itlaunched a Tiger Web Talkback session
at nikegolf.com,where fans could ask questions and hear Tiger talk aboutgolf. The session was part of a
nationwide Nike Golf consumerexperience day, which included equipment demos,long-drive contests,
and in-store specials.

In tennis, Nike has aligned with Maria Sharapova,Roger Federer, and Rafael Nadal to push its line of
tennisclothing and gear. Some called the famous 2008Wimbledon match between Roger Federer and
RafaelNadal—both dressed in swooshes from head to toe—afive-hour Nike commercial valued at $10.6
million.

Nike teamed up with seven-time Tour de France championLance Armstrong not only to sell Nike
products but alsoto help Armstrong’s LIVESTRONG campaign. Nike designed,manufactured, and sold
over 70 million yellow LIVESTRONGbracelets, netting $80 million for the Lance ArmstrongFoundation.
It also featured Armstrong’s message of survival,willpower, and giving in a series of Nike commercials.

To promote its line of basketball shoes and apparel, Nikecontinues to feature basketball superstars such as
KobeBryant and LeBron James. In addition, it formed a partnershipwith Foot Locker to create a new
chain of stores, Houseof Hoops by Foot Locker, which offers only basketball productsby Nike brands
such as Converse and Jordan.

Recently, Nike’s lead in the running category hasgrown to 60 percent market share thanks to its
exclusivepartnership with Apple. Nike_ (Plus) technology includesa sensor that runners put into their
running shoes and areceiver, which fits into an iPod, iTouch, or iPhone. Whenthe athlete goes for a run or
hits the gym, the receivercaptures his or her mileage, calories burned, and paceand stores it until the
information is downloaded. Nike_ isnow considered the world’s largest running club.

In 2008 and 2009, Nike_ hosted the Human Race10K, the largest and only global virtual race in the
world.The event, designed to celebrate running, drew 780,000participants in 2008 and surpassed that
number in 2009.To participate, runners register online, gear up withNike_ technology, and hit the road on
race day, runningany 10K route they choose at any time during the day.Once the data is downloaded from
the Nike_ receiver,each runner’s official time is posted and can be comparedto the times of runners from
around the world.

Like many companies, Nike is trying to make its companyand products more eco-friendly. However,
unlikemany companies, Nike does not promote its efforts. Onebrand consultant explained, “Nike has
always been aboutwinning. How is sustainability relevant to its brand?” Nikeexecutives agree that
promoting an eco-friendly messagewould distract from its slick high-tech image, so effortslike recycling
old shoes into new shoes are kept quiet.

Today, Nike dominates the athletic footwear marketwith a 31 percent market share globally and a 50
percentmarket share in the United States. Swooshesabound on everything from wristwatches to
skateboardsto swimming caps. The firm’s long-term strategy focuseson basketball, running, football,
women’s fitness, men’straining, and sports culture. As a result of its successfulexpansion across
geographic markets and product categories,Nike is the top athletic apparel and footwearmanufacturer in
the world, with corporate fiscal 2009revenues exceeding $19 billion.

Questions

1. What are the pros, cons, and risks associated withNike’s core marketing strategy?

2. If you were Adidas, how would you compete with Nike?