Nike is on Top of the World
By: Yvette Colpitts
Mary Ann Strout
April 17, 1997
Nike, a sports marketing machine, is currently on top of the world. Open a sports related magazine and you are sure to see an ad. Watch a televised sport event and you will most likely see your favorite athlete with a shirt, a hat, a pair of shoes, or all three with a Nike swoosh. Just mention the word Nike and people associate it with superstars like Michael Jordan, Andrew Agassie, and recently Tiger Woods, who just signed a multi-million dollar contract. What has made Nike so well renowned? Why, it's the presence of the Nike logo on everything and everyone. So familiar has the Nike swoosh become to its target audience that both athletic shoes, the primary product of Nike, and its billion dollars worth of non-shoe products no longer needs to carry its brand name - just the swoosh. Even today's ads for this 6 billion dollar company only need to display a logo with a picture to get the point across to consumers. Will Nike ever die? At this rate, most likely not - the Gods are watching over this company with favorable eyes.
A brief background:
Nike was the vision of two men named Phil Knight, a former college distance runner, and Bill Bowerman, a track coach at the University of Oregon. Together they started the Blue Ribbon Sports Company in 1962 (Willigan 91). The company's market strategy was to under cut its competition by selling cheap imported shoes that resembled the more expensive European styled athletic shoes. Bill Bowerman's shoe designs were generated from the inputs of athletes, and became some of the best high performance products available in the market.
According to the book Swoosh the Unauthorized Story of Nike and the Men Who Played There, Bill Bowerman became known as the "father of jogging" (Strasser and Becklund 72). In doing so, he helped inspired the running movement that would produce millions of customers for Blue Ribbon Sports products. In 1972 the "Nike" brand was launched. Phil Knight purchased the swoosh logo for $35 from a local art student and named the first shoe "Nike" after the Greek winged goddess of victory. Little did he know how valuable that logo would become.
In 1978, Blue Ribbon Sports changed its corporate name to Nike. Nike's profits grew enormously in the 70's doubling every year. Up to this point, Nike's focus had been on the product and the "core consumers" who were the athletes performing at the highest level of the sport. In the mid 80's profits began to level out and Nike had to change its focus in order to continue to grow. The wants of the general public became as important as the core consumer. The idea of creating emotional ties with the public by incorporating and selling athletic ideals of "determination, individuality, self-sacrifice, and winning" emerged (Lane 45). This strategy brought Nike back on top of its competition and transformed it from a million dollar company to a billion dollar company.
Today, Nike pays out approximately $100 million a year to get athletes to use and pitch Nike products.
Nike pioneered the idea of segmenting its athletic shoes to cover the entire athletic shoe market while holding on to a strong single brand identity. Not a bad idea considering that this approach enables Nike to gain a wider customer base and sell a greater amount of shoes. Each athletic shoe is defined to a specific sport as a separate category rather than just lumping all athletic shoes together. Now sports enthusiasts buy multiple athletic shoes in a year increasing Nike sales. For example, the below chart portrays only some of the many different product lines of Nike shoes. There are over 100 styles of shoes.
Men's & Women's Racing Shoes Track & Field Basketball Tennis Cross-Training Technical Running Shoes Air Max Air Rift Zoom Super Fly Air Swoops Courtster Air Worp Air Structure Zoom Zoom Swift Air Flight One GTS Air Griffey II Rotational Air Footscape Air Streak Zoom V Air Max Air Alarm Air DT Max Uptempo Air Max Triax Air Skylon Zoom Country Air Zoom Kooyong Air Trainer Flight Max Air Pegasus Air Treak Zoom Rival Inside Force Air Air Trainer Light Vitesse Press Air Windrunner Air Mariah Zoom Eldoret Sandstar Air Terra Air Edge Outback Air Trail Other Shoe Categories: Volleyball Golf Non-Tech Street Hockey Soccer Boys & Girls Running Run/Walk Football Baseball/Softba Cheerleading Fitness Infants ll Sandals In-Line Ice Skates Skates
No style of athletic shoe is off-limits to Nike. If there is a demand, they will make it. Recently, the company began marketing Nike in-line skates and ice skating boots. For an athlete, having such a wide selection of shoes for a specific need can be great. But is the selection just too large? Nike's designers average a new shoe style every single day (Lane 43). For the "Joe American Public," all these different type of shoes can confuse the consumer.
Nike did not just stop at making shoes. They introduced an apparel lines; ranging from stylish casual clothing to sweat resistant athletic wear. To many teenagers, it "cool" to be seen in Nike clothing. Even for adults, Nike sports wear is considered a fashion statement. This accounts for Nike's phenomenal 98.8% growth in U.S. Athletic apparel sales from 1995 to 1996 (Profiles of Top 100 Advertisers, S44).
Division Sales 1996 1995 % Change US Athletic $2,773 $2,309 20.00% Footwear US Athletic $843 $424 98.80% Apparel International $1,682 $1,244 35.20% Footwear International $651 $473 37.80% Apparel Other Brands $522 $311 68%
Nike holds the highest retail price for all segments of their athletic shoes. A pair of Nike's athletic shoes can run anywhere from $60 to $145 depending on the type of shoe. For example, an Air Pegasus shoe retails for $70.00 in a typical US sporting store even though the manufacturing costs average $16.00 a pair in Indonesia (Kwon 2). When interviewing a Sales Manager at a local Ladies Footlocker, the manager proclaimed that Nike shoes usually sells for approximately $5.00 more than Reebok or Adidas (Nike's main shoe competitors). Some people (even some in our group) would never buy Nike shoes because of the high cost. So why are so many consumer's willing to pay higher prices just for the Nike brand? The store manager believes that "consumers are more likely to buy Nike because of its large product line; larger than any other shoe company" (Patti - Ladies Foot Locker). The manager explained that if a customer walks into the store, that customer will get bombarded with the variety of Nike shoes to select from; therefore, increasing the likelihood of walking out of the store with a pair of Nike's. But, is there more to it? We believe it also has a lot to do with the promotion of the Nike brand.
Phil Knight stated during a interview by the Harvard Business Review, "We understand that the most important thing we do is market the product. We've come around to saying that Nike is a marketing-oriented company and the product is our most important marketing tool" (Willigan, 100). Coaches and players at the high school level are also the object of Nike's marketing plan. In an effort to secure the next Michael Jordan sensation, Nike works closely to develop long lasting relationships with the high school athletes. Nike and Adidas tug at these players using shoes and money to get their attention. For high schools kids, the whole concept can be overwhelming. Nike states the concept of sponsoring high school athletics is to show kids "the positive value of sports." (Smith 46).
Nike may want to represent positive values of sports, but there is another reason for marketing towards younger athletes - brand loyalty. Nike has creatively secured brand loyalty among its customers by targeting the younger generations.
As a result of Nike's aggressive marketing campaign, students are identified by the athletic wear on their feet. Throughout the United States, Nike is the sponsor of high school athletic teams. Nike competes with other athletic companies to win the support of team coaches by awarding the coaches with shoes, T-shirts, hats and bags. These free gifts can add up to nearly $15,000 a year (Smith 45). Gifts from athletic wear companies such as Nike are a welcome change for coaches. The ethical dilemma is that the coaches are developing loyalty with an athletic wear company rather than their school principal.
Nike has also promoted itself through many programs such as Sport Youth Camps, and recently through the 1996 Olympics. Most of the U.S. athletes in the Olympics wore uniforms that displayed the swoosh emblem. This notorious swoosh logo and slogans such as "Just Do It" are now famously worn on T-shirts and hats by non-athletes. The popularity of the logos can be credited to the millions of dollars Nike has spent on national advertising. In fact, 95% of the money Nike spends on advertising has been for national television and magazine ads.
Type of U.S. Advertising Dollars Magazine $48,500,000 Sunday Magazine $118,000 Newspaper $239,000 National $97,000 Newspaper Outdoor $3,242,000 Network TV $61,182,000 Total $113,378,00 0
Nike has successfully marketed their product in every region of the world. Geographic regions are divided into four areas; United States, Europe, Asia-Pacific, and the Americas (Wolk). Within each region Nike has multiple distribution facilities. Merchandise is distributed through retailers and through NikeTown. Regional sales managers meet with agents of the retail companies at the distribution headquarters to conduct the sale. Never do Nike Representatives sell directly to individual retail outlets.
NikeTowns continue to pop up in major cities throughout the United States - Portland, Chicago, Atlanta, Orange County and recently Seattle, with many more to come. They are strategically placed to attract tourists. Their purpose is not necessarily to initiate purchases, but to focus on the entertainment value and gain the attention of the consumer. However, unwarily, Nike potentially puts itself in competition with local retailers that sell Nike merchandise. (Lim 1).
Nike's mission statement is "to be the number one sports and fitness company in the world" (NikePark). They have successfully achieved their mission, but will they always remain on top? Lately Nike has been highly criticized for its unethical profit margins and corporate labor practices overseas. Reports have surfaced with regards to subcontractors of Nike mistreating their Vietnamese workers. Besides this point, some people disagree with Nike's over persuasive marketing tactics. Many are afraid that the endorsements of big athletic companies such as Nike will interrupt the simple pleasures of watching and playing sports. Soon, athletes will become walking billboards. Young athletes will feel greater pressure to be the best in order to sign multi-million dollar contracts for endorsements.
Nike's continual success hinges on the technical advancements and developments in athletic shoes, and the primary use of marketing through sponsorships and nationwide celebrity endorsements. In a Forbes article, Phil Knight claimed that he did not know much about advertising, but that the "old athlete in him understood sports as the culture of the U.S. and the language of the world." "People don't root for a product," Knight reckoned, "but for a favorite team or a courageous athlete." This strategy has been very successful for Nike, placing it among the top 60 successful marketing companies in the world. Nike continues to expand globally shutting out its competitors on a global scale. With this type of continual success, Nike's near future is not in jeopardy.
"100 Leading National Advertisers." Advertising Age. September 30, 1996: S44-S45.
D'Orio, Wayne. "Just Doing It." Promo. March 1997: Nexis Lexis.
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Lane, Randall. "You are what you wear. Nike's Phil Knight isn't selling shoes; he's selling attitude." Forbes. October 14, 1996: pg. 42.
Martin, Molly. "Fitness Favorites." Pacific Magazine. April 13 1997: pg. 9.
Patti. Ladies Foot Locker. Personal Interview. April 14, 1977.
Reilly, Rick. "The Swooshification of the World." Sports Illustrated. February 24, 1997: pg. 78.
Smith, Chris. "Sneaker Wars." New York. March 3, 1997: 40-47
Strasser, J.N. and Becklund, Laurie. Swoosh. Orlando, Florida: HBJ, 1991.
Whipple. "Phil Knight: After 24 years building Nike into a worldwide presence, Knight seeks to perfect his masterpiece." Business Journal-Portland. September 13, 1996: Nexis Lexis.
Willigan, Geraldine E. "High Performance Marketing: An Interview with Nike's Phil Knight." Harvard Business Review. July-August 1992: pg. 91-101.
Wolk, Martin. "Nike Profits Surge 77 Percent as Sales Rise." Reuters. March 20, 1997: Nexis Lexis.