beats

NIKEIllustrated Marketing Report

3

Introduct ionMarket Report

In t roduct ion

This report was written to establish the potential of Beats to venture out into the footwear market in 2016 in collaboration with Nike.

Beats Electronics was founded in 2008 by Hip Hop rapper Dr Dre and Jimmy Iovine (Beats by Dre, 2014). Since then it has gone on to be one of the biggest audio lines in the world. In the USA

it is now worth 70% of the audio market (Helm, 2014). Beats Electronics has now been sold to Apple for $3 billion (May 2014).

The main primary sources of information are: questionnaires, one on one street interviews and focus groups from 2014 to 2015.

The main secondary sources are: Billboards, Guardian, Independent, beatsbydre.com, BBC, The Drum online, Mintel, WGSN, LSN, CNET online.Beats Electronics is a private brand so there was very limited information on them and it was difficult to get in contact with Beats' representatives. It was,

however, possible to get one interview with Nike.

It was also difficult to get realistic CADs images of trainers that would in future replicate those of Beats iconic collection because the colours were not the right fit and the shape and the design did not

work with Beats' brand aesthetic.

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The ProposalMarket Report

beats

NIKE1. The Proposal

1. The Proposal

Company OverviewMarket Report

11 .Company Overview

BEATS ELECTRONICS

Beats Electronics stands today, as one of the best electronic companies in the world. INC states that it now controls 70 percent of the headphones market (Helm, 2014). Established in 2008 (Joyce, 2013) Beats continues to be an unstoppable force. They have naturally caught the eye of the international brand Apple, who are now worth $700 billion (Fletcher, 2014). Apple has recently bought Beats Electronics for

a sum of $3 billion dollars (Gibbs, 2015). Iconic Music producer Jimmy Iovine and Rap Mogul Dre founded the company in 2006 (Gittleson, 2014) and have managed to present to the world true visionary high quality products. Such as beats by dr.dre headphone lines and the Pill sound system. Stars like Omar Johnson, have been seen at the forefront of inspiring, thought provoking Beats by Dre campaigns (Davies, 2014) Beats by Dre have made a mark in todays pop culture, there products have become a necessity for all generations. Beats by Dre have

relentless passion (Davies, 2014) that many brands look and fail to replicate.

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Product serviceMarket Report

1 .2 Out l ine the new product or service

The Chronic Col lect ion

The Chronic album curated by Dr Dre and produced by Jimmy Iovine sold three million copies in 1992 (Gittleson, 2014) and is still considered today a masterpiece. It was inspired by the gang culture and hip hop within America. The Chronic album pushed two iconic minds, Dre and Jimmy Iovine together. They

were unstoppable and with this new venture they shall continue to be just that.

Michael Ukagbeu, Age 21 (Pr imary Shot, St reet Interv iew 2014)

Beats Electronics will replicate that history and magic by moving into the footwear market. The range shall pay homage to the album that started it all. The collection shall be called The Chronic Collection. Beats Their main focus shall be trainers. Initially the duo were meant to create trainers but

opted out to create headphones (Gibbs, 2014) instead. Now it is time for Beats to venture out into the footwear market as it is set to go onto be worth ’11 million by 2019 (Mintel, 2014). Also the footwear market is currently worth ’9.4 million (Mintel, 2014).

Beats will produce trainers that remind old and new consumers just how great and exceptional Beats Electronics are at producing astonishing quality products.

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USPMarket Report

Beat Electronics new venture not only has a strong backing from Apple, a $700 BN company (Fletcher, 2014). They also have a strong USP in its upcoming collaboration with Nike. Nikes' total revenue increased $7bn in its third quarter (WGSN, 2015). 30 respondents, when asked "what footwear brand they like buying", 70% said Nike (see appendix 1). This just reiterates Nikes' brand power among consumers and why it would be ideal for Beats to collaborate with them. Beats Electronics will gain credibility moving into

the footwear market, with this new collaboration. This partnership will be the right move on Beats behalf. Nike previously partnered with Apple for the 'Nike fuelband' (Gibbs, 2014). Beats will now have a cemented relationship with Nike, which means Beats will produce quality trainers that reflect their brand without any detrimental issues between either brand. This partnership will elevate Beats Electronics status to new heights. Nike Representative (Nigel, 2014) agreed

with this partnership. He went onto say that a brand needs to have "history, an involvement in the music and entertainment industry" (Nigel, 2014), If they want to successfully collaborate with Nike. This makes Beats a perfect match for Nike as they have that and more. Together with Nike they can produce innovative stylish trainers for

their target consumer.

1 . The Proposal

USP

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Ansoff Matr ixMarket Report

1 .4 Matr ix

Ansoff Matr ix

Existing Products New Products

Market Penetration

Market Development

Prese

nt

Future M

ove

Existin

g M

arkets

New M

arkets

Product Development

’ Successfully launched Beats music in January (Pham, 2014)

’ Product integration with HTC audio system (Milmo, 2013)

’ Power beats higher end version of beats solo (France, 2014)

’ Beats expanded to speakers with ’The Pill’ (beats by dre, 2014)

Diversification

’ Beats expanding into the footwear market

’ Widening their audience’ Risky venture’ Beats have a strategic partnership in place with Nike that will create credibility for

the brand.’ Secured support from Nike Representative (Nigel, 2014) sees it as a

realistic venture.

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Market ing MixMarket Report

beats

NIKE3. Marketing Mix

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Market ing MixMarket Report

Michael Ukagbeu, Age 21 (Pr imary Shot, St reet Interv iew 2014)

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Target MarketMarket Report

2 . 1 Michael Scott Ukagebu, Age 21

Target Market

* Michael works part - time as a waiter* Currently studies Music Journalism in London.

* He has his own blog, filled with music reviews and poetry.* Loves playing Xbox games such as 'Assassins creed' with his 'mates'.

* He loves having "beats headphones" as they go with "every outfit" he owns.* He collects "New Balance Trainers".

* Michael spent "eighty pounds" on his latest pair".

(Ukagebu, 2014)

Target MarketTarget Market

Luke Grey, Age 27 (Pr imary Shot, St reet Interv iew 2014)

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Target MarketMarket Report

2 . 1 Luke Grey, Age 27

Target Market

’ Luke is a graphic designer’ lives in a studio flat with his girlfriend’ Has just bought tickets to see J Cole at the 02.’ Iin future he would love to own a pair of 'Giuseppe trainers'.’ Luke has finally been able to buy Adidas ’Y3 trainers.’ He to the gym every Friday, he wears "Nike Running shoes" whenever

he goes.

(Grey 2014)

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DemographicsMarket Report

2 .The Market ing Mix

Demographics

57%

42%

100%

30 male respondents were questioned about footwear .

(Wiafe,2014)

21-25

36%26-31

4%31-41

4%

30 male consumers were questioned. The majority of respondents were aged 16-20. Age range 21-25 followed after as the

largest majority (Wiafe,2015).

Male respondents said are currently students in university (Wiafe,2015).

Male respondents said are currently employed for wages (Wiafe,2015).

80%

20%

30 male respondents, when asked where they lived 80% percent said

London.(Wiafe,2015)

30 Male respondents, when asked where they lived

20% percent said they lived in the Midlands.(Wiafe,2015)

21-25

56%

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DemographicsMarket Report

2 .The Market ing Mix

Spending Power

Spends £30-£59.99

on trainers

Spends £0-£29.99

on trainers

Spends £150+

on trainersSpends £60-

£89.99on trainers

£30-59.99

33% £60-89.99

33%

£150+

17%

£0-£29.99

17%

42%

2%

57%

30 male consumers were questioned. The majority of

respondents spend at 30-89 pounds on trainers. 16-20 (Wiafe,2015).

Male respondents said buy footwear once a year

(Wiafe,2015).

Male respondents said buy footwear once a month

(Wiafe,2015).

Male respondents said buy footwear once a week

(Wiafe,2015).

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Market ing TypologiesMarket Report

2 .The Market ing Mix

Dope Mi l lennials

New MIllenials communicare via mobile, instant messagaing and texting. (Lsn,2009)

They are fun loving people,who appreciate thei r fami ly and make t ime to vis i t home.

They value education and health. They always want to improve their lifestyle. Majority look for work.

They buy into brands that fit their style and way of life. They buy into brands that cater to their needs. (LSN,2009)

They love socialising with friends. They also love music and trying out new things given the time they have off.

Health and exervcise is crucial for their lifestyle. They drink water and regugarly and go to the gym.

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The ProductMarket Report

beats

NIKE3. The Product

Launch SeasonMarket Report

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Spring/Summer 2016 will be the official Launch season for Beats by Dre Chronic collection. More Consumers will be out exercising playing sports on the streets. Consumers will be spending

more money on trainers in the summer.

Inspi rat ionMarket Report

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Beats inspirations are drawn from the Hip Hop culture, music scene of the 90's. Beats with this new venture will translate that culture, colour and way of life into their trainers.

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Inspi rat ionMarket Report

2 .2 Product

Mater ia ls And Design

Mesh will be a key material for the chronic collection. Its highly breathable and it will offer a great deal of protection for consumers who choose to run. Majority Respondents commented they buy 'comfortable' trainers. (Wiafe, 2014). IU and rubber outsoles will be used, it comforts and supports the feet. (NIKE, 2015)Gradients fades will be put on as a type of finish pay homage to the 90’s love of graffiti and spray paint. WGSN highlighted gradients, mesh the new trend of 2016 (WGSN, 2015)Materials such as leather and EVA foam will be used for different models. Designs for the chronic collection shall follow Nikes' Air Max,

Rosche, slip on trainers. Beats colours and look will be incorporated in the designs.

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Sourcing StrategyMarket Report

2 .2 Product

Sourcing Strategy

Beats have successfully taken steps to ensure a licensing agreement with Nike. Licensing agreement will permit Nike to manufacture Beats

footwear range. The agreement states that Nike will have control over parts of the trainer design. Nike will also be market the product alongside Beats. Beats have no manufacturing expertise within the footwear market, so this

will give them a great edge.

Beats has chosen to manufacture the trainers at one of Nikes contract factories. The factory is called 'Chang sin Indonesia' (Nike INC, 2015). The Benefits to Beats Electronic manufacturing in Indonesia are as

followed:

’ Labour Cost are lower ’ Indonesia third biggest supplier for Nike outsource’ Nike estimated to have 171,000 employees in Indonesia ’ Been based there since 1980's, the relationship is good.’ Beats buyers and agents can trust they will stick to their lead

times.’ They are reliable.

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Sustainabi l i tyMarket Report

Beats By Dre headphones collaborated with EKOCYCLE, their goal was to encourage consumers to recycle and not waste (Beats By Dre, 2012)

This new manufacturing Licensing agreement with Nike, can allow beats to take a clearer and more prominent stand towards sustainability.

Nike, in favour of sustainability has:

’ Participated in developing strategies for fair labour.’ Created environmentally preferred materials.’ Collaborated with the Plant PET Technology Collaborative (PTC.)

The Nike Inc. code of conduct for contract factories and workers, states, ’Employers have to be over 16’ and that ’working hours are not excessive’.

(Nike Inc., 2015)

Beats Electronics will mirror and implement Nike's sustainability.

2 .2 Product

Sustainabi l i ty

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posi t ionMarket Report

beats

NIKE5. Position

36

Price Sty le Matr ixMarket Report

2 .5 Posi t ion

P r ice Sty le Matr ix

NIKEbeats

High Price

FashionClassic

Low Price

Beats competitors will mirror that of Nike's. The Brand will be competitng against the likes of Adidas, New Balance and Puma. Respondents from Beats extensive primary research agreed. They were asked beforehand having no knowledge of beats brand extension, what brands they buy. Nike, New Balance and

Adidas came top for their first option. Therefore when pricing Beats will make sure that the price range is in direct simmilarity to that of its

competitors.

48

SWOT Analys isMarket Report

beats

NIKE4. SWOT Analysis

4. SWOT Analysis

49

Swot Analys isMarket Report

1 .4 Matr ix

SWOTAnalys is

Strengths Weaknesses

’Beats lack of a design team

’ Lack of expertise within the footwear market.

’ Small Range

’ Heritage Brand, Beats connection with consumers are strong.

’ Strong relationship with Nike, products manufactured will be of good

quality.

’ Nike collaboration adds credbility to the Beat's footwear venture.

Apple buying Beats, helps to strenghtne the brands D.NA.

Opportunities

’ Could move on to collaborate with fashion designers.

’Apple aquisition, next collection incoporate technology.

’ Risky venture’ Beats have a strategic partnership in place with Nike that will create credibility for

the brand.

Threats

’ Risk losing credibility among the audio market, if Beats spends too much time

working on it.’ Widening their audience’ Risky venture’ Beats have a strategic partnership in place with Nike that will create credibility for

the brand.’ Secured support from Nike Representative (Nigel, 2014) sees it as a

realistic venture.