Marketing (Case Study - Nike)

Durojaiye Hadijat Oluwatosin STU 19895 1

REPORT

ON

MARKETING

(CASE STUDY: NIKE)

BY

DUROJAIYE HADIJAT OLUWATOSIN

STU 19895

LEVEL 5

BTEC HIGHER NATIONALS

WORD COUNT: 3229

TO

RDI/EDEXCEL

DATE: 14th DECEMBER, 2009


Table of content

Introduction

Section 1

Concept and Purpose of Marketing

Definition of marketing

Characteristics of market oriented organisation

Selling concept versus marketing concept

Benefits and costs of implementing marketing approach

Section 2

Concept of Segmentation, Targeting and Positioning

Macro and Micro Environmental Factor to Marketing Undertaken By Nike

Segmentation criteria

Target market for Nike+ Sensor

Buyer behavior

Section 3

Individual Elements of the Extended Marketing Mix

Nike’s competitive advantage

Nike and its distribution strategy

Nike and its promotional strategy

Section 4

Application of the Extended Marketing Mix to Different Market Segments

Marketing mix for Nike+ Sensor

Difference in consumer and organizational marketing

International market versus domestic market

Conclusion


Introduction

Nike is the world’s largest athletic footwear and apparel company.

I am the Operations Office of Change-A-Life Foundation. I assist in developing and implementation of all administrative material and projects for the Foundation.


Section 1

Concept and purpose of marketing

The Chartered Institute of Marketing (http://www.cim.co.uk) defines Marketing is the concept of

satisfying customer needs by means of the product (or service), everything associated with

creating, delivering and consuming that product, and, by achieving a high degree of customer

satisfaction, retaining that customer indefinitely thereby achieving profitable growth.

The American Marketing Association (http://www.marketingpower.com) describes Marketing is

the process of planning and executing the conception, pricing, promotion, and distribution of

ideas, goods, and services to create exchanges that satisfy individual and organisational

objectives.

With the above, Marketing can be described as a process of implementing an effective marketing

mix targeted at consumers of a product with the aim of maintaining a high level of consumer

satisfaction while generating sales and profit.

This description was arrived at after closely studying what marketing entails

Characteristics of Market Oriented Organisations

Business organizations differ in their orientation starting from production to sales then

marketing. Marketing orientation of a business is to have an altogether different mindset i.e. to

focus on the customer first and the needs of the business thereafter

(www.freebizplan.org/business.../marketing/marketing_oriented.htm)

http://www.cim.co.uk/

http://www.marketingpower.com/

http://www.freebizplan.org/business.../marketing/marketing_oriented.htm


According to Dave Hall et al (2008), a business that is market oriented is one who continually

identifies, reviews and analyses consumers’ needs. Also, for an organisation to be market

oriented, it must exhibit the following characteristics:

Market Research: Nike rely on research committees and advisory boards made up of athletes,

coaches, trainers, equipment managers, orthopedists, podiatrist and other experts who consult

and review designs materials and concepts for product improvement.

Design its product according to the wishes of the consumers: Each brand speaks to a different

consumer as Nike has a dozen brands that serve more than 30 major sports consumer lifestyle

and serve millions of consumers with thousands of its products.

Produce the product in quantities the consumers want to buy: Nike believes that connecting

with consumers is one single most important competitive advantage in business today as such,

deep meaningful relationship with customers are the center of everything they do.

Distribute product in according to the buying habit and delivery requirement of the

customer: Nike ensures this by working with wholesale partners to create differentiated retail

destinations and product assortments that are tailored to their customers. This is done by

investing in direct retail concepts. Nike sells its products in 170 countries.

Set the price of the product at a level the consumer is ready to pay: Nike has created a

portfolio of brands capable of reaching across multiple sports, lifestyle categories, and price

points. Nike has become more strategic in developing and managing its product mix and pricing

to meet various segments and target audience.

Selling concept versus marketing concept

The Selling Concept

Kotler (2006), believes the selling concept holds that consumers and businesses, if left alone,

will ordinarily not buy enough of the organizations products. The organization must, therefore,

undertake an aggressive selling and promotion effort. This concept assumes that consumers

typically show buying inertia or resistance and must be coaxed into buying.


The Marketing Concept

The marketing concept holds that the key to achieving its organizational goals consists of the

company being more effective than competitors in creating, delivering, and communicating

customer values to its chosen target markets (Kotler, 2006).

The selling concept takes an inside-out perspective. It starts with the factory, focuses on the

existing products, and calls for heavy selling and promoting to produce profitable sales while the

marketing concept takes an outside-in perspective. It starts with a well-defined market, focuses

on customer needs, coordinates all the activities that will affect customers, and produces profits

by satisfying customers (Kotler, 2006). Its goal is to get sales and no concern is shown for

consumer satisfaction after the sale. However; marketing based on hard selling carries high risks

as it focuses on short-term results - creating transactional sales - rather than on building long-

term, profitable relationships with customers.

The marketing concept on the other hand is based around the philosophy that the customer, and

their needs and wants, is the number one priority. Achieving organisational goals depends on

determining the needs and wants of particular target markets and delivering desired benefits and

satisfactions of products and services better than the competition

Nike can be said to exhibit the market concept. Nike has various brands which it sells to various

segments of the market. For instance, Nike has been able to successfully group its customers into

three distinctive groups of men, women and children and provide products which fits into each

segment’s lifestyle and needs. Thus, Nike attracts and retains customers through superior product

offerings, which delivers Customer satisfaction and offering extended services to retain

customers.


Benefits and costs of implementing marketing approach

Any marketing approach to be adopted by an organization must meet the organisation’s goal and

objectives and the cost of the marketing approach must not be higher than the accrued benefit.

The cost to be incurred may be but not limited to the cost of the followings:

Market research: Nike invests heavily in market research in order to keep developing products

which will meet customer needs and satisfaction.

Initial product development: Nike has invested in setting up advisory board whose

responsibilities are to review designs, materials and concept for product improvement.

Attracting attentions of customers: Nike spends highly on attracting customers especially with

its endorsement scheme where notable stars approve its products. Also, it engages in sponsoring

major events. An example is being the official footwear and apparel sponsor of the Bank of

America Chicago Marathon which is the second largest marathon in the United States, attracting

over 45,000 runners every year

(http://answers.yahoo.com/question/index?qid=20081021151207AA5JAwZ,

www.Nikebiz.com?media/pr/2008/04/10_marathon.html and

http://wiki.answers.com/Q/Cost_and_benefits_of_marketing_approach).

Benefits

Profit: Nike has been able to make remarkable profits by driving top line revenue, expanding

gross margin, leveraging on expenses and focusing on the highest return opportunities.

Customer loyalty and trust: Over the years Nike’s swoosh logo has become one of the most

recognized symbols in the world making it a brand which is tested and trusted.

http://answers.yahoo.com/question/index?qid=20081021151207AA5JAwZ

http://www.nikebiz.com/?media/pr/2008/04/10_marathon.html

http://wiki.answers.com/Q/Cost_and_benefits_of_marketing_approach


Long term goal: Nike is been consistent in its long term profitable growth.

Reputation: Nike has built its reputation over the years as one of the leading manufactures in the

footwear and apparel industry by offering products that meets customer requirements.


References

American Marketing Association (2009) Marketing power [Online]

http://www.marketingpower.com [Assessed: 14 November 2009]

Business Plans for small business (2007) Market oriented business

http://www.freebizplan.org/business.../marketing/marketing_oriented.htm [Assessed: 17

November 2009]

Chattered institute of marketing (2009) Marketing [Online] http://www.cim.co.uk [Assessed:

11th November 2009].

Dave H, Rob J, Carlow R, Alain A, Ian C and Dave G 2008. Business studies Fourth Edition

Great Britain, Person Education.

Kotler P and Arstrong G, (2006), Principles of marketing. Eleventh Edition. New Jersey, Pearson

Education.

Nike Inc. (2008) Press releases http://www.Nikebiz.com?media/pr/2008/04/10_marathon.html

[Assessed: 3rd December 2009].

Wiki Answers (2009) http://wiki.answers.com/Q/Cost_and_benefits_of_marketing_approach


Yahoo Answers (2009) Cost and benefit of marketing approach

http://answers.yahoo.com/question/index?qid=20081021151207AA5JAwZ Identify and

assess the benefits and cost of a marketing approach [Assessed: 20th November 2009]








Section 2

Concept of segmentation, targeting and positioning

Macro and micro environmental factor to marketing undertaken by Nike

Under the macro environment, the economic and technological environments will be discussed

while under the micro environment, stakeholders will be examined.

The economic environment

Companies and their suppliers, marketing intermediaries, customers, competitors and public all

operate in a macroeconomic environment of forces and trends that shape opportunities and pose

threats. These forces represent non-controllables which a company must monitor and respond to.

Currently, the world economy is in recession as such, Nike being a global brand operates in a

recessionary environment. It is therefore imperative to recognise the key features associated with

this stage of its business cycle. For example, consumer and buying power declines during a

recession, and spending may actually remain at the depressed level even when the economy

enters the recovery period. This automatically reduces company profits.

In the economic arena, Nike is increasingly affected by global forces such as:

1. Asian economic power: The Asian economic crisis also affects Nike since its goods are

manufactured in Asia. The labor costs and material prices are rising.

2. International monetary crises: Nike's growth is not just affected by the local economy but

also in the international economy. A weak Euro and an Asian recession could mean weak

sales for Nike.


Technological environment

Technology affects not only products and services that are available to customers, but also the

way in which things are made and the ways in which time can be saved in carrying out some of

the fundamental operations in the workplace. A company’s growth prospective is affected by

how many major new technologies are discovered.

Nike is able to effectively harness its technology environment to boost its marketing efforts and

this has translated into robust sales of its products. However; as products become more complex

the public needs to be assured of their safety. Consequently government agencies’ powers to

investigate and ban potentially unsafe products have been expanded. Marketers must therefore be

aware of these regulations when proposing developing and launching new product.

Stake holders

According to RDI (2009), stakeholders are groups of individuals who have a stake in, or an

expectation of, a particular organisation's performance. Such stakeholders will include many

interest groups. Some of these groups will have an interest in many organisations, whilst others

will only hold an interest in particular types of organization.

It is therefore imperative to identify these key stake holders so as to safe guard their interest in

the company. An understanding and identification of stake holders will enable Nike to satisfy

them.


Segmentation criteria

To manage effectively the marketing effort and to satisfy the needs and wants of customers,

many firms place consumers into groups, a process called market segmentation. In this process,

potential customers are categorized based on different needs, characteristics, or behaviors.

Market segments are evaluated as to their attractiveness or potential for generating revenue for

the firm (http://www.answers.com/topic/marketing).

Commonly used criteria for segmentation include:

1. Geographical (e.g. country, region, city, town, etc.)

2. Demographic (e.g. age, gender, socio-economic class, etc.)

3. Behavioural (e.g. brand loyalty, usage rate, etc.)

Nike may use the above to segment the market for its Nike+ sensor for example; it may create a

segment to be marketed to say African men and women athletes between the ages of 18 – 35

years.

Target market for Nike+ Sensor

The Nike+ sensor enables footwear to talk to an iPod nano or Nike+ SportBand, giving instant

performance information and real-time feedback during a run. With this, the iPod nano/

SportBand becomes a personal coach or training partner as runners can log their run data, track

their progress, utilize training tools, and connect with other members all over the world at the

nikeplus.com (www.nikebiz.com/media/pr/2006/05/23_nikeplus.html).

http://www.answers.com/topic/marketing

http://www.nikebiz.com/media/pr/2006/05/23_nikeplus.html


Figure 1: Nike+ Sensor (http://www.apple.com/ipod/nike/run.html)

Naturally, the preferred target market for the Nike+ Sensor will be majorly professional male and

female athletes (in the track category) in Africa. This target market will be attractive as athletes

need to constantly train and monitor their runs and its progress for competitions. Usually

professional athletes engage in the followings:

1. Run to burn calories

2. Engage in running completion e.g the Olympics

3. Engage in running/work-out for agility, speed and power

4. Engages in improving coordination, endurance, stability and functional strength training.

5. Run/train to develop and maintain sport specific strength

Athletes’ programs need to be designed for them. The only way to do this is to work with a

coach or trainer who specializes in the particular sport and can custom design a program. This,

the Nike+ sensor does.

http://www.apple.com/ipod/nike/run.html


Buyer behavior

Buyers make purchases for the purpose of satisfying needs. All the behavior exhibited by buyers

during purchase may be termed as buyer behaviour. Some of the questions marketers must ask

are:

1. How do buyers want to purchase the product?

2. Do they prefer to buy from retailers, locally, via mail order or perhaps over the Internet?

3. Which channels are best served to provide the customer with the information they need

before buying?

4. Does the product need specific technical assistance either to install or service a product?

Consumer is the king and it is the consumer that determines what a business is, therefore a sound

marketing programme start with a careful analysis of habits.

Nike should recognise that a full knowledge of buyer behavior and what influences buyer

decision such as demographics, personality, motivation, attitudes, beliefs, and feelings, culture,

locality, ethnicity, family, reference groups, lifestyle will help its marketers understand how

various products fit into the plans, goals and lives of consumers of their products. Thus,

developing an effective strategy (en.wikipedia.org/../consumer_behaviour).


References

Answers Corporation (2009) Marketing http://www.answers.com/topic/marketing [Assessed: 6th December 2009].

Apple Inc (2009) Rock and run http://www.apple.com/ipod/nike/run.html [Assessed: 6th December 2009].

Nike Inc. (2006) Press release http://www.nikebiz.com/media/pr/2006/05/23_nikePlus.html [Assessed: 6th December 2009].

Resource Development International (2009) Micro environment http://www.rdi.co.uk [Assessed:

8th December 2009].

Wikipedia (2009) Consumer behaviour http://en.wikipedia.org/wiki/Consumer_behaviour

[Assessed: 8th December 2009].



http://www.nikebiz.com/media/pr/2006/05/23_nikePlus.html

http://www.rdi.co.uk/

http://en.wikipedia.org/wiki/Consumer_behaviour


Section 3

Individual elements of the extended marketing mix

Nike is engaged in the design, development and global marketing of footwear, apparel,

equipment and accessory products. Its products are designed for specific athletic use however;

some of its products are worn for casual purposes. Nike creates designs for men, women and

children. It designs shoes for outdoor and indoor sporting activities and other athletic and

recreational uses. Nike also sells casual footwear, apparel and accessories for men and women

under the brand names such as Cole Haan, Converse, Hurley, Nike Golf, and Umbro

(http://www.nike.com, http://www.nikebiz.com)

Nike’s Competitive Advantage

Nike is the world’s largest athletic footwear and apparel company. Rivalry in the apparel and

footwear industry is very proactive. Many new sports conglomerates are attracted to this market

due to high and promising profits. Nevertheless, Nike faces only few competitors due to high

barrier to entry and the ability to diversify and differentiate its products. Some of company’s

major competitors include Adidas and Reebok.

One of the reasons Nike continues to lead innovation in footwear, apparel, and equipment is that

Nike is already highly advanced in the Research and Development area. Specifically, Nike has

an advisory board and operates its own Sport Research Lab for effective research work,

reviewing designs, materials and concepts for product improvement

(http://www.nikebiz.com/company_overview/)

http://www.nike.com/

http://www.nikebiz.com/

http://www.nikebiz.com/company_overview/


Nike enjoys the popularity of its brand name and it is recognized all around the world. Nike’s

Swoosh Design logo is one of the most recognized symbols in the world.

Nike has many brands and each speak to different segment and target consumers of the market

effectively thus allowing for long term growth. Also, Nike’s ability to effectively differentiate its

product has placed it above its competitors which have translated to profit margins that are

higher than the industry average.

Nike and its distribution strategy

Nike’s distribution strategy involves working with wholesale partners in order to create

differentiated retail destination and product assortment that are tailored to their consumers

however; Nike’s main distribution involves closely managing the distribution of its products so

as to balance supply and demand. Nike achieves this by investing in direct retail concepts. This

strategy is cost effective and ensures uniformity in prices. This strategy helps to measure

consumers’ responses and accurately project the company’s profit and loss.

Since Nike’s major distribution strategy involve the use of its on-line stores it may be improved

by engaging in television marketing with toll-free call back numbers or its website to allow

consumers place orders and speed up purchases.

Nike and its promotional strategy

Nike’s promotional strategies involve the use of endorsement and sponsorship. For example,

Nike is the official footwear and apparel sponsor of the American Football Team.

The successes of Nike’s endorsement strategy lie in the fact that Nike is able to talk effectively

to various segments by using stars that connects and appeal to each segments and target

consumers.


Reference

Nike Inc. (2009) Company overview http://www.nikebiz.com/company_overview/ [Assessed 6th

December 2009]



Section 4

Application of the extended marketing mix to different market segments

Marketing mix for Nike+ Sensor

Target market 1: professional African male and female athletes in the track events from ages

16-35 years.

Target market 2: African male and female runners who want to keep fit; from ages 13-60 years.

Product: Nike+ Sensor

Scope of the product/end user

The Nike+ sensor is a product that emanated from the unique partnership between Nike and

Apple. With this, the iPod nano, iPod touch (2nd generation), or iPhone 3GS becomes a coach,

personal trainer and favorite workout companion. The Nike+ sensor can also be used with the

Nike+ Sport Band.

Figure 2 : Nike+ Sensor (http://hastenministries.wordpress.com/2009/06/02/nike-sportband-

product-review)

http://hastenministries.wordpress.com/2009/06/02/nike-sportband-product-review



Figure 3: Nike+ SportBand (http://gadgetwise.blogs.nytimes.com/2009/07/17/marathon-tech-

review-nike-sportband)

Figure 4: Nike+ iPod Sport (http://www.apple.com/ipod/nike/run.html)

The Nike+ sensor works by inserting the wireless sensor inside the custom, built-in pocket

beneath the insole of a Nike+ shoe, then plugging the receiver into the Dock connector on the

Nike+ Sport band or iPod nano. While running or walking, the sensor sends information to the

device, tracking the time, distance, pace, and calories burned.

After running, sync the iPod or detachable USB of Nike+ SportBand to transfer workout data to

iTunes and nikeplus.com where one can evaluate performance history, set goals, and even

challenge other runners to a virtual race.

http://gadgetwise.blogs.nytimes.com/2009/07/17/marathon-tech-review-nike-sportband




Figure 5: Procedures in activating Nike+ (http://www.apple.com/ipod/nike/run.html)

Specifications

The sensor's battery is not replaceable or rechargeable and has a life of over 1000 active hours.

Pricing

For Target 1: Pricing method is the market skimming

Market skimming pertains to firm releasing a good in a "first to market" scenario. Here, the idea

is to set the price at an initially high level, however; reduce it over time once the level of demand

gradually rises.

For Target 2: psychological pricing

This is ideal as this segment of the buyer tends to look for products which offer value for money.

It is believed that a slightly lower price will influence buyers’ decisions on whether to purchase

or not.



Place

For Target 1: All Nike direct retail shops in Africa and Nike online stores (www.nike.com),

Apple stores (www.apple.com), Apple retail stores, Apple authorized resellers and selected retail

stores in Africa.

For Target 2: all the venues of the 2011 All African Games in Mozambique thereafter, to be

available at all Nike wholesale and direct retail shops/stores and Nike and Apple online stores,

and selected stores in Africa.

Promotion

For Target 1: Public relations activity will be implemented. This will involve sponsorships,

press conferences, press release and donations. The internet will also play a major role in the

promotional mix

For Target 2: Advertisement will be majorly used. This will involve placing commercials in

television, bill boards, radio, newspapers and sport magazines showing a notable African athlete

endorsing the product. Bill boards will be placed at strategic locations and especially locations

near, and at the venue of the games. Product will be displayed at strategic stores in all venues.

Difference in consumer and organizational marketing

According to Dave Hall et-al 2008, consumer marketing is where business is marketing to

consumers while business to business marketing is where one business is engaged in marketing

its product to another business.

The organisational buying process is also more complex as it places emphasis on problem

recognition, need description, product specification, supplier search, proposal solicitation,

supplier selection, order routine specification and supplier performance review. Also

http://www.apple.com/


organisations place high monetary value on goods, make lengthy purchases of goods, and engage

in relationship marketing in order to retain customer when compared to consumer marketing.

International market versus domestic market

International marketing is of consequence to firms which operate in countries other than their

home country or the country in which they are registered in and have their head office.

With maturity within Nike’s domestic markets and opportunities in the international market,

Nike’s operation in an international market is solely dependent on a thorough understanding of

the culture, political and legal factors (political stability, government attitude to business, level of

economic development and the level governmental regulations of products) of the country in

which they market as these factors are clearly different from that obtainable in its domestic

market.

In as much as increasing global market share, sales and revenue is paramount in international

market, Nike must be careful not to introduce products which upset the social norms of the

people in the region since this will affect the demand for the products.


Conclusion

An effective understanding and implementing good Marketing practices has placed Nike at the

top of the ladder. Currently, Nike sells its products in 170 countries, employs more than 30,000

worldwide employees, has brands that serve more than 30 major sports and consumer lifestyles,

work with over 600 factory partners and serve millions of consumers with thousands of its

products.


References

Apple Inc (2009) Rock and run http://www.apple.com/ipod/nike/run.html [Assessed: 6th

December 2009].



He Who Has Ears Let Him Hear! (2009) Nike+ SportBand product review

http://hastenministries.wordpress.com/2009/06/02/nike-sportband-product-review [Assessed 4th

December 2009].

Macblogs (2008) Clever runners force apple to patent Nike+iPod Sensor and shoes

http://www.macblogz.com/2008/09/16/clever-runners-force-apple-to-patent-nikeipod- sensor-

and-shoes [Assessed: 6th December 2009].

The New York Times (2009) Marathon Tech Review: Nike SportBand


[Assessed 4th December 2009].



http://www.macblogz.com/2008/09/16/clever-runners-force-apple-to-patent-nikeipod-%20%20sensor-and-shoes/




Bibliography

Apple Inc (2009) Rock and run http://www.apple.com/ipod/nike/run.html [Assessed: 6th

December 2009].

American Marketing Association (2009) Marketing power [Online]

http://www.marketingpower.com [Assessed: 14 November 2009]

Answers Corporation (2009) Marketing http://www.answers.com/topic/marketing [Assessed: 6th

December 2009].

Business Plans for small business (2007) Market oriented business

http://www.freebizplan.org/business.../marketing/marketing_oriented.htm [Assessed: 17

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Chattered institute of marketing (2009) Marketing [Online] http://www.cim.co.uk [Assessed:

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He Who Has Ears Let Him Hear! (2009) Nike+ SportBand product review

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Kotler P and Arstrong G, (2006), Principles of marketing. Eleventh Edition. New Jersey, Pearson

Education.

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and-shoes [Assessed: 6th December 2009].










Nike Inc. (2009) Company overview http://www.nikebiz.com/company_overview/ [Assessed 6th

December 2009]

Nike Inc. (2008) Press releases http://www.Nikebiz.com?media/pr/2008/04/10_marathon.html


Nike Inc. (2006) Press release http://www.nikebiz.com/media/pr/2006/05/23_nikePlus.html


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[Assessed 4th December 2009].

Wiki Answers (2009) http://wiki.answers.com/Q/Cost_and_benefits_of_marketing_approach


Wikipedia (2009) Consumer behaviour http://en.wikipedia.org/wiki/Consumer_behaviour


Yahoo Answers (2009) Cost and benefit of marketing approach

http://answers.yahoo.com/question/index?qid=20081021151207AA5JAwZ Identify and

assess the benefits and cost of a marketing approach [Assessed: 20th November 2009]



http://www.nikebiz.com/media/pr/2006/05/23_nikePlus.html

http://www.ilearn.co.uk/



http://en.wikipedia.org/wiki/Consumer_behaviour


Marketing (Case Study - Nike)

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