“The most important product of market economy is the consumer,” Werner Mitsch, a German aphorist, once said. Early in 1962, two men implemented this idea and built the base for a company which has eliminated its competitors with the help of an amazing marketing concept. Today this company is known as the biggest sports article manufacturer of the world – NIKE.
Due to the definition of the American Marketing Association, marketing is “an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders." In other words, marketing is about “the process of planning and executing the pricing, promotion, and distribution of goods, ideas, and services to create exchanges that satisfy individual and organizational goals." By taking a closer look at NIKE’s beginnings we will try to find out in how far this abstract definition has changed into a clear and practical profile.
The story of success started at the University of Oregon in the USA in 1962, where Bill Bowerman, a coach specialized on competitive sports, and one of his students, Phil Knight as a middle-distance runner, realized a risky idea about bringing low-priced, high-tech athletic shoes from Japan to the USA in order to sell them under their own brand. The goal was clear: dislodging German domination of the US athletic footwear industry and improving the athletes’ individual performance.
After Phil Knight earned his MBA at Stanford University, he travelled to Japan, and succeeded in negotiating with executives from Onitsuka Tiger, a footwear manufacturer. As a result, Knight's company, Blue Ribbon Sports, became the distributor of Tiger brand footwear for the western United States. In 1964 samples of Tiger footwear were sent to Knight’s former coach Bowerman who suggested a partnership with him to provide endorsement clout as well as footwear design ideas. With a pledge of $500 each the two gave birth to Blue Ribbon Sports and built the foundations of NIKE. So far so good - but which strategy did the two sports and business men follow, so that they did not end up as simple footwear distributors?
The most crucial consideration was to develop a tactical marketing based on the four components of the marketing mix. As the centre of their business was and still is the product itself, the two men had to collect information about their possible target market and the consumers’ special desires. This consumer-orientated market was and still is marked by constant communication between the ultimate buyer and the manufacturer. That is why they drove to high schools and universities talking with the athletes about their needs in order to create them prototypes and help them win. For hours they sat in coaches' offices and locker rooms and talked about running, listening to reports about the races, the training, the injuries and what exactly runners wanted in a product. This individual consumer-caressing culminated in the 70’s with Bowerman experimenting with rubber spikes by pouring a liquid rubber compound into his wife's waffle iron, which led to the creation of the successful and patented “waffle” sole.5 So the communication with athletes changed into a key role regarding NIKE's product design and marketing strategy. Even today, the company still depends on this interaction and feedback from athletes of all levels. Because of the individuality of their sneakers, NIKE products always changed so that an increasing product range was developed.
Apart from the product itself the place and availability played a decisive role in the story of NIKE’s success. In 1965, Blue Ribbon Sports called Jeff Johnson, a former track rival of Knight's at Stanford University, the company's first full-time salesman selling shoes out of the back of his van to high school students at track meets. In 1966 Johnson opened the company's first retail outlet in a narrow building in Santa Monica, California.4 Today Nike owns facilities in Oregon, Tennessee, North Carolina and The Netherlands. It operates leased facilities for 14 NIKE towns, over 200 NIKE Factory Stores, a dozen NIKE Women stores and over 100 sales and administrative offices. But next to NIKE’s direct distribution it offers sportswear with the help of a huge amount of other specialised and department stores, so-called channel participants.
As far as the price is concerned, NIKE has much scope for setting the price for a special product. In fact, the whole idea of NIKE was based on a strategy in which the production costs were low and the products’ prices competitive but profitable. Even today NIKE’s production industry is located in the free trade zones, like Mexico, Indonesia and the Dominican Republic where the low-production costs serve the company’s price formation and consequently its sales increase.5 Generally, the production-costs are 10 percent or less of the price for which the good can be bought; the other 90 percent are due to the success of a perfect brand-marketing.
And here arises the question of brand-caring, namely why do so many people buy an expensive pair of sneakers from NIKE if they can get one for half of the price from an unknown manufacturer? The answer is hidden in the last component of the marketing-mix instrument – the promotion.
As NIKE does not produce its goods by itself, the company focuses on its brand-caring. After the incorporation of Blue Ribbon Sports in 1967 and annual sales approaching $300,000, Phil Knight began to develop a new athletic footwear brand with the help of a graphic design student. In 1971 they presented the new logo referred to as a Swoosh. The brand’s name was completed when Jeff Johnson when NIKE’s first salesman dreamed of the Greek goddess “Nike” and gave the company its new face.5
Just one year later after defining NIKE’s corporate identity and design Knight and Bowerman made use of a special promotion tool to come out, namely the sales force. They simply delivered the first NIKE products marked with the new brand to athletes competing in Eugene, Oregon for the US Olympic Track & Field trials. One of them was the American record-holder Steve Prefontaine, a University of Oregon middle-distance runner under Bowerman, who became the first major track athlete to wear NIKE shoes.4
Four years after experimenting with a waffle iron Bowerman’s self-designed Waffle Trainers were introduced and became the best-selling training shoe in the U.S.
NIKE was definitely growing which caused the two business men to invest more money into advertising. That is why in 1977 their first print ad with the slogan "There is no finish line" was presented showing the first sign of NIKE’s later provocative and to some extent philosophical tags.5
Shortly after that, NIKE underlined its rebellious and powerful image by signing Tennis “bad boy” John McEnroe to an endorsement contract. But the company did not get tired of development.
In the early 80’s its first national television advertisement was shown during the New York Marathon. Moreover, the patented invention of NIKE's air technology lead to the creation of the Air Force 1 basketball shoe which made use of the new technology for the first time. Again, NIKE bet its former success on the sales force-tactic when Michael Jordan, the most famous basketball player at the time, was signed to an endorsement contract, too. Sure enough, it worked out: Jordan presented his own shoe the Air Jordan, which was banned by the NBA because of too much publicity. This shoe caused so much reaction on the market and of course in the media that it changed into a public relations tool by itself – a key moment for NIKE. No surprise that the corporate turnover broke through the financial border of $1 billion.5
The following years NIKE developed its tactic focussing on sales representatives into a successful strategy by signing popular sportsmen and women at the beginning of their career like the famous baseball and football player Bo Jackson, the Brazilian national soccer team, Tiger Woods and many others. Next to that, NIKE drew public attention with the help of terse slogans like “Just do it” from 1988 and controversial campaigns like "You Don't Win Silver — You Lose Gold.", which was criticised and discussed during the Summer Olympics in Atlanta in 1996.5
Today NIKE can call itself undoubtedly the biggest sportswear manufacturer of the world. As a role model for efficient brand-marketing, the company still focuses on the consumer desires and never stops improving “the process of planning and executing […] to create exchanges that satisfy individual and organizational goals.”3
Links http://www.nike.com/nikebiz http://www.marketingpower.com