Marketing_Strategy_for_Nike_Personal_Fitness_Shoes_Trainers

TABLE OF CONTENTS INVESTIGATION AND ANALYSIS | | EXECUTIVE SUMMARY | 2 | INTRODUCTION | 3 | SITUATIONAL ANALYSIS | 5 | COMPETITIVE EDGE | | RECOMMENDATIONS | 30 | SEGMENTATION, TARGETING ANDPOSITIONING | 7 | MARKETING OBJECTIVES AND GOALS | 8 | MARKETING STRATEGIES AND PROGRAMMES | 9 | CONCLUSION | 10 | APPENDICES | 11 | BIBLIOGRAPHY | 12 | | | INVESTIGATION AND ANALYSIS EXECUTIVE SUMMARY: Nike is the world’s most recognised sports brand in footwear and apparel. They command the highest market share of 47% in the U.S. Unfortunately they have not been able to compete with the growing demand for fitness shoes/trainers. Their competition Reebok and Sketchers have surpassed sales in this particular type of footwear, leaving Nike at the bottom. Personal fitness shoes/trainers are used by women to aid in weight loss, to tone key muscles or just to maintain a healthy lifestyle. Nike has the competitive edge because of its name and the ability to use innovation in their products. Nike needs to be in touch with the growing trends of consumer buying and focus on the female buyer. Nike needs to develop a personal fitness shoe/trainer which is far superior to that of the competition. By launching a marketing campaign Nike can regain its position in all areas of athletic footwear. Nike has a $315 million marketing budget for 2011. By investing $100 million on a marketing campaign Nike can generate sales over $300 million since they have over 168 Nike owned stores and more than 24000 retail stores in the United States and internationally. (Nike Inc Annual report 2010) (See Fig 5. In appendix for sales and revenue projections.) INTRODUCTION: Nike is the world’s renowned leading supplier of athletic shoes and apparels. It controls more than 47% of the athletic shoe market with sale of U.S 3.7 Billion. This company was founded in 1962 by Bill Bower man and Phil knight as Blue Ribbon Support and later on it became Nike in 1978 (Partlow, 2003). It is supplying its high quality products in more than 100 countries with its major target areas including United States, Europe, Asia Pacific, and the Americas. Nike has attained this legendary position through innovative and attractive design, quality production and wise marketing strategies. (http://marketingmixx.com/marketing-plan-2/164-marketing-plan-of-nike.html) (17 March 2011) Unfortunately, due to major changes in the sneaker industry Nike has suffered a decline in their market share as their competition (Reebok, Adidas, Sketchers and New Balance) has introduced personal fitness shoes/trainers. Nike has been beaten down for its seemingly stubborn refusal to enter the fitness shoe/trainer market which is projected to surpass $1 billion in 2010. (http://www.cnbc.com/id/38525225) (Darren Rovell 2 Aug 2010) A study released might suggest that Nike simply didn’t want to risk its enormous brand equity on a shoe category that could come crumbling down as fast as it grew. (http://www.cnbc.com/id/38525225) (Darren Rovell 2 Aug 2010) The study released by the non-profit American Council on Exercise (ACE) reflected that, in many cases, the shoes failed to live up to the promises the manufacturers of the shoes made. The council’s chief science officer Cedric X. Bryant said that the shoes “are not the magic solution the consumers were hoping they would be, and simply do not offer any benefits that people cannot reap through walking, running or exercising in traditional athletic shoes.” Nike fights back offering a middle ground to consumers by launching a woman’s training shoe called Nike Air Max Trainer One. (http://www.cnbc.com/id38525225) (Darren Rovell 2 Aug 2010) Presently, there is clearly a high demand for toning shoe; Nike has seen their market share drop by 7.2 percent to 31 percent whilst Reebok Easy tones and Sketchers Shape Ups have both seen the market share of their respective companies increase. Reebok’s share of the U.S. fitness footwear in doubled to 6.7 percent or $90.3 million. Sketcher’s share has tripled to 17 percent which represents $226 million worth of sales. (http://www.bloomberg.com/news/2010-06-03/nike-mocks-butt-toning-shoes-driving-market-share-loss-to-addida.-s-reebok.html) (June 3 2010) In May 2010 six out of the top ten fitness shoes were toning shoes. Four shape Ups and Two Easy Tones. In fairness to Nike, the four remaining slots were occupied by Nike brands. During 2008 U.S. sales of toning shoes totalled $17 million. During the first four months of 2010, toning shoes sales rocketed to $252 million. (http://www.bloomberg.com/news/2010-06-03/nike-mocks-butt-toning-shoes-driving-market-share-loss-to-addida.-s-reebok.html) (June 3 2010) The other manufacturers seem to have a vision of the future which is very different to that of Nike. Considering the sales figures, Nike seems to be the ones who are out of step with the market. (http://www.bloomberg.com/news/2010-06-03/nike-mocks-butt-toning-shoes-driving-market-share-loss-to-addida.-s-reebok.html) (June 3 2010) SITUATIONAL ANALYSIS SWOT ANALYSIS: STRENGTHS: Firstly, Nike’s strengths come from their strong brand recognition. Nike’s strengths also lie within the quality of their products. For years consumers have chosen Nike because their sneakers are far superior to any other brand which creates strong customer satisfaction. Their capacity of innovation and the use of technology in their products are extraordinary. Nike captures the target markets by having top athletes who endorse their products. Nike’s products are readily available to every individual across the globe. Most sporting goods stores carry their brand of sneakers. WEAKNESSES: Nike’s weaknesses come from the ability to not foresee the changing trends of consumer buying in terms of health and fitness, which is hitting the world by storm. Nike’s research and development team has not yet found a scientific advantage that personal fitness shoes does work. Their slogan states “the shoe works if you do.” Another weakness refers to their advertising of the Nike Air Max Trainer One. Nike advertised in the U.S. in women’s magazines including Seventeen, Teen Vogue, Cosmopolitan, Glamour, Lucky Shape, Fitness and Women’s Health as well as the lack of stores catering to the active female. (http://www.cnbc.com'id/38525225) (Darren Rovell 2011) Nike’s failure to advertise in other avenues may have been a down fall. E.g. Sketchers use advertisements on the television and their Shape Ups is endorsed by Kim Kardashian, a celebrity. Nike’s major weakness is its competition. Reebok and Sketchers have dominated the fitness shoe market since 2010. Nike’s business is heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share declines. OPPORTUNITIES: Nike should research and develop an improvement to the Air Max Trainer One as well as developing a new model of the personal fitness shoe. Nike can also improve on their advertising campaign by having endorsers who swear by the product. As well as backing their shoe with real science and facts. Nike can also diversify their products such as creating fitness and toning apparel. Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, consumers that wear Nike’s products do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since the product could become unfashionable before it wears out i.e. consumers need to replace shoes. Additionally Nike can create the shoe and customise it to suit any individual. They can do this via online support and in stores. THREATS: The toning shoe market has already been infiltrated by the market leaders, Sketchers and Reebok making it difficult for them to rise above. The competition has a very strong hold on the female buyer. Nike initially said that the shoe does absolutely nothing in regards to fitness. They might feel the backlash of the media for once stating that. Customers may not believe in the shoe therefore they might purchase a substitute. E.g. Porter’s five forces analysis includes - three forces from horizontal competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers. Michael E. Porter 2008:86-104 “The Five Competitive Forces that Shape Strategy”, Harvard Business Review. This can be illustrated by: Porter’s five forces analysis: PEST ANALYSIS: POLITICAL: The government must create economic policies that foster the growth of businesses. Nike fortunately has been helped by the U.S. policies which enable it to advance its products. The support accorded to Nike by the U.S. government, particularly in general macroeconomic stability, low interests rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth. (http://www.suite101.com/content/marketing-audit-of-nikes-strategies-a94402) (By Gwendolyn Cuizon Feb 12 2009) ECONOMIC: The biggest threat to Nike would be economic recession. During recession, Nike’s growth will be adversely affected. The U.S. economy is experiencing a downturn right now. Consumer purchases are slowing down. Currently, Nike’s feeling the pinch of the economic recession. The Asian economic crisis also affects Nike since its good are manufactured in Asia. The labour costs and material prices are going up. Consumers are looking for more bargains. (http://www.suite101.com/content/marketing-audit-of-nikes-strategies-a94402) (By Gwendolyn Cuizon Feb 12 2009) SOCIAL: People are more health conscious nowadays. Diet and health are getting more prominence. Consequently more people are joining fitness clubs. There is an accompanying need for fitness products particularly exercise apparel, shoes and equipment. Nike is at the forefront of this surge in demand. (http://www.suite101.com/content/marketing-audit-of-nikes-strategies-a94402) (By Gwendolyn Cuizon Feb 12 2009) TECHNOLOGICAL: Nike uses Information Technology in its marketing information systems to the economics of innovation, segmentation and differentiation for most it’s businesses. Nike’s leadership status owes in large part to the use of extremely valuable Information Technology and applying it to every aspect of the product from development to distribution. (http://www.suite101.com/content/marketing-audit-of-nikes-strategies-a94402) (By Gwendolyn Cuizon Feb 12 2009) NIKE’S COMPETITIVE EDGE: Nike’s competitive edge comes from: 1) Brand name. 2) Product quality. 3) Inventory turnover. 4) Cost leadership. 5) Effective inventory turnover. ( See appendix for Porter’s Value Chain Fig 1.) RECOMMENDATIONS SEGMENTATION: The United States comprises of fifty individual states, with approximately 307,006,550 million people. (U.S. Census Bureau 2009) For Nike to be able to launch a new fitness shoe/trainer they must evaluate their population. They can do this by dividing the population into segments, either by age, sex, family size, income group or by occupation. Nike needs to identify personality traits and distinguishing characteristics in groups of the population in order to launch a successful shoe as well as consumer behaviour patterns example brand loyalty and frequent/infrequent purchases. TARGETING: Nike’s target group should be geared towards women between the ages of 18 – 65 to be able to focus on women who are overweight, athletic or just to maintain a healthy lifestyle. In choosing the target market a conventional view of the customer value proposition is provided by Knox et al (2003) states: “an offer defined in terms of the target customers, the benefits offered to these customers and the price charged relative to the competition.” Nike should provide the most efficient product to foster the best possible performance in these target customers. Offerings should include ground breaking personal fitness shoes/trainers and a marketing campaign to appeal to more customers. POSITIONING: Nike must position itself in such a way that they are head to head with the competition. Since Nike is the weakest in personal fitness shoes they need to capitalise on their strengths. Nike’s key resources include: 1) Reputation in the industry. 2) Strategic marketing innovations. 3) Efficient employees. 4) Integrated research laboratories. 5) Distribution network. By utilizing these resources Nike would be able to invest in research and development marketing. As well as lower manufacturing, labour and material cost due to outsourcing. And low distribution costs due to distribution capability. (http://www.slideshare.net/divya-mishra/nike-competitive-advantages)(n.d.) MARKETING OBJECTIVES: Nike needs to create a personal fitness shoes/trainer on par with the prices and quality with the competition during this year in preparation for its launch in December 2011.Nike can also make a strong online as well as retail store presence. As well as encouraging its consumers to participate in customizing their shoe. Nike should be able to command at least 17-20% of the market share by the end of 2011-2012 (See Fig 2. In appendix) NIKE’S GOALS: Nike’s goal is to become the leading sports brand in United States and internationally in Nike’s personal fitness shoes/trainers by reinforcing its position in the market with innovation and technology. To maintain their quality and make it easily available at every marketable place. To meet the requirement of all type of customers (male, female, old and young) These goals and objectives can be attained by creating a strong marketing campaign. With a focus on research and development, technology and innovation. The product should be launched in December 2011. MARKETING MIX: Nike's marketing strategy is an important component of the company's success. Nike is positioned as a premium-brand, selling well-designed and high-priced products. Nike lures customers with a marketing strategy centering on a brand image attained by a distinctive logo and the advertising slogan: "Just do it.” PRODUCT: To create a personal fitness shoe/trainer that is more desirable to the consumer than that of the competition. To make the shoe comfortable, attainable, reliable, affordable and supported by clinical studies to show its benefits. The purpose of these shoes is to provide or aid in weight loss, make movement easier and for the wearer to be able to use them for sports or everyday use. Also to assist in the toning and shaping of specific muscles in the leg and buttocks. Nike can also use their innovation techniques to create a shoe that is more attractive and trendy. Nike can also seek to diversify their product by creating a line of toning and fitness apparel which is synonymous with their shoe. The Ansoff matrix (http://tutor2u.net/business/startegy/ansoff_matrix.htm) can help in the development of their new line as well as improving on their existing product. THE ANSOFF PRODUCT MATRIX: PRICE: (Official website of Nike Inc.) Nike’s competitors Reebok, Adidas and Sketchers range from U.S. $72-$100. Therefore Nike must create a fitness shoes which is comparable to that of its competition with an average price of U.S $100-150. If the price is too low then consumers may think the product is generic and does not live up to Nike’s standard. The average price of Nike’s women’s Air Max Trainer One is U.S. $70-$150. The company has invested 1 billion in the past two years for community stores. They plan to invest at least 315 million U.S dollars by 2011 for their yearly marketing budget. (http://marketingmixx.com/marketing-plan-2/164-marketingplan-of-nike.html) (17 march 2011) This can be done by the using pricing strategies for example: Price skimming. This would allow the marketer to set a relatively high price for the shoe at first, and then lowers the price over time. This would be effective for Nike since its brand name is synonymous with quality and higher prices. Nike should price the product at U.S. 150 dollars. (Refer to Fig 2 and 3 in appendix for market share and skimming.) PLACEMENT: Nike has 168 individual Nike owned stores in the United States and their products are available at major malls and departmental stores all over the globe. They have more than 20,000 retailers in United States and also in other 200 countries. The companies also sell its products through individuals, auxiliaries and licensees. The company has its production units, customer services and operational units in all over the World. Nike should target and position the fitness shoe/trainer in the demographic areas such as Los Angeles and New York the top two states that are health conscious. The need to be skinny and fit is a priority. PROMOTION: By using 100 million out of the 315million Nike plans to invest in marketing this year they can create a spectacular promotional campaign. Firstly, Nike should launch their new fitness shoe/trainer in early December. This places emphasis on Christmas and the holidays. Impulse buying and gift giving should be targeted. Secondly, advertising in all sports, women’s and men fitness magazines making sure that Nike’s swoosh logo and image plays an important role. Thirdly, having well known celebrities endorse the shoe. Nike should use athletes as well as non – athletes there by targeting all consumers. Also through the use of newspapers, radio, television and billboards. The use of the electronic media should be used to Nike’s advantage through Facebook and Twitter updates. Additionally Nike can sponsor major sporting events having the players wear their personal fitness shoe/trainer and apparel. Similarly Nike can target fitness centres such as gyms and recreational facilities and have qualified Nike personnel educating the potential consumer about its benefits. Nike can give their consumers the option to customise their shoes to their liking, both in store and online, this would create value both to the consumer as well as the product. The new tag phrase should be ‘Just for you.’ This product would be a star in the BCG matrix. (See appendix Fig 4.) Lastly Nike can launch their global campaign in the 2012 London Olympics where the world would be Nike’s playground to advertise. CONCLUSION: The introduction of this shoe would allow Nike to gain a larger female market. Nike needs to continue to focus on the female buyer as the trends are changing rapidly. Nike’s market share and revenues will continue to grow once they maintain a relationship with the consumers. By the end of 2012 Nike will be at the forefront of this surge in demand as the personal fitness shoe/trainer empire grows. APPENDICES: VALUE CHAIN ANAYSIS: Michael E. Porter: Value Chain Analysis helped identify a firm's core competencies and distinguish those activities that drive competitive advantage. The cost structure of an organisation can be subdivided into separate processes or functions assuming that the cost drivers for each of these activities behave differently. Porter's strength was to condense this activity based cost analysis into a generic template consisting of five primary activities and four support activities. By subdividing an organisation into its key processes or functions, Porter was able to link classical accounting to strategic capabilities by using value as a core concept, i.e. the ways a firm can best position itself against its competitors given its relative cost structure, how the composition of the value chain allows the firm to compete on price, or how this composition allows the firm to differentiate its products to specific customer segment. VALUE CHAIN ANAYLSIS: (Fig 1.) PROJECTED MARKET SHARE IN THE PERSONAL FITNESS SHOE/TRAINER INDUSTRY BY2012 (Fig 2.) Nike | Sketchers | Reebok | Others | 20% | 19% | 17% | 44% | PRICING STRATEGY: SKIMMING- (FIG 3.) BCG MATRIX: (Fig 4.) Kotler and Armstrong (2001) The personal fitness shoes/trainer that Nike’s marketing department produces should be a star. In the BCG Matrix the star is considered high growth products competing in markets where they are relatively strong compared with the competition. Eventually their growth will slow, and assuming they maintain their relative market share, will become cash cows. PROJECTED FORCAST OF SALES AND REVENUE FOR 2012, 2013 AND 2014. (Fig 5.) Sales are expected to double each year. 1) Cost of Nike’s personal fitness shoe/trainer =U.S. $ 150 each. 2) Weeks of each yr =52 3) Projected sales from each store =100 shoes each week. 4) No. of Nike owned stores in USA =168. 5) Total budget =U.S. $100,000,000. Therefore: 150*52*100*168= U.S. $131,040,000 in sales. Total revenue: $131,040,000-100,000,000=$31,040,000 Years | Million $US | $US | Comments | 2012 | 100.00 | 100,000,000 | Break Even Point | 2012 | 131.04 | 131,040,000 |   | 2013 | 262.08 | 262,080,000 |   | 2014 | 524.16 | 524,160,000 |   | BIBLIOGRAPHY: Annual report of Nike Inc 2010. Pursuant to secton13 and 15(d), filed on 07/20/2010. Filed period 05/31/2010. Retrieved on June 10 2010. Armstrong .G. and Kotler, P. (2001), Priniciples of Marketing, 9th Edition. 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