The Segmentation of Nike Inc - Essay Example

Introduction Nike is a name that is almost synonymous with sports shoes and also sports goods. The company, through endorsements and sponsorships mainly, has developed a strong position in the footwear industry as a sports good manufacturing company. The company is positioned as a luxury product that promises quality and experience to the consumers. In 2012, Nike released another innovative product, the Nike Fuel Band. At the end of the year, it came up with a second generation of the Fuel Band. This product was the first in line in terms of a wearable monitoring device that monitored the activity of the wearer throughout the day (Chu and Golden, 2013). The product was innovative and it was consistent with the organizational objectives of Nike of targeting to the affluent young sport loving generation. The product was an instant success owing largely to the brand image of Nike. Part 1: Segmentation In terms of behavioral segmentation, the product is target to the loyal customers. The product is priced at $149, which makes the product a luxury product. The product would therefore not greatly appeal to the price sensitive consumers and they may look for the same product offered by cheaper brands. Since the product is more of a luxury than a necessity, the price sensitive consumer would be generally not attracted towards the product. Therefore the segmentation of local customers makes the most sense for this particular product. Consumers who have already purchased Nike and are satisfied with the product would be more tempted to buy the product. This is because the product, firstly, targets the same target market in terms of their psychological behavior (that is high end sporty consumers wishing to live an active lifestyle) Nike also proposed benefit segmentation as its products guarantee the best sports footwear and its accessories. While the product is priced higher, it offers consumers benefits that other competitors are not able to offer. These include Blue Tooth connectivity and an iPhone application. Product-Market Growth Matrix For the new Fuel Band (2nd Generation), product development strategy is best suited. This is because the product is new, with a few modifications from the first generation Fuel Band but the market remains the same (Kelion, 2013). With this product, Nike is and should continue to target its existing consumers which are sports loving people who live and enjoy an active lifestyle. They are mostly high-end sophisticated consumers to frequently and even occasionally consume luxury products such as the Fuel Band (Sherman, 2013). The product, Fuel Band, in this case is a relatively new product. Nike had released the first generation of Fuel Band in the beginning of 2012 but a more modified version was developed in the end of 2012 known as the Nike + Fuelband (Nike Inc., 2012). Environmental Uncertainty In terms of the environmental uncertainty Matrix, the product is positioned as high uncertainty. Products positioned in this area of uncertainty have the following characteristics: dynamic and unpredictable market; involves many components; requires high skills and knowledge. Since the Nike Fuel Band fits in all these areas, it faces high uncertainty in the market (Robbins and Coutler, 2007). Competitor analysis In terms of competition, the company faces competition from mainly three other products: Jawbone UP, Fitbit Flex and Basis. A general comparison of the features of these products is shown below: Feature Fuel Band Jawbone Fitbit Flex Basis Price 149 130 100 200 Battery Time (in Days) 1-4 10 5 4 Compatible Applications 3 10 27 0 Blue Tooth Yes No Yes Yes Water Proof No No No No Water Resistant Yes Yes Yes Yes Unique Features Calories, Time, Steps, Nike Fuel and Daily Progress Vibrating Alarm Vibrating Alarm Pulse, Sweat and Temperature Compatible With iOS and Web iOS and Andriod iOS, Andriod and Web iOS, Andriod and Web The competitor analysis shows that Nike Fuel Band may enjoy some benefits over the competitors in terms of its unique features. It also enjoys the support of a big brand in the name of Nike but the product needs to provide more to the consumers. The product falls short of expectations in terms of its battery life which is the least as compared to competitors. This is mainly because the product offers more features than any other competitors’ products, which impacts on the battery life. However, since the purpose of the band is to be worn all the time by the user, the low battery life impacts the practical usability of the product. Another disadvantage of the product in regard to its competitor is that the product is not compatible with Andriod which is one of the most used smartphone operating system around the world (Feinburg, 2013; Kelly, 2013) Part 2: Marketing Objectives Nike, with its Fuel Band, aims to improve its position in the minds of its customers as a technological driven company that is strongly attuned to the needs of the sporty consumers. The company intends to develop a strong position in the market of wearable monitoring devices at a time when the market is still in its developing stages and Nike has a first move advantage. Part 3: Sustainable Competitive Advantage The advantage that Fuel Band enjoys over its competitors is its brand image and its sleek design. The product comes from a line of Nike products that have a strong and credible image in front of the sporty consumers; the primary target market for Nike. Also the LED display and the minimalistic design add a sophisticated look to the wearer’s attire (Johnson, 2013). The features of the product also provide advantage since the product offers the most features as compared to competitors. The issue of battery life can be corrected with time and allow the product to shine better (Bishop, 2012). Growth-Share Matrix In terms of the Growth Share Matrix or the BCG Matrix, the Nike Fuel Bands are positioned as the star products. The characteristics of a star product include high industry growth rate; good potential of high profitablity; experience curve of business further helps the product; star product improves portfolio of the product (Williamson, et al., 2013). Considering these characteristics, it can be assumed that the Fuel Bands are star product. This can be said because of the high number of competitors entering the market for this particular product. Despite this, the Nike Fuel Band (2nd Generation) was sold off in four hours after its launch in 2012 (Hollindale, 2013). Also according to the BergResearch Group, in 2012, 8.3 million fitness trackers were sold worldwide, with the number expected to increase by nearly eight times in the next give years (Chu and Golden, 2013). Nike’s experience in the sports good market and its strong research and development research further ensures that the product captures a high market share; thus fitting the product in the star category. Strategic Positioning The objective of Strategic Positioning is that ‘firm meets its own objectives for aligning the brand with consumers’ (Hassan and Craft, 2012). When marketing products outside the local markets, organization needs to revise its strategy. This is done in order to attract the right consumers so that the firm’s objectives are fulfilled. In the case of the Fuel Band, Nike has used the same strategy on the same target market. In terms of the target market, they have the same attitude and beliefs. They love sports and belong to the youth generation who is ready to buy new technology and above all is able to afford these products. The strategic positioning remains the same. The marketing campaign remains essentially the same; only the celebrities within the campaign change as the region changes. Part 4: SWOT Analysis Strengths: Fuel Ban enjoys the most strength because it is associated with Nike. The product is manufactured by Nike which has a strong brand image in the market. Even when consumers do not own a Nike product, they aspire for one. The company has a strong financial background and a state of the art R&D department that will ensure that the product is updated on a continuous basis and does not fall behind the competitors’ products. Nike can synergize the marketing of this product with that of their other products; and since the original marketing campaign is highly successful; this product would also potentially enjoy a good marketing (Michalek, 2012). Additionally, Nike has the patent rights for this product which makes its position stronger in front of the competitors. Also the product targets the existing consumers who are aware of the quality of Nike products; Weaknesses Right now the problem with the product is in its features. The product can only be synced with one smartphone, the iPhone. Considering that iPhone is not owned by all consumers and other smartphones have equal if not more popularity, this is an issue for the company. In terms of the company, the brand Nike has been under a lot of negative criticism for its sweatshops in Bangladesh, Pakistan and India and the impact of this negative publicity will impact this product also (Wazir, 2001). Opportunities Currently the product enjoys a lot of opportunity. More and more people are turning towards a healthy lifestyle and this product promotes a healthy lifestyle. Also the number of Obese is growing all around the world which means that the number of potential consumers for Nike is growing (Vong, 2012). This is aided by the fact that Despite the recent recession, luxury goods have increased in demand as luxury brand increased by 3.3% between 2011 and 2012 (New Statesman, 2012). Therefore many luxury brands have increased the range of their products (Lamb, 2011). Nike is one of these brand and it also enjoys a strong brand image around the world therefore marketing the product would be quite easier (Martinez and Chernatony, 2004). Also Nike was the first to develop this product and thus has the first move advantage (Carr, 2013); Threats Nike Competitors are developing similar bands such as the Fuel Band which means that the products will fierce strong competition in the coming years. Moreover, products competing against the Fuel Band are priced lower than the Fuel Band with a better battery time. In this world where new technology is constantly entering the product, there is a chance that the product may be lost in the hordes of other innovative product and become outdated in the next year. PESTLE Analysis Political In terms of politics, the company is situated in America. America enjoys a stable political environment and the government regulations support multinational companies such as Nike. However, Nike also operates in other regions. Since US in the recent years has acquired a negative outlook, especially within Gulf and Islamic states, it could mean drop in sales in particularly these regions (Bloomberg, 2003). The company also has manufacturing facilities in emerging countries such as China and India which are not so politically strong and therefore the company faces certain issues in that regard. The company has also recently being in the limelight for the poor working environment that the suppliers of this company maintain. However, it has issued strong code of conduct for the suppliers in order to improve its position among the consumers. Economic Though, the overall global economy has gone through a recession which has impacted almost all companies around the world, luxury products have enjoyed a rather good period. This is evident from the growth of luxury products. The economic crisis has somehow impacted the psychology of the customers and they are leaning more towards luxury products who bodes good for Fuel Band since it is a luxury product. Social There has an increase in consumer spending towards technologically advanced products. The Generation Y loves technology and loves to buy new gadgets to surround itself with something new and shiny. Since this generation has entered the workforce, this means they have become stronger financially which means they will buy more products (Forbes, 2013). There has been an increase in the awareness regarding obesity and eating habits. The younger generation is more and more looking towards developing a healthy and active lifestyle and the Fuel Bands promote such a lifestyle. The consumers are also becoming more interested in how companies operate and whether their operations are ethical. Nike, in this regard, has faced certain issues as the working conditions of its manufacturing facilities in emerging nations were quite degrading. This has led to negative publicity for the brand which was aided by the media, especially social media. Technological New products are constantly entering the market. Technology has greatly changed the way consumers conduct most of their activities. New products are launched every few weeks. This saturation of technological products in the market makes it infinitely more difficult for products such as Fuel Band to break the clutter and rise to the top. Legal In terms of legal analysis, the company needs to look out for patent rights and patent infringement. The company has the patent for its Fuel Band but this does not prevent counterfeits from entering the market. This greatly impacts the sale of the products as consumers often look for cheap alternatives even when they do not deliver the same quality. Here Nike can benefit because most consumers associate more with the brand rather than the product. The company also has to ensure that it follows both international laws and local laws since it operates in multiple countries around the world. Environmental Today’s consumer is more environmentally aware than consumers before. They expect and demand companies to comply with environmental laws and companies that fail to do so lose favor among the consumers. Companies like Nike have to ensure that they follow environmental laws to prevent increase in costs due to fines and lawsuits and to prevent decrease in profits due to consumer’s boycott of the brand. For this, the company has to continuously review the carbon imprint of the Fuel Bands so that the product is more environmentally safe. Evaluation and Recommendation The Nike+ Fuel Band is indeed a revolutionary product. Nike was the first to release it in the market and at the right time when the market for this product was just developing. This product is a star product in the sense that the product was an instant hit when all the product line was sold within four days of release. However, the product flatters because of its low battery time and its lack of application in smartphones others than Apple’s iPhone. But Nike has a good marketing strategy and incorporating the product in the same category can allow the company to turn the product into a cash cow. Nike can also align the product with its existing product lines such as Nike footwear. The company can integrate the band and the footwear to work together. They can also allow consumers to buy matching bands and footwear whose mechanics are geared in such a way that they work perfect when used together. Nike can also explore a new market by targeting the obese people who need to or want to lose weight; but it a trendier manner. This can be a good strategy considering the recent awareness regarding health and physical exercise. The growing number of obese people is a good opportunity for Nike. Nike here can use the emotional appeal by asking the consumer to choose health over their preferred options which is more food. The company can take celebrities that have recently lost weight or want to lose weight and incorporate them in Nike’s current overall marketing campaign. They can take a celebrity such as Jack Black, Oprah Winfrey and Mellissa McCarthy. These celebrities could form the face of the Fuel Band where they promote a healthier and more physical lifestyle. Since Nike already uses celebrities, this would synergize well with their overall marketing campaign and thus lend credibility to the product. 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