Marketing Principles of Nike Corporation - Essay Example

? Marketing Principles- Nike Table of Contents I. Introduction 3 II. The 4 Marketing P's as they Apply to Nike 5 A. Product 5 B. Place 6 C. Price 6 C. Promotions 7 III. General Costs of Marketing 7 IV. PEST Analysis 8 A. Political Factors 8 B. Economic Factors 8 C. Social Factors 9 D. Technological Factors 9 V. Segmentation 9 VI. Buyer Behavior, Pricing 10 Works Cited 11 I. Introduction This paper examines key marketing principles applied to a real company, in this case Nike. Included is a discussion of the 4Ps of marketing for Nike, marketing costs and kinds of activities tied to marketing, PEST analysis, targeting and segmentation methods/strategies, effect of buyer behavior on Nike marketing and sales strategies, pricing and how that reflects on market realities and Nike's business objectives, and the role of promotions in the marketing mix for Nike (Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.). Nike's core business is in the research design and marketing on a global scale of shoes, equipment, apparel and related services, with a special focus on athletic apparel as well as athletic footwear. Present in more than 190 nations around the world, Nike utilizes a variety of distribution channels, including the Internet, Nike-owned stores, and retailers, even as the Nike stores are either owned by the company directly or are franchised to others. Aside from athletic gear, Nike is also present in the segment of recreational wear, and there is an overlap in the categories as they pertain to the sale of specialized sports and leisure apparel for different sports, including cricket, American football, wrestling, baseball, lacrosse, walking, golf, activities in the outdoors, volleyball and tennis. It is heavily present too in the major team sports globally, including football,.soccer and basketball. The seven categories around which the Nike business are organized, meanwhile, are as follows: Action Sports, Basketball, Nike Sportswear, Soccer, Running, Women's Training and Men's Training. The company has a line of products for children, and its product lines also include other accessories as well as bags. It's IHM subsidiary is a direct to customer distribution channel, and it is via this channel that Nike is able to tap into a network of non-affiliated entities to produce and market goods under the Nike name, including devices, apparel, and software applications together with all sorts of other equipment. The company owns Converse as a wholly-owned subsidiary, through which the company manufactures and markets products under certain key brands, including Chuck Taylor and Jack Purcell. The company also owns the Hurley International, through which it markets apparel as well as accessories for young people and for those engaged in action sports activities. On the other hand, it has disposed of its Cole Haan and Umbro brand, the latter a marketer of soccer-related apparel, accessories and general merchandise (Google; Reuters). There is no better way to gauge the performance of the company and the overall success of its marketing strategies than to look at how the share price of Nike has fared historically. Looking at the financial performance of the firm in this respect, one sees that the company has done well crafting and executing on its marketing strategies and marketing mixes. The chart below shows that Nike's stock has done well over the past ten years, indicating such success. The stock price chart shows that the company's shares have consistently been on an upward trajectory by way of stock price trends, and generally doubling over the past three to four years on the back of a successful overall business strategy and marketing strategy(Google) : Graph Source: Google II. The 4 Marketing P's as they Apply to Nike The above discussion points us to the various brands, product lines, and product categories or segments where Nike has chosen to compete, and it is clear that the focus on athletic apparel and athletic wear in general is a major company focus that has contributed to much of its success. Breaking down the marketing mix elements for Nike and giving an overview of the components as they relate to Nike, this section looks at the product, price, place and promotion aspects of that mix (Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.). A. Product As discussed, there are seven umbrella product categories around which Nike organizes its product lines, and those seven overarching product categories are as follows: Action Sports, Basketball, Nike Sportswear, Soccer, Running, Women's Training and Men's Training. A parallel products categorization is made via its stale of subsidiary companies and brands, including Hurley and Converse. Within these general categories, the company markets product lines, from athletic wear to active sports wear, children's wear, youth wear, sports accessories such as bags, electronic equipment, devices, and software. It is this matrix of brands, products and companies that in the end constitute the complex product offerings that Nike brings to the market. A large component of the product element of the mix too is the level of the research and development, technology, and third party involvement that the company infuses into them, with the goal of differentiating the products through a host of qualities, including overall product excellence, innovation, supply chain excellence, and a host of other product-related factors (Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.; Google; Reuters) B. Place Place pertains to distribution and the distribution strategies and channels for Nike. As discussed above, Nike's overall distribution strategy is complex and multi-faceted. It markets directly to consumers and licenses its brands to third parties who likewise engage in the manufacture and distribution of apparel, equipment, devices and software, among other things. It also has Nike stores around the world that are either owned by the company or are owned by franchise holders. Then there are the retailers who also have access to Nike products and are able to sell those in their own distribution channels and stores. The use of various distribution channels makes sense for a company that is diverse and has the wherewithal to excel in distribution along all of the distribution channels mentioned above. Also, a key point in the distribution element of the mix is that it has the global distribution network that it can leverage in terms of scale to craft very efficient distribution strategies (Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.; Google; Reuters). C. Price The focus on research and development, innovation, and the use of premium positioning for its product strategies translate to premium pricing for Nike. This means that the price reflects the premium differentiated message of the firm's products and services. The premium pricing is a vital element of the marketing mix and the overall business strategy, because it allows Nike to reap higher profit margins for its products and further sustain the premium message by being able to invest in the other aspects of the company's marketing mix for its products, including further investments in innovation and product research and development, and the use of premium highly-paid athletes and celebrity endorsers for its products as well, touching on the promotions aspect of the mix. The price aspect of the mix reinforces the overall premium positioning of the company's products and also reinforces the other elements of the marketing mix (Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.; Google; Reuters). C. Promotions The company spends heavily on advertising its products and services across the globe, making use of celebrity and sports star endorsers to reinforce the global appeal of the brand and the products and to reinforce as well the premium, excellence aspects of the brand's image in the many markets that it serves. Being present in the major global and regional sporting events, sponsoring professional sports teams and star athletes, and investing in traditional and online media advertising are also vital elements of the promotions aspect of the marketing mix for Nike. The orchestrated set of promotions activities revolve around a differentiation strategy that finds its complement in the innovation, research and quality aspects of the product, and the premium pricing, as well as the use of premium distribution channels such as the Nike stores. All of the elements of the marketing mix are reinforced by the promotions element, and show consistency in this and the other marketing mix elements as far as enabling an overall differentiation strategy for the firm Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.; Google; Reuters) III. General Costs of Marketing As discussed in the price section of the marketing mix, there is a heavy investment in marketing for Nike, because of its emphasis on the premium and differentiated positioning of its brands and product offerings. These costs are large and recurring, and relate to the large costs and investments in sustained advertising in media, sponsorships of global and professional sports events and leagues, the use of highly paid global sports stars, and the like. The heavy emphasis on marketing translates to marketing in general being a main cost item, and it can be said too, gleaning from the success of Nike, that marketing is a key aspect of its overall business strategy and a key component of its sustained success (Mind Tools; Ettenson, Conrado and Knowles; Ehrnke et al.; Google; Reuters). IV. PEST Analysis A. Political Factors The US market where it has its headquarters and where Nike gets a large portion of its revenues is stable politically notwithstanding short term upheavals. The stability owes to the stability of its government institutions. Elsewhere the company faces various political risks in the various countries where it manufactures and markets its products. In all, the track record of the firm in being able to successfully operate in more than 190 nations around the globe attest to the overall stability of the global political environment, not discounting regional conflicts and the constant churn of political events worldwide (Google; Reuters; Boeninger). B. Economic Factors The long-term prospects for the American and world economies, and for the economies where Nike has substantial presence and/or generates a substantial portion of overall revenues, are good, and there is room for organic growth in those economies and for Nike to capitalize on that organic growth in order to sustain its business strategies. Organic growth in the world economies should be able to guarantee that Nike too will be able to grow at some minimum level on par with the organic growth of the different economies. Moreover, as with the political factors, the fact that Nike has shown consistently good performance over the past ten years, with economic conditions varying over that period, means that the impact of economic factors to Nike's prospects have been factored in and are favorable (Google; Reuters; Boeninger). C. Social Factors Social acceptance of Nike as a brand and as purveyor of a lifestyle of sports excellence is high, and Nike itself is a global icon. That icon status translates to social goodwill, and the presence of Nike in the most important markets in the world as well as in many of the world's most populous countries translate to Nike benefiting from that social goodwill (Google; Reuters; Boeninger). D. Technological Factors Nike's sustained investment in innovation and research and development, and its growing presence in applications for mobile as well as in equipment and other technology-heavy accessories and peripherals, means that technological factors such as advancements in computing and in mobile, will continue to benefit Nike, which will use those advances to further innovate and differentiate itself (Google; Reuters; Boeninger). V. Segmentation The company can be seen as being focused in the market segments that it pursues, and where it is able to excel and gain traction all over the world. Those segments are represented in the seven categories where it has chosen to organize the whole company around. Those segments are the following Action Sports, Basketball, Nike Sportswear, Soccer, Running, Women's Training and Men's Training. Meanwhile, Nike also has segmented the markets in other corollary ways, as evidenced by its acquisition of Converse which has its own set of markets and market segmentation, its Hurley business catering to young people, and its targeting specific sports in basketball and soccer as market segments in themselves. They are also marketing to children as a specific market segment. Moving forward, there may be money in going after an older demographic that is fitness and wellness oriented. This segment may have the financial resources and the inclination, as well as the technological sophistication, to serve as an important new market segment for Nike (Google; Reuters; Ettenson, Conrado and Knowles). VI. Buyer Behavior, Pricing Buyer behavior is influenced by marketing and by trends that matter to the different market segments, and there is a dynamic where Nike makes use of insights from buyer behavior too to craft the marketing mix for its products and services and to fashion marketing strategies that take buyer behavior into account. In the case of pricing, the premium pricing is a signal of the positioning of the company, where Nike's objectives revolve around being a differentiated company offering superior products and services, to realize better profit margins from competition. With regard to promotional activity, the expertise and long experience of Nike in undertaking such promotional activities as sponsoring professional sports teams and global sporting events integrate well with the general promotions aspects of the marketing mix, and reinforce the overall differentiation business strategy of Nike (Google; Reuters; Ettenson, Conrado and Knowles). Works Cited Boeninger, Chad. “How to find PEST Analysis Information for a company, organization, or industry”. Ohio University. 2013. Web. 14 November 2013. Ehrnke, Cole et al. “Marketing's Four P's: First Steps for New Entrepreneurs”. Purdue University. n..d. Web. 14 November 2013. Ettenson, Richard, Eduardo Conrado and Jonathan Knowles. “Rethinking the 4 P's”. Harvard Business Review. January-February 2013. Web. 14 November 2013. Google. “Nike Inc (NYSE: NKE)”. Google Finance. 2013. Web. 15 November 2013. Mind Tools. “The Marketing Mix and 4 Ps”. MindTools. 2013. Web. 14 November 2013. Reuters. “Nike (NKE)”. Reuters.com. 2013. Web. 14 November 2013. Read More