Strategic Marketing in Nike - Assignment Example

STRATEGIC MARKETING IN NIKE Executive Summary: This research is focused on the use of value adding services in the marketing strategy. The report is being addressed to the Board of Directors of Nike in context of highlighting the changes that are required in the marketing strategy of Nike. So far, Nike’s marketing strategy is based on reflecting the core values of the organisation and inspiring sports athletes. However, for further value addition in the marketing strategy and creating sensitive and brand loyal customers Nike should try to enhance its reach to the larger consumer segment. In view of the growing competition in the sports segment, the company is recommended to evolve its marketing strategy. Nike’s strategy has always been to develop their brand with global perspective by creating a motivational consumer base for the company. Nike tries to influence the brand perception of the consumers and can sustain it by adding materialistic benefits in marketing strategy. In order to sustain in the competitive scenario, it is recommended to the company that enhancing their business into the motor sports segments will create a bigger market place for the Nike. Also they can develop their connection with the consumers if Nike endorses athletes who are close to their consumers or local athletes. . Table of Contents Table of Contents 3 Introduction: 4 Existing marketing strategy of Nike: 4 Role of service in strategic marketing: 6 Factors influencing the strategic marketing process of Nike: 8 Achieving Differentiation with service inclusive marketing: 10 Service focused pricing strategy for improving marketing effectiveness: 12 Recommendations: 15 Conclusion: 15 Reference List 17 Introduction: Marketing concepts and strategies are evolving rapidly with the growing competition in the corporate sector. New forms of marketing such as viral marketing, guerilla marketing, etc. are now forming exclusive segments of the marketing process of the business houses. As defined by Beard (2008), strategic marketing helps the firms to align their business objectives with the market demands and creates consumer awareness. Grönroos (2010) added that the primary objective of a strategic marketing process is to help the business develop a long-term sustainable competitive advantage. Combining the above two definitions it can be observed that strategic marketing helps in developing a competitive advantage by allying the business objectives with market requirements. Nike is known to be one of the pioneers of the modern day marketing process. They have established themselves as one of the leading brands in the sportswear industry (Anderson and Narus, 2007). The strategic marketing concept of Nike will be analysed in context to the role of services in marketing and factors that can be included to boost the marketing effectiveness of the company. The researcher will try to evaluate the gaps in the marketing strategy of Nike in terms of the service marking strategy and provide suitable recommendations for developing the marketing efficacy of Nike. This report is being referred to the Board of Directors of the company. Existing marketing strategy of Nike: Nike Incorporation is one of the leading firms in sportswear and apparels. The mission statement of the company states that it aims to inspire and innovate for every sports person in the world and also reflects their marketing style and the core value. As emphasised by late Apple CEO Steve Jobs, consumers want to know the position of a brand in the market and what it stands for, Nike has focused on reflecting the core belief on which the company was formed (Youtube, 2013). The fundamentals of the marketing strategy of Nike depend on the concepts of diversity and inclusion. They saw the entire sports industry as a unified world and made it their objective. Based on the aspect of diversity, they chose to develop their products that will help athletes to improve their performance on their respective field of play (Anderson and Narus, 2007). Right from the beginning, Nike marketing and promotional activities were focused not on their products but on athletes (Berry and Yadav, 2008). In short, celebrity endorsements were the key idea of their marketing process. However, they expressed their marketing activities as a way of bringing together sports persons from different segments and connecting them with their services. Nike stated that they wanted to share the basics of diversity for creating awareness among their internal and external stakeholders and bring them together (Shove and Pantzar, 2008). This again brings back the point of focusing on the core values of the company rather than the products and services offered. The aspects of services offered in the marketing activities of Nike are limited; they develop their ads and other marketing activities as a source of motivation for their consumers (Yoshida et al. 2013). This benefitted by the company in two primary manners namely, they developed a transparent relationship with their customers and they enhanced their brand equity on a global level. The tag line of the company, “Just Do It” was also developed as an additional push to the customers to go and achieve (Nike, 2014). Coviello et al. (2008) opined that the concept of service offerings in the marketing activities of Nike is psychological in nature rather than materialistic. The consumers know it as a high brand and thus are looking for a way to connect with it (Nufer, 2013). The motivational promotions helped the customers realise the extra services being offered to them by Nike. However, inspite of their diversified marketing strategy, Nike has failed in the global market in the last few years (Berry and Yadav, 2008). Competitors such as Adidas have superseded them and were selected as the official sponsors for the Fifa World Cup 2014. Thus the scope of improvement in the marketing strategies of Nike exists based on the growing competition in their respective industry. Role of service in strategic marketing: According to Hooley et al. (2012), companies are trying to enhance the differentiation in their marketing strategy by providing intangible elements to the consumers. In this context, Coviello et al. (2008) earlier argued that the effectiveness of the services or the intangible elements offered in the marketing process of a company mainly depends on the value of the services to the consumers. In the contemporary scenario, most of the firms are trying to add services related to their pricing strategy by adding discount plans in their customer awareness programs. For instance, one of the most recent ads posted online by Adidas, UK stores, was free delivery of products related to soccer when the order is above £40 (Vouchercodes, 2014). On the contrary, Nufer (2013) reflected this type of marketing is solely focused on the sales activities of the company rather than developing communication with the customers. The role of service additions in marketing is thus crucial and complex to use but at the same time boosts the outcome of the marketing process. The idea or concept of service inclusion in marketing processes is based on adding value for the consumers. The last decade has seen a tremendous growth in the process of service inclusion in marketing process (Yoshida et al. 2013). Firms are organising events for directly communicating with their consumers and form a loyal consumer base. Again the service additions in the marketing process also depend on the aim of the marketing activities of the firm. As stated earlier with the example of Adidas, this type of marketing process mainly focuses on driving the sales. On the other hand, when a company aims to build customer relationships, they offer services that allow the customers to communicate with them (Grace and OCass, 2005). For example, advertisements that provide help line numbers of customer care executives are often reflected as a step towards developing customer relationships. Figure 1: Service Inclusion in marketing process (Source: Shove and Pantzar, 2008, p - 54) According to Barlow and Stewart (2008), inclusion of extra elements in the marketing process depends on the positioning of the brand. The perception of the consumers regarding a brand is formed on the basis of their past experiences. This also acts as a challenge for the marketers while including diversification or differentiation in their marketing strategy. Yoshida et al. (2013) stated that the success or failure of a marketing process depends on the ability of the customers to connect with the process and perception plays a crucial role in the process. For example: In the American automobile industry, Volvo is known for their safety, while Ferrari is known for speed. Hence, the consumer perception regarding both the brands is formed accordingly. Now, if Volvo tries to offer their customer a car which focuses on speed rather than safety, the first act of the consumer will be to compare it with their perception, in this case Ferrari (Nufer, 2013). Thus, the competition level increases and the chances of success reduce. Similarly, if Nike is offering a service to their customers along with their marketing, it has to be related to their brand position and consumer perception. Factors influencing the strategic marketing process of Nike: The basic layout of the strategic marketing process of Nike is directly aligned with the organisational mission. They focus on inspiring people. It can be observed that Nike rarely promotes their products and services; rather they promote famous sports personalities from various sports segments (Barlow and Stewart, 2008). Their vision is to bring together athletes from various parts of the sports industry and unify them. A streamlined marketing process overall has thus helped them in building an efficient brand equity in the global market (Nike, 2014). The key factors that influence the marketing activities of Nike can be segmented into two categories, namely internal and external factors. The internal factors include core values of the firm, brand identity, product quality, services offered to the customers, pricing, etc. The external factors include market competition, consumer behaviour, consumer perception, means of marketing, etc. Figure 2: The goods-service Spectrum (Source: Hooley, Piercy, and Nicoulaud, 2012, p - 356) According to the above goods-service spectrum proposed by Hooley, Piercy, and Nicoulaud (2012), Nike’s products and services falls in the first quadrant of packaged goods that have tangible services attached with the goods. However, comparing with the marketing process of Nike, they try to provide intangible services such as motivation and satisfaction to their consumers. The influence of core value in the marketing of Nike has been discussed in the above segments. The influence of brand identity is also high in case of Nike. Nike is primarily a manufacturer and designer of commodity products and has been able to achieve a niche position in the industry (Walter et al. 2008). The pricing of the products are mostly focused on premium pricing technique that reflects the demand of its product in the international market. But mostly what Nike added in their marketing strategy was not to create awareness regarding their products but regarding their benefits. This is the key theme behind marketing ideas of Nike, they focused on reflecting the additional benefits that customers can easily justify as their personal needs. The jogging marketing campaign for selling the moon shoes is an exclusive example of this. The company did not market the product rather it marketed jogging and its benefits (Moon, 2014). This also indulged the external factor of customer perception; customers began to associate the brand with jogging and other sports creating a bigger space for the brand to occupy in their decision making process. Nufer (2013) noted that Nike have developed an unique concept of marketing that added to the consumers thought process and developed a better market for the company. Focusing on the intangible elements added in the marketing process, it can be stated that Nike provided the consumers with want and satisfaction for the product, a clear understanding of the benefits that motivated the customers to use their products. The influence of external factor of competition was thus reduced as Nike directly communicated with their consumers and portrayed a selfless version of the brand (Walter et al. 2008). However, with the increase in availability of alternative products to the consumers, the effectiveness of the psychological influences is reducing in the market and thus intangible service addition in the marketing process of Nike needs to justify the changing expectations of the customers. Achieving Differentiation with service inclusive marketing: Differentiation in the marketing style of a company allows it to build a competitive advantage and stand apart from its competitors (Barlow and Stewart, 2008). However, developing an appropriate differentiation is a complex process and result in huge losses if not failure. One of the best examples of differentiation failures was Facebook in the year 2008, when it introduced the beacon in its webpage that allowed the advertisers to update posts in the pages of the members. This was taken as a service inclusive marketing process for Facebook, however the members criticised this activity, as access of their account details to the advertisers had reduced the security of their account (Youtube, 2012). Thus, differentiation service for marketing must again relate to the customer behaviour and customer needs (Nufer, 2013). The marketing strategy of Nike is unique and has helped them in achieving success, but in order to differentiate they need to include new aspects such as value adding services in the marketing process. In case of Nike, the value addition in marketing is mainly done by influencing the psychological or thinking pattern of the consumers. They try to connect the consumers with something bigger such as the example of jogging in case of moon shoes. Jogging is a worldwide known exercise and Nike made it bigger. Customers wanted to be a part of the jogging process and thus marketing process succeeded (Moon, 2014). Figure 3: Points of Differentiation (Source: Boulding et al. 2010, p - 161) The differentiation in the existing marketing strategy for Nike can again be psychological advantage to be provided to the customers. As stated earlier, product focus in the marketing process is very low in Nike. Adding product information in their marketing process will enable to establish direct contact with the customers (Yoshida et al. 2013). Competitor firms such as Reebok have developed a similar multi-focus strategy that markets the sports and also shows the benefits or key features of the products to the customers (Boulding et al. 2010). Thus, brand and product positioning are being done in one activity. Service value can also be added with the help of offers or invitations. Referring back to Adidas, they set up multiple events at market hubs and business places all over the world by creating an open match viewing platform for their customers. They also posted pictures of these events on their social media profiles and online videos to reflect their connection with the customers. This has been termed by Boulding et al. (2010) as deferred benefits of marketing provided to the customers. Similarly for Nike to achieve differentiation in their marketing activities they can provide physical satisfaction for their customers such as home delivery of goods, extra gift items for new customers, etc. Service focused pricing strategy for improving marketing effectiveness: Pricing strategy of a firm is often referred to as the final decision making factor of the consumers. Grace and OCass (2005) stated that a marketing activity may be able to create awareness among the customers but if the product or service price is above the consumer purchasing power then the marketing activity fails to sustain. However, researchers such as Grönroos (2010) and Walter et al. (2008) argued that price of a product does not influence the consumer decision when the benefits and idea of the products or services are reflected appropriately. Nufer (2013) observed that previously firms were used to study the market and then develop the product according to the customer needs. However, in the present scenario, firms are designing the product and then creating the demand for it in the market with exclusive marketing activities. For instance the case of Google Glass, the concept of the product has been developed in a manner that will attract the customers beyond their need for it. Considering the marketing strategy of Nike, Boulding et al. (2010) noticed the logo of the company is placed on the products in a manner that is visible when the products are being used. Figure 4: Nike Logo Placement (Source: Nike, 2014) Nike has mostly focused on premium pricing for the company. The consumer perception regarding the brand has helped them to achieve the desired market effect (Moon, 2014). However, when they will include a value addition in their marketing process, the price of the products and services must be able to support the marketing strategy. In order to create a sustainable competitive advantage with marketing process, the alignment of all the marketing principles is necessary (Yoshida et al. 2013). According to Grönroos (2010), when value added marketing is created the company gains the advantage of fluctuating the prices of the products or services. Nufer (2013) added that when consumers are receiving something of value the price motivates or de-motivates their decision making process. On the other hand, Walter et al. (2008) stated that value of product resides within its consumers and as each consumers have different value for the product, the influence of pricing on the decision making process in not uniform. Considering a differentiation strategy being used for value-added marketing by Nike, the price of the products to be launched will not be the primary influencing factor because of the huge brand equity of the company (Grönroos, 2010). But again, availability of alternative products in the market will highlight price among the decisive factors inspite of added services in the marketing process. This was noticed in the case of Ford Edsel which failed in competition with Ford Mercury (Youtube, 2012). The influence of pricing is related to the offerings of the product and the consumer behaviour. The value addition in marketing with services thus requires alignment of the variables of extended marketing mix and extensive communication with the customers to enhance transparency in the buyer-seller relationship. Recommendations: The recommendations provided are based on the gaps evaluated in the marketing strategy of Nike: Venturing into new sport segments Although Nike has developed a unique strategy for marketing their products they have actually overused the benefits of this concept. Sports segments such as Formula 1, Golf, etc are enlarging their viewer base and most of it is coming from the emerging markets. China, India and Russia have the largest viewer response for Formula 1 and Nascar races. Nike can focus on the motor sports segment that will enlarge their scope of operations and also help in communicating with the consumers of the emerging nations. Developing market consumer needs differ from that of developed markets The developing nations are enlarging their markets however the consumer purchasing power is still low in comparison to that of the developed markets. In the developing markets, consumers are affected by price and quality of the products, the marketing strategies offer extra services that can relate to the consumer needs such as discounts and bundle offers. In a country such as India where the potential of growth is huge, Nike can create their promotional activities with the local celebrities. In short celebrity endorsements with local sports heroes will help them in capturing a larger consumer base in the developing markets. Conclusion: The report focused on the existing marketing strategy of Nike and the concept of value creation in the marketing process by adding services. The growth of competition has provided the consumers access to more alternatives, this has created the need for a specific and direct approach which is also beneficial to the consumers at the same time. The marketing process of Nike focuses on promoting their core value and inspiring sports athletes. This remarkable strategy has helped them again significant brand equity and identity in the global market. However, with the growing competition customers need something more to develop a long-term sustainable relationship with the brand. In order to improve the efficacy of their marketing processes, Nike has to develop a differentiation in their marketing process by adding extra services that add value for the consumers. The existing service strategy of the company creates psychological value for influencing consumer brand perception but the physical benefits are still lacking in the marketing activities of Nike. In order evolve the marketing efficacy of Nike, venturing into new sports segment and promoting the local sports stars of the markets will be helpful. Although, Nike had a winning marketing strategy with the change in the market nature and consumer demands they need to improvise for ensuring organisational sustainability in the competitive industry. 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