Nike: The Worlds Leading Designer

A report said to be formal when it is supported by sound or authoritatively documented resource of information. So to prepare a formal report we need to conduct research work backed by piece of evidence or fact. This report is all about evaluating the selected brand “NIKE” based on its strengths and weaknesses with a view to determining its effectiveness. This report will mainly focus on analyzing brand value, brand image and brand positioning of Nike. In the later part of the report, methodologies such as SWOT analysis will be used to evaluate the brand effectiveness from owner prospective and then customer-based equity pyramid will be used to evaluate the effectiveness of the selected brand from customer’s prospective. Brand value will illustrate the brand value chain of Nike. Brand positioning will identify the brand positioning value, plan and implement brand market programs, measure and implement brand performance, growth and sustainability of brand equity, target market and pricing strategy. In brand image part, Memorability, Meaningfulness, Likability, Transferability, Adaptability and Protectability of the selected brands will be included. Last but not the least, this report have supported by reliable sources of websites, articles, books and journals as references.

Background

Nike is the world’s leading designer, distributor and vendor of athletic footwear, apparel, equipment and accessories for a wide range of sports and fitness activities. According to data monitor the company mainly operates in Americas, Europe, Middle East, Africa and Asia pacific. The head quarter of Nike is located in USA and there are about 32,000 people who worked in Nike as an employee. Data monitor also suggested that the company able to increase their revenue up to 14% from year 2007 to 2008. In addition the net profit also increases by 26.3% on that period. The Companies key products and services include:

Brand value

Brand value can be defined as potential income, status and market value of any particular brand. (Keller, 1998) The higher the brand value is, the more it becomes asset for any company. In an article Mullman, Jeremy identifies that Nike become second for the publication’s 2007 marketer of the the year. This article highlights the brand value of Nike. In addition according to data monitor Nike’s revenues increases in every sector and it justify that the brand value of Nike is increasing day by day.

Source- http://www.sdrnet.com

To demonstrate the brand value, brand value chain model can be used. The brand value chain model is a organized approach for assessing the sources and outcomes of brand equity and is the way through which marketing activities create brand value.

Source- Keller, K.L.1998

The brand value chain has several basic grounds. Basically it presumes that the value of brand ultimately resides in the hand of customers. Brand value creation process begin when the firm decided to invest in a marketing programme, the connected marketing activities then affects the customer mind and finally the investment community consider this market performance. In an article, Madden, Normandy mentioned that a Chinese sports brand named Anta aims to become the next Nike. Form article we can assume the brand value of Nike in particular segments. Marketing program investment, customer mind set, market performance and shareholder’s value are the main value stages for value chain program. Marketing programs include product, communication, trade and employee. Customer mind-set includes the awareness, associations, attachment and attitudes a customer is shown towards any particular brand. According to an article of Marketing (00253650), a marketing executive of Nike reportedly got the details of company’s customer service through telephonic conversation. Through this activity, Nike proves their brand awareness towards the customers. Program quality multiplayer in the value chain model is design to affect the mind-set of the customers. By using this tools clarity, relevance, distinctiveness and consistency of any brand can be measured.

Brand Image

Brand image is the reflection of market positioning for any particular brand. Positive brand image can bring glory for any particular brand. In general there are six criteria for choosing brand elements. (Keller, 2009)They are-

Memorability

Meaningfulness

Likability

Transferability

Adaptability

Protectability

The first three criteria are the marker’s offensive strategy and build brand equity; however the later three play a defensive role for leveraging and maintaining brand equity. (Keller, 2009)

Memorability

It is a necessary condition for building brand equity for achieving brand awareness, (Keller, 2009) brand element that promote the goal and make possible for brand recall or recognition in the mind of customer. Fitzgerald, Kate in his article presented the findings in a survey of customer advertising recall in the United States where Pepsi-Cola have outperformed Nike as an advertiser reminded. So based on that article we can say that Nike need to improve their brand awareness in order to maintain their top position.

Meaningfulness

Brand meaningfulness means all kind of meaning with either descriptive or persuasive content. There are mainly two important criteria through which the meaningfulness of the brand can be measured. (Keller, 2009) They are-

General information about the nature of the product category

Specific information about particular attributes and benefit of the brand

According to data monitor Nike is the world’s leading designer, manufacturer and marketer of sports equipment. So from that information we can say that when we talk about the meaning of Nike, one word that comes in to our mind is “sports”. The reflection of that we can see in activities of Nike where they sponsor many of the world activities.

Likability

Any particular brand becomes likable when it has achieved rich visual and verbal imagery. In that prospective brand’s logo can play an important role for increasing the image of any brand. According to Light, Larry, in his article he mentioned that, Nike is using brand image which is seems to like the clips of Olympic Games. In justification of that one executive of Nike mentioned that Olympic is all about sports and the name Nike is always with sports.

Transferability

Transferability means the degree at which the brand element adds to the brand equity of new products of a brand. (Keller, 2009) that means when any new product of existing brand comes in the market with the same name, is it acceptable to the customer or not. In that regard Nike always able to transfer their brand successfully. For example we can say from data monitor is that, the portfolio of Nike brand is always increasing.

Adaptability

As the customer’s value and option can be changed any time, brand adaptability can play an important role in that regard. The simple is the brand Logo and name is simple is for the company to adapt. In that perspective Nike should have strong adaptability, as their name and logo are very simple.

Protectability

Protectability means how protected the brand is from legal and competitive sense. In case of international brand it is important to choose the brand elements that are legally protected and officially registered with suitable legal authorities.

Brand Positioning

Brand positioning is at the heart of marketing strategy. As the name implies, positioning means finding a proper place in the minds of customers or market segment, so that company can maximize potential benefit for the firm. (Keller, 2009)

Before establishing or deciding about positioning the marketers need to follow the following matters: (Keller, 2009)

Who the target consumer is

Who the main competitors are

How the brand is similar to those competitors and finally

How the brand is different from them.

Target Market

According to data monitor Nike is the world’s leading designer, manufacturer and distributor of athletic footwear, apparel and equipment for range of sports and fitness activities. From that information we can assume what types of customer Nike is targeting. According to Campaign (UK) the articles announced that Nike is planning to launch a new television campaign in UK featuring Wayne Rooney and Fernando Torres. Form that news article we can assume that brand association can play an important role in case of improving target market for brand such as Nike.

Nature of Competition

Nature of the competition means degree of rivalry among the established firms. In that prospective Nike’s main competitors are Adidas, Puma, Finish Line Inc, New Balance Athletic Shoe and Rebook. In an article Pereira, Joseph Signifies that several rivals have used advances in technology, design and marketing to make their products more competitive with Nike, as Nike’s retailers bought too many shoes in advance. From that article we imagine how rivalry Nike is facing from their competitors.

Updating positing over time

For well established brand, competitive forces often dictate shifts in positioning strategy over time. (Keller, 2009) From that point we can understand that Nike should update their positioning strategy time to time in order to be remained top in the market. This strategy is essential for Nike when we look back to the previous article of Pereira, Joseph Where it suggested that Nike’s rivals are taking the opportunity of advancement in design and technology.

Analysis and findings

In the analysis part methodologies such as SWOT analysis will be used to evaluate the effectiveness of Nike as brand from the owner’s prospective and customer-based equity pyramid will be used to evaluate the effectiveness of the selected brand from customer’s prospective.

Methodologies

SWOT Analysis

By using SWOT analysis we will able to evaluate the Nike’s Strength, Weakness, Opportunities and Threats from the Owner’s prospective.

Strength

Vertical Integration

All the marketing activities of Nike are vertically integrated. From manufacturing to sales, Nike has their presence in every segment of the value chain. Nike has contracted third party supplier located in low cost countries such as, China, Vietnam and Indonesia. In addition Nike sells its merchandise to the international retailer all over the world. This type of vertical integration reduces the cost of Nike and also increases the revenue for the company.

Diversified revenue steams

Nike generates revenue from various geographical locations and this mix of revenue generation has balanced their position in the world market and helps them to make diversification. By doing diversification Nike is reducing their business risk and provides opportunities for themselves for cross selling opportunities.

Wide product portfolio

Wide product portfolio means wide range of products in different market segment. The product portfolio of Nike is huge. Starting from athletic footwear to apparel, Nike produces sports equipment and accessories.

Weaknesses

High pension liabilities

Nike offers the largest employee benefit for their employees. Because of this huge amount pension they have to give every year, according to data monitor their unfunded liabilities increases to 37% in 2008, which can hamper the growth for the company.

Opportunities

Brand reorganization Initiative

According to data monitor, Nike took a reorganizational strategy in 2009 where they would distinguish its brand in to a new model consist of reduced management layer in six different geographical locations.

Market outlook of global sports equipment

According to data monitor report, global sports market is increasing day by day. So as market leader of sports industry Nike has the opportunity to increase their market share by creating line extension.

Growth in footwear market

The footwear market throughout the world has shown positive improvements in the recent years. So with the movement of globalization advancement Nike has the chance to offer various kinds of athletic footwear to their potential and loyal customer.

Threats

Intense competition

The sports industry is hugely competitive throughout the world. Any competitive moves taken by the company can easily be imitated. So this kind of intense competition can reduce the profitability of Nike.

Limited Control over contract manufacturer

As previously mentioned that Nike has contracted third part supplier from whom they might face certain threats as they have very little control over them.

Customer- based brand equity pyramid

Brand equity pyramid model can be defined as customer’s response based on their knowledge regarding any particular brand. (Kevin, 2009) by analyzing this model we will be able measure the effectiveness of Nike as a brand from the customer’s point of view.

Source- Keller, KL, 2003

Brand Resonance

Are the loyalty, attachment and felling customer having for any particular brand. According to Duguid, Sid, in his article he suggested that brand have advanced forward from counting on return on investment to return on loyalty. As an example this article also mentions that Nike has threatened Premier league side Manchester United regarding cancellation of their sponsorship if they failed to win any trophies next season. So form that example we can assume that how valuable brand loyalty is mean to Nike.

Brand feelings

Brand feelings are closely related with the brand. Generally brand feeling is the view of customer when they initially heard the brand name. It represents fun and excitement. According to William D. Wells, emotion can play an important role in case purchasing of any particular brand.

Brand performance

Through brand performance company can estimate product’s steadfastness, competence and service effectiveness. Form the customer’s point of view, Nike is in world leading position in case of sports related footwear and apparels.

Brand Imagery

It is the strategy when marketer use customers profile and history to bazaar their product. On that regard Nike uses different types of technique to collect as much data as possible so that in future they can used those data for personal marketing.

Brand Salience

It is the technique used for category identification and need satisfaction. Maslow’s hierarchy of needs is the theory used for measuring different types of need for different segment of people. In that prospective Nike’s target customer are sports person throughout the world with self esteem need.

Critical evaluation of the report

If we critically evaluate the report from the beginning, we can say that executive summary and background were well structured and will provide necessary information regarding the report to the readers. If we go downwards, the report will cover the topics such as brand value, brand image and brand positioning. In the later part methodologies such as SWOT analysis and customer-based pyramid model can be used to evaluate the brand effectiveness.

Important concept developed

Important concept developed during the preparation of the report are uses of brand value chain in the brand value section, through which value of any brand can be measured. In this part this report tried to evaluate brand value of Nike against available literature. In the brand positioning part, concepts such as target market, rivalry among the established firms in the sports market were generated and then compared with available literature. In the brand image part, concept such as memorability, likability, meaningfulness, likability and transferability were implanted and evaluated. In the later part of this report methodologies such as SWOT analysis and equity pyramid were developed to evaluate the Nike brand’s effectiveness.

Evaluation of the sources used

The articles of journals and newspaper, books and web links has been used as a primary and secondary source of supporting are very satisfactory and well trusted.

Evaluation of logical errors

The report has some illogical errors in various segments. For example the evaluation of brand value chain is not well enough to evaluate the brand value of Nike. In the positioning sector, market segmentation was not discussed and for brand image only criteria for choosing brand elements should not be well enough to evaluate any particular brand.

Recommendation and conclusion

Recommendations are always helpful for any company, through which they can generate new ideas. So after completing this formal report the following recommendations can be generated-

Nike should improve their techniques in terms of measuring their perceived value of their customer.

To add more value to their brand, Nike should try to attach more international celebrities as brand association

In case positioning, Nike should make cheap products to capture the low and mid level markets by taking advantages of low labour cost of their third party suppliers.

Finally Nike shouldn’t threat their brand loyal customer such as Manchester United, in case of certain bad times. It can affect the brand image of Nike.