How NIKE is building Brand Equity
1. Brand Equity: introduction
Brand equity is defined as “the differential effect of brand knowledge on customer response.” Three elements of this definition need to be emphasized. The most critical element is differential effect or “differentiation.” Without this, a brand is not different from the next one, and therefore, can never seek a premium. In some instances, differentiation is easy to create (e.g., automobiles, breakfast cereal, etc.), whereas in other instances this can be much more challenging (e.g., gasoline, bottled water).
Regardless, however, it is equally important to strive for differentiation. The next element is brand knowledge. Your customers should know about the differentiation. They should be aware of it, and should appreciate that the differentiation is meaningful for them. The last key element of this definition is customer response. Customers should respond favorably to this differentiation. This response should (hopefully) be reflected in their desire to demonstrate some loyalty towards the product, and in their willingness to pay a premium for their preference. These definitions underlie the model we present.
2. Managing brand equity
The model shown in Figure below depicts the elements that we believe all high-performing brands have in common but this model cannot be said as a comprehensive model of brand equity, but rather to highlight its essential elements. As this shows, brand equity rests on a solid foundation of brand vision and brand identity. Given a strong foundation, brand knowledge can be built. Important dimensions of brand knowledge include brand awareness and brand image. Finally, brand equity results in superior performance; that is, the ability to earn long-term economic profits. Two key indicators of a brand’s ability to earn economic profits over the long run are brand loyalty and the ability to command a price premium (i.e., a price-cost differential above “normal”).
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3. How brand create Equity: a case study of Nike
4.1. Company’s Profile
Nike Corporation was incorporated in 1968 with the name of Blue Ribbon Sports. And in 1978 it became Nike. In their thirty-four year history, Nike has primarily been in the business of designing, developing, and marketing athletic footwear, attire, equipment and accessories, а lot of companies go out on a limb when it comes to business decision or management strategies with Nike Corporation.
Nike is а powerful company. Nike Corporation is a well managed company in а striking industry, the company has a strong brand image, and they are effectively capturing the value shaped from their savings. Modern superior ways to make products are significant in today’s Apparel companies, both to be efficient and to be able to make hi-tech products. Nike is dependent upon high technology in their effort to stay ahead of their competitors and create products. These technologies are found within computers, used to create, design and develop the products and machines that actually make the shoes.
Besides these main areas of technology such a large corporation also uses a lot of diverse technology such as accepting programs on computers, intranet within the headquarters and not to forget Web page technology for their web page. They have а extremely developed Web site used for marketing and sales purposes. (Carty 2001 34-47)Nike primarily competes in the footwear industry, a subset of the consumer cyclical sector. The major competitors of Nike are Reebok and Adidas, but any company that sells athletic and leisure footwear, apparel, or sports equipment could be considered а contestant too. Competition within the footwear industry can be very strong and change quickly due to rapidly changing customer preferences and technology. With an active industry such as Nike, it can be challenging to sustain a competitive advantage.
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Nike positioned itself in an industry where are virtually no substitute products. Runners, walkers, basketball players, football players, and virtually every person…
4.2. The mythology behind Nike name
Nike was the name of a Greek Goddess in the ancient Greek culture. She was the goddess of victory and helped the rightful to succeed. Her wings swooshed and so does the feather she kept in her hand. Her attributes were also associated with the force and speediness. This is the story that the logo and the brand name of Nike tells us. This famous sportswear company is named after an ancient Greek goddess of victory, and her sisters were the goddesses of force and strength and her brother was the god of rivalry. She bestowed upon fame and glory to those who achieved victory. If you think, isn’t this what Nike (the shoe company) does to successful athletes? They give them the fame and glory by signing them up for their marketing and advertising campaigns while bestowing everything they wear with the swoosh logo?
4.3. The Power of brand name
The Nike brand and its familiar swoosh is known throughout the world. It appears on the shirts, shoes, and hats of famous sports figures such as Tiger Woods, Michael Jordan, Andre Agassi, Monica Seles, Pete Sampras, and others who sign lucrative contracts with the company. Branded: The Power of Brand Names — Nike is an account of the ability of Phil Knight to propel his company to the top, and keep brand awareness at the forefront. His marketing and production savvy have made the Nike name instantly recognizable in 82 countries.
4.4. Logo: The Swoosh
The SWOOSH logo is a graphic design created by Caroline Davidson in 1971. It represents the wing of the Greek Goddess NIKE. Caroline Davidson was a student at Portland State University in advertising. She met Phil Knight while he was teaching accounting classes and she started doing some freelance work for his company. Phil Knight asked Caroline to design a logo that could be placed on the side of a shoe. She handed him the SWOOSH, he handed her $35.00. In spring of 1972, the first shoe with the NIKE SWOOSH was introduced.
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Nike's idea of producing their shoes was to let their costumers design and personalize their own pair of shoes. There are three main parts of athletic shoes including Nike brand shoes. The midsole, the outsole and the top part of the shoe known as the upper. The materials for the upper part of the shoe vary on the design of the shoe. The midsole is generally made out of a combination of materials. ...
4.5. Nike’s Brand Image
Brand image is the impression in the consumers’ mind of a brand’s total personality (real and imaginary qualities and shortcomings).
It is set of feelings, emotions and experiences that are linked to the brand. While brand personality is the image the company wants to convey through the different brand architecture (logo, name, Marketing mix, and communicated messages) and they have control over, the brand image is the subjective mental picture of the brand. It is developed over time through advertising campaigns with a consistent theme, and is authenticated through the consumers’ direct experience. Because it is a subjective perceived position, brand image can deviate from the brand identity due to different perceptions, unexpected events, and different interpretation of communicated messages. The ultimate goal of any company is to lessen the gap between the perceived and the required brand image through actively getting feedback from the market and responding to any trends. Nike brand image that the company initially was building is a pure American icon, high performance, innovative aggressive brand, associated with high notch athletes, achievers and winners; mainly serious males.
Nike is perceived as a high performance brand, since their inception Nike considered performance as top priority, they designed shoes that are durable, lightweight for runners. They used leather in their fabrics because it is more durable than garment yet less fashionable. From the early day, Nike has learnt the consumers’ need by listening to the need of athletes, sharing their true passion for running. They designed their shoes to give athletes the best performance. In doing so, Nike has created a reputation as a provider of high quality running shoes designed especially for athlete.
The innovative product strategy they adopted emphasized their innovative image in the minds of consumers. They introduced a lot of innovative products in the sport market starting from the Marathon shoe debuted in 1965, moving on to the innovative new cushioning technology that was used with running shoes for the first time in the 70’s, followed by the introduction of the “Air” technology in basketball shoes in 1988, and lately the alpha line high tech products.
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... monopolistic competition, trying to convince consumers its product is better than its competitors. Nike successfully does so, earning increased ... priced athletic shoes and not going for the high price brand name shoes. As a result, this is bringing Nike a ... By enormous advertising, Nike leads consumers to believe that its product is better than its competitor's product. Nike is extremely successful ...
4.6. How Nike creates Brand Equity
When people around the world think of Nike, what perceptions come to mind? For many it is the feeling in the line ‘Just does it’, the images of star athletes, competing for success, and winning. It is all these associations, and perceptions, together with a good product, which make the Nike brand so valuable. (Of course, some people have other perceptions, which may not be so Positive or valuable, for Nike this is all part of the challenge of managing their brand.)
Nike brand and logo contribute substantially to the brand image and brand equity.
4.7.1. Brand Association
The core of building the brand equity for Nike brand equity is brand association. Nike is associating its brand with famous athletic celebrities that have similar personality as the brand; they are achievers, winners, determinant, and accomplishment oriented, nontraditional (out of the box).
Like the legendary Michel Jordan the basket ball player, McEnroe the famous tennis player, Michel Johnson the famous American sprinter. Nike is capitalizing on the idolized view of American for their athletic heroes, specially the youth the main target of NIKE. This association projects the personality of the celebrity on the brand. The most famous example for brand association ever was the collaboration between Nike and Jordan, the association that personified Nike as a superior, achiever, successful and amazing top performing brand, By time this personification became permanent even when Jordan was not there turning consumer response to Nike brand from conditional (stimulated by the presence of Jordan) to permanent unconditional one.
4.7.2. Brand awareness
From the other side this association, in addition to the personification of the brand, it increased the brand awareness. Nike communicated this association through their TV ads that was a hit at their time in the states like the Jordan air ad that caught fire and increased their sales dramatically.
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... to the different countries. Nike as a brand has not only sold its products well but has also ... V. 2008),"Co-creating value through customers' experiences: the Nike case", Strategy & Leadership, Vol. 36 Iss: 5 pp. 9 ... use of value of the sports good, its market price, households’ professions and revenues, the population’s ... it should not be really low or too high, but we must also have in mind ...
4.7.3. Perceived Quality
In addition, one of the most important sources of Nike brand equity is the high perceived quality of the brand not only among athletes but also between the public. Although most of their market was the public that used their shoes just for walking around yet Nike was committed to design their shoes according to the high standards of professional competition. They listened to athletes and designed shoes that satisfy their needs for high performance and durability. Seeing a winning athlete wearing a Nike shoes in a professional competition authenticated the quality perception in the minds of the customers about the Nike brand. Also they didn’t follow the trends of other shoe maker like Rebook who used garments in the fabrication of their shoes instead of leather because it is more fashionable although it is less durable, Nike didn’t do so and they stick to using leather fulfilling their commitment to quality.
4.7.4. Brand credibility
Another important pillar in Nike brand equity is their brand credibility as a brand which was established over the years through their commitment to delivering what they promise. A clear example for this is in the 80’s when Aerobics games were rising and the trend in the shoe design was shifting toward more fashionable, less durable line, by that time Nike decide to pursuit fulfilling its brand promise to deliver high performance and high quality. They shifted to sponsoring basketball the toughest and the highest on performance scale sport in the US.
4.7.5. Brand Loyalty
Another block in Nike brand equity is the good relationship with its consumers. A relationship that started with the beginning of the company when Knight used to speak to athletes using their language and listen to their feedback. He used to meet with them in tracks in high school and in colleges. This strategy created a lot of attachment of athletes to the brand, some sort of brand loyalty. When the company expanded they used a “Finger on the pulse strategy” where Nike have some of its employees hitting the street finding out what is in the minds of their consumers and following their needs and tracking their brand perception.
4.7. Marketing Strategies of NIKE
Nike’s marketing strategy rested entirely upon a brand image which is favorable and has evolved into a great multinational enterprise over time. The favorable brand image has been kept afloat due to the strong association with the Nike’s logo which is quite distinctive and the slogan “Just Do It” which has been used in advertisement for quite some time. The company has been known to invest heavily in advertisements and brand promotion.
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3.7.1. Market Segmentation
Most of the consumers of Nike’s products are mainly sportsmen. This is so because of the utility that comes with the products. An athlete is more likely to go a sports shoe designed and marketed by Nike more than a person who detests sporting and exercises. Nike targets these consumers by agreements between Nike and athletic teams, college’s athletic teams1 etc for product sponsorship and eventual promotion to the members of these teams. In this way, Nike is able to reach a wide number of consumers and consumers who are more likely to buy. Even though others are likely to buy the products, Nike pays specific emphatic targeting to the athlete more than any group of individuals even though it also targets the youth who have embraced the hip hop culture.
3.7.2. Targeting strategies
Nike lays a number of strategies to target their immediate consumers; athletes and other sportsmen. The targeting strategies include among others the sponsorship of products by professional athletic teams, celebrity athletes and college athletic teams. This strategy is specifically successful because of its ability to reach a large number of athletes. If the athletic team manager prescribes a specific type of track shoes made by Nike, the trainees have no option other than to buy them. The teams can as well buy the track shoes in bulky and supply them to the team members. The second strategy that Nike applies is the designing of product destination. It does this by associating success with the product. For example, when a celebrity athlete sponsors a specific brand of athletic shoes, the brand will be associated with success. This psychological effect is reinforced with advertisements that affirm this position.
Finally, Nike targets the consumers who are likely to develop product intimacy; those who care more about the utility and quality of the product than the price. In this way, the pricing is not affected too much in a bid to accommodate a large number of consumers. However, price has also been factored in Nikes marketing strategies as shall be seen later in this paper.
3.7.3. Pricing Strategies
As stated in the foregoing section, Nike targets the consumers who embrace product intimacy and thus care less about the product. This has enables Nike to set relatively higher prices than its competitors. This is a strategy that calls for higher pricing points so as to push the perceived product value. It has been established that consumers who consider a product to be of high quality are likely to pay the high price more often and consistently. Once consumers develop product intimacy, they come to associate their person with the product and will pay whatever price quoted on the product provided it has the Nike logo on it.
Another very important thing to note is the fact that Nike uses the vertical integration pricing strategy in which they take ownership of the participants at channel levels that differ and they also engage in multifarious channel level operations both in a bid to control costs and thus influence pricing function.
3.7.4. Distribution Strategies
Distribution strategies embraced by an organization can either give them an edge in market or make them lag behind the winners in the market. The more efficient the product distribution is the more sales and thus more profits. The delivery of the right product and at the right time to the consumer not only effects utility but also leads to high degree of consumer satisfaction and loyalty. Nike distributes its products on level basis. The high priced premium products are given to certain distributors while leaving the low priced to be sold at highly discounted prices at mega retail stores such as Wal-Mart. Whereas Reebok embraced a limited distribution strategy Nike ventured more into a global3 market capitalization.
3.7.5. Promotional and Communication Strategies
Apart from Nike selling quality products which have lead to a high degree of customer loyalty, the promotional strategies that the company employs are simply superb. Nike has contracted a number of professional and celebrity athletes which have managed to draw a considerable attention to their products. Some of the sportsmen signed by Nike include soccer stars such as Ronaldinho, Ronaldo and Roberto Carlos, Basketballers such as Jermaine O’Neal and Lebron James2, triathlete Lance Armstrong and golf superstar Tiger Woods. This has created a relatively high degree of Nike products’ awareness. Besides the signing of celebrity sportsmen to promote their products, Nike has also employed a great deal of advertisements through the mass media. Nike employs a selective- demand advertisement focused on the high priced shoes used for traditional sports.
4. SWOT Analysis of Nike
5.8. Strengths
* Top management consists of a committed group of executives all bringing together vast experience and knowledge.
* Establishment of Standards – A comprehensive establishment of profitability standards has assisted Nike in its evaluation of individual performance as well as a comparison to other competitors.
* Evaluation of Performance – Nike thoroughly examines and compares the aforementioned performance standards to the actual results that have occurred as a result of implementing strategies to meet or exceed performance standards.
* Marketing Research – Nike primarily conducts marketing research on a continual basis to assist in maintaining the company’s position as the leader in industry
* Having more than 30% of global market share
* One of the top 100 brands in creating equity
* Sponsoring of sports athletes and gain of valuable coverage
* Development of high quality products at reasonable price
* Re-location of products
* Brand Loyalty High prestige i.e. Famous
5.9. Weakness
* Pressured to charge low prices
* Due to diversified products, values fall as market shares fall
* Newness of Facilities – Nike’s facilities abroad has attracted bad publicity in recent years. Though its facilities comply with local labor standards, generally, they have not met U.S. standards.
* Focus – Focusing on applied research can be a weakness as well. Many new, innovative ideas come into existence as a result of basic, unspecific research
5.10. Opportunities
* Has established global brand recognition due to sporting events
* Treated as a fashion brand by youths and thus stays in demand
* Due to high quality products, it brings in more profit
5.11. Threats
* Fake products
* New brands of the same quality with lower price margin leaving a competitive advantage.
5. Conclusion
Nike has remained and continues to remain at the top of production and distribution of sports gear and equipment. However, it should be noted that competitive pressure cannot allow Nike to ‘sleep at the top’. The recent Reebok- Adidas merger poses a great challenge to devise new marketing strategies to continue leading or recede to oblivion. All the above show a competent marketing management can hoist organizations top become market leaders and making the market leaders maintain their competitive edge in the market through adherence to marketing ethics, marketing plans and well thought out and formulated marketing strategies.
6. Recommendations
Following are the some recommendations for NIKE to maintain and enhance brand equity and sustain its market share:
* Increased market share through a new product development, competent pricing strategies, advertisement, and other sound promotional activities
* Restructure market dominance by driving away competitors mainly through fierce promotional strategy coupled by pricing function that will make the market quite unattractive for the competitors
* Increased social responsibility to strengthen the image of the company
* Diversification of market through factoring the Asians and Black Americans in their product promotion besides doing a research to establish the tastes of these groups
* Venture into new distribution channels especially in international markets
* Different pricing strategy so as to open up a new market segments
* Nike should work with General Federation of Labor and Labor Union
* Nike should work with other shoe manufacturers, provides fair wages to the workers
7. References
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