Nike’s Shift to Digital

The times are changing and so is Nike. Nike’s total shift from the traditional ad world to the interactive dynamic consumerism has allowed Nike to achieve a great deal of brand exposure and engagement from its consumers. Result? 55% growth in membership in 2011 and 30% growth in sales to reach $2.8 billion. (1)

 Nike began experimenting with digital platforms as early as 1996 when the brand launched the website for the Atlanta Olympics. In 2006, Nike created the Nike+ platform to meet the changing demand of customers in the mobile era. It is a multi-channel, sensory combining Apple and Nike technologies that allows individuals to track performance.

 For the first time, this platform allows Nike to have a personal conversation with its customers. It also supplies data to Nike laboratory to study the behaviors and patterns of its customers. In 2010, Nike launched Nike Digital Sport and hired scores of new engineers to make technology for digital communities. The latest product from Nike is its NIKE+ FUELBAND. The launch events have completed changed to meet the demand of its customers. Interactive digital campaigns have replaced the traditional advertising. Although Nike still runs some major outdoor advertising campaigns, it takes the form of a 30 story billboard that posts fan headlines from Twitter. Major commercials by Oscar-nominated directors are now first launched on Facebook before primetime television. Clearly, digital is now more important to Nike than traditional advertising. (2)

 

 

Based on Nike’s media budget allocation, Nike has clearly focused on digital marketing in recent years. In 2010, it spent nearly $800 million on ‘nontraditional’ advertising, greater than any other top 100 U.S advertisers. In the last three years, it drop 40% in TV and print advertising in the U.S. even though its total marketing budget climbed up to $2.4 billion. (1)

 Nike is no longer relying on a handful of superstars to sell its products. It wants to go where its customer is. Nike’s target 17 year old customers are spending majority of their time online and social media. Marketing and advertising campaigns are increasingly split between Wieden + Kennedy and a host of other agencies that specialize in social media and new technologies. The brand understands that digital media has provided interactivity between the audience and the company. It allows brand to engage with customer unlike any form of traditional media. This means not only pouring more and more time and effort into Twitter and Facebook, but also placing a new priority on the quality of online advertising; making videos commercials that provide enough value, through entertainment or education, that Nike consumers will feel compel to share the content via their social network, giving Nike’s ads the kind of reach that historically would have cost a fortune. So now Nike doesn’t have to wait until World Cup or Super Bowl and spend $200 million to get a few hundred million views. Now with digital, Nike could get this number of views and impressions in any given day. (3)

Strength (Short Term)

There are many benefits of shifting from traditional to digital for Nike. eMarketer estimates 120 million US consumers use their smartphones and tablets to shop. Mobile has erased the hard divide between the physical store and ecommerce. In a June 2013 study from RetailMeNot.com and Ipsos Public Affairs, US consumers mentioned product research as the most common activity while digital shopping. Also, consumers have always spread news about products by word-of-mouth, and that has become a function of social media networks. Therefore by investing in digital early and completely own the space, either creating valuable content or building relationship with customers, Nike is in the forefront of digital consumerism and will be able to capture these customers. (7)

There is a perception that Nike’s marketing efforts have lost some of their novelty.  Other brands such as Adidas, Reebok and Under Armour have started to emulate Nike’s advertising look and feel – its reverent assertive tone and tack. Its ads are no longer refreshing. Also Nike brand is so ubiquitous that people just look past the ads. Knowing the brand is different from engaging with the brand. Innovative products like Nike iD (where customers can design their own shoes),

 Nike FuelBand nad Flyknit running shoes have helped Nike improve its financial performance. For instance, gross margins in the fiscal third quarter has rose for the first time in two years. Nike’s shift to digital has helped it to regain its edge. TV, print and radio used to be the primary media consumption by everyone. Now those media represent a fraction of the media people consume now. Nike’s shift to digital has helped it to regain its edge. The “ecosystem” of digital services that Nike has created encourages consumers to connect with the brand daily. For example, people spend hours on Nike website building their own iD shoes, tracking and analyzing their own performance. “When you have millions of people that come back and reconnect with your brand multiple times a week, you realize that that connection is more valuable and powerful than any traditional pushed marketing messages.” In the short term, Nike will continue leveraging its ecosystem to create an intimate conversation and generate loyalty from its customers. (4)

Strength (Long Term)

In the long term, Nike will be able to leverage its customers’ data collected from digital fineness services and various digital platforms to create super personalized products and act as people’s personal trainer. The data Nike obtains from its customers via its various digital platforms and products is extremely valuable at shaping Nike’s future. Nike is no longer just a sportswear company. Because of its digital integration and innovation, Nike has captured everything associated with sportsmanship and the reverent lifestyle that aspired by people. According to eMarketer, B2C ecommerce sales worldwide is forecasted to grow at an average rate of 20% up to $2,065 billions in 2017. eMarketer also forecasts that over 1 billion internet users ages 14 and older will make at least one purchase via a digital channel this year. (Worldwide B2C ecommerce, Source: eMarketer, June 2013) In the long term, Nike will be able to capture a big bulk of sales via digital through its technological innovation and personalized digital marketing effort. (7)

Weaknesses (Short term):

Although digital has provided many benefits for Nike, there are short comings as well. Digital is fast and unpredictable. Any negative PR related to Nike’s brand will escalate like fire. For example, when the news of Oscar Pistorious’ involvement in his girlfriend’s death broke out, it went viral on various social media and press almost instantly. Among other Nike-sponsored athletes, NFL quarterback Michael Vick, Tiger Woods, and Lance Armstrong all experienced some form of allegation that damaged the brand. Thus, any small imperfection or negative rumor could be magnified online via social media which in term could cause serious damage to the brand.  Sometimes, it is hard for a big corporation like Nike to respond to the instantaneous nature of digital and implement the necessary damage control in time. (3,4)

Weaknesses (Long term):

Competition is even fiercer online. We are clearly living in the age of digital and the future will continue be dominated by digital. By investing in the making of various futuristic digital products, Nike is in the forefront of digital weave. However, in the long term, there will be more competitions as more and more companies realized the importance of creating this digital ecosystem. Similar brands will start copying what Nike is doing, creating more niche products that are better suited to people’s needs. “The maturity of the brand creates an inherent challenge because you are no longer the new kid on the block,” and as a result Nike executives ‘run the risk of being the victim of their own success.” (3)

 A great example is the iPhone from Apple and Android based phones. Although Apple was the pioneer in the smartphone industry, Android phones are catching up with even more innovative features. As a result, Apple is now playing catching up by imitating many features from Android instead of leading the industry with new and useful innovations. Another long term weakness might be that customers are now bombarded by everything digital and their growing fear of privacy invasion by every company, they might start to grow tired and there might be a potential of digital phobia trend in the future. With most of its marketing and products on digital, Nike will have difficulties going back and meet the needs of these people.