Nike's new marketing mojo

Fortune Magazine noted Nike’s innovative marketing in Scott Cendrowski’s article Nike’s new marketing mojo. The world’s largest sports company has fared well in recent years, bringing a 120% stock return in the last five years, compared to the S&P 500 index’s 2.5%, even while dealing with a series of unpopular celebrity endorsers. This success has been enabled by a shift from traditional (TV and print) to nontraditional advertising. In fact, even as its advertising expenses soared to a record $2.4 billion last year, Nike’s traditional advertising expenses fell 40% in just three years. Of the 100 top US advertisers, it spends the largest portion of budget on nontraditional ads.

The shift toward nontraditional advertising has brought it closer to its target customers. Teens have shifted away from the TV and now spend more time in online communities. That is precisely where Nike has placed itself. It has contracts with several marketing agencies specializing in web and social media, and these ventures have paid off with marketing successes like the viral spread of its 2010 football commercialvia Facebook. Further, it has expanded its reach—it can get a message out to 200 million people on any day, not just on the day of the Super Bowl.

Nike has utilized partnerships as well as outside contractors to develop and sustain its marketing success. Nike+ is a venture with Apple that links shoes and iPods to record and give feedback on people’s workout.

While these marketing efforts have brought it to the online hangouts and personal devices of its users, they have also given it a key resource: consumer data. It knows facts about its customers’ workouts, profiles, and habits. It knows what customers want, when, and why.

Its strategy has also enhanced brand loyalty by making Nike a part of social networks and a part of the modern exerciser’s workout recording routine. Further, it is reestablishing its brand by spending money on helping customers perform athletically, not on ads featuring celebrities. It provides tips on proper exercise and habits, which ties customers to Nike more than do passive TV or print ads. It is active marketing that reinforces the company’s purpose and stems from the customer value proposition.

Nike’s marketing strategy may be a success, but some of the electronic devices associated with it may be questionable. Take FuelBand, a $149 wristband that measures a person’s exertion throughout the day. The black rubber band with “Fuel” glowing in bright letters across the display may be a good accessory for teens, but it is doubtful that there is a sufficient market of teens who would spend $149 to track their bodies during non-exercise. The product is marketed as a way to stick to health goals by getting constant data on habits. This seems more like a good tool for adults, but most adults would not wear the band with a business outfit. Further, the complexity of the product may be high. The band must synchronize with the user’s iPhone, something prohibited for many teens during much of the day at school, and it must be linked to the user’s social media accounts to deliver the full experience. All these setup difficulties may not be justified by the additional knowledge about non-exercise periods. The concept may also be hard to understand—most have always been taught that exercise is what counts, not the periods in between, which are the focus of this product. Plus, being a product that is so customized to a person, trialability is a major flaw, though observability may be better. Compatibility is slightly more complex. On one hand, people need to remember to wear the band at all times, not just during a workout, which may be a difficult habit change. But conversely, the device connects to a user’s existing devices and social networks. Nonetheless, this product does not seem to have smash hit prospects.

Nike+ is another product that may be doomed to fail. Complexity may similarly be high since it must be synchronized to an Apple product. Further, it is doubtful that there would be much demand for a device that controls the music one listens to as one works out. While passive recording of various exercise metrics may be a good way to give feedback to the user, an active interference during the process may be overly intrusive. This interference may not add enough value to entice a customer to replace a regular heart rate monitor, or simply the smart sensor on most workout machines, with Nike+.

Nonetheless, Nike is smart to delve into electronics and marketing through social media, since such efforts firmly place it into its customers’ increasingly online experience. But it is also smart to partner with companies that can execute its devices strategy better. The alliance with Apple was a brilliant move—not only does the presence of Apple products in nearly every customers’ pocket make adaptation of Nike+ and FuelBand easier, but the move also associates Nike with hip and modern electronics. Customers need not make as many new purchases since they already have part of the package. And, the earlier infiltration of Nike into social networks helps move customers to make the new purchases—they have much of the hardware, they already connect with Nike via Facebook, and now they are only a few small products away from integrating the experiences to revamp their workout. The plan is brilliant.

What do you think about Nike+ and FuelBand? And do you think that Nike's move to nontraditional advertising is well planned?