Nike's Utilization of Brand Strategy to Increase Global Competitiveness.

• Author: Araujo, Dan

THE STORY OF NIKE'S MARKETING SUCCESS

Business entities seek success in the form of sales, profit, and market share. Their order of importance depends on the situation, but invariably the three are related: sales lead to market share, market share leads to sales, and both can impact profit (Buzzell et al., 1975; Syzmanski et al., 1993). From a strategic marketing perspective, Nike seeks to increase sales, profits, and market share in a unique manner illustrated in Figure 1.

Nike finds new customers directly through geographic expansion and continued market penetration, both of which inherently contribute to increases in sales and profits. It should be noted that both expansion objectives enjoy a mutualistic relationship in that geographic expansion leads to more consumer relationships, and stronger relationships lead to word of mouth expansion within extant markets (Berger & Shwartz, 2011). Nike utilizes a standardized global marketing strategy in which it communicates a single identity complete with a single set of products; this is successfully facilitated via specific tactics such as endorsements and brand portfolio expansion which shall be explained in depth later. The introduction of a brand into a new geographic region inherently expands potential sales, global market share, and if the operation is managed efficiently, profits (Buzzell et al., 1975; Syzmanski et al., 1993).

Nike's market penetration and geographic expansion strategy are predicated upon building consumer-based brand equity (CBBE) and utilizing specific tactics to diffuse it across unreached demographic and psychographic sets. CBBE is built exclusively through recall, relevance, and esteem (Keller 1993). The reason behind this hyper focus on three particular brand aspects is because brands which perform well on these aspects generally generate the greatest revenues (Datta et al., 2017). Each of these three aspects can be further broken down into the tactics utilized to build them. Relevance is built through endorsements, collaborations, and portfolio expansion; esteem is built through endorsements, collaborations, media ads and R&D advancements; and recall is built through endorsements, collaborations, and media ads. CBBE is then diffused via the tailoring of the same tactics needed to build these aspects in the context of the new market; the most effective of these are portfolio expansion, endorsements, and collaborations. Nike also expands by providing equipment for an ever-growing number of sports and by constantly developing new products to satisfy ever developing physical needs of top level athletes.

This process of broadening brand appeals would ordinarily lead to the dilution of the flagship brand and its meaning; but Nike has prevented this with two tactics. The first is to change its brand meaning from a running shoe brand to a sports equipment and athletic lifestyle brand, allowing for products ranging from soccer cleats to winter coats. The second is to disassociate new products which are too unrelated to its core identity via distinct brand names, such as with Converse or Cole-Haan.

The first portion of this paper will explore the function and theory behind Nike's method of building CBBE by focusing on recall, relevance, and esteem. The second will focus on the specific tactics employed to accomplish Nike's CBBE building and diffusion objectives and explore how cost savings are realized through synergy between tactics.

BRAND STRATEGY

In constructing a brand, Nike focuses its efforts exclusively on brand recall and relevance because when these two aspects are well developed, high perceived esteem is the result (Datta et al., 2017). This relationship and the relationship between each individual aspect and sales-based brand equity (SBBE) will be explored in depth to illuminate how Nike leverages these relationships with specific tactics to not only create a strong brand but also save marketing dollars.

According to Datta et al. (2017), the individual components of CBBE can be divided into two categories: REK (relevance, esteem, and knowledge) and ED (energized differentiation). Using the terminology established by Keller, REK would be brand resonance, response (judgements and feelings), and salience, while ED would be brand meaning (performance and imagery) (Keller 1993). The categories of REK and ED differ in terms of their contribution to SBBE. According to previous research, CBBE explains 47% of SBBE, and brands with a high REK enjoy a SBBE that is .52 standard deviations above the mean, while brands with a high ED are .08 standard deviations below the mean (Datta et al., 2017). Furthermore, brands with a high REK perform .29 standard deviations better in product categories such as athletic apparel, which emphasize social value (Datta et al., 2017). However, brands with a high REK also perform .5 standard deviations worse in categories that feature a few dominant brands, which indicates that Nike must utilize unique tactics to overcome this difficulty (Datta et al., 2017).

One such step that Nike takes is to save time, money, and effort by focusing exclusively on relevancy and recall in order to achieve esteem, rather than to invest in specific esteem building measures. This supposition is supported by the finding that relevance is correlated to esteem by a factor of .85, and knowledge is correlated with esteem by a factor of .7...