Marketing Analysis How Nikeid Strengthens and Accentuates

Marketing Analysis

How NikeID Strengthens and Accentuates the Global Nike Brand

Nike is considered the leading provider of athletic wear, shoes and equipment globally, and is perennially also listed as one of the top fifty most valuable brands in the world. Its supply chain spans over 52 nations and over 80% of its products are produced in Asian nations where product uniformity and lack of variation is essential to achieve production efficiency (Nike Investor Relations, 2013). As of today Nike operates production centers in 42 nations, has 774 direct and contract factories in production, and over 1 million workers who are both direct employees and those of contractors (Nike Investor Relations, 2013). Nike has had to build a production network to this scale to support the many product liens they sell today. The company's marketing has concentrated on aligning their iconic brand with providing customers with the athletic apparel they need to excel in their chosen sports and leisure activities. What's been missing from their brand messaging is the opportunity for the customer to participate in defining their own experience and product. Nike's iconic brand can support selling millions of shoes a year yet didn't fully deliver on the possibility of creating greater customer loyalty through the purchasing and product use experiences (Deng, 2009). To hold on and grow their most profitable customers, Nike had to deliver a more effective online experience than just a typical website. The answer to this challenge was creating the NikeID product strategy and website which provides Nike customers with the opportunity to create highly customized, build-to-order shoes to meet their exacting requirements. NikeID is managed as a separate business complete with its own analytics and dashboards (Nike Investor Relations, 2013).

NikeID Takes Brand Marketing to a New Level

The most critical aspect of the Nike brand experience is giving customers the opportunity to see how their apparel, from shoes to jackets and equipment, accentuate their own unique identity. The promise of improved athletic performance is inherent in all Nike products, yet the precise aligning of product attributes to a given customers' unique needs accentuates and strengthens that connection with every customer who chooses a mass customized product (Senanayake, Little, 2010). As Nike generates over 60% of revenue from loyal customers who repurchase and use their products, the need for bringing customers into the design process of their own apparel is critical to future growth (Nike Investor Relations, 2013).

To address this issue Nike chose to define a global product strategy that allowed for customers to be the co-creators of their own shoes, while also presenting a high quality, intuitive and easily customized website experience. What's unique about NikeID from a website perspective is that the site itself is a direct representation of how flexible Nike has designed and executed the actual production strategy to support this marketing strategy. The following is a screen capture of the American English version of the NikeID website as of November, 2013.

Figure 1: NikeID website (American English Configuration)

The marketing strategy behind this website is aimed at giving every customer the opportunity to have their own unique identity, supporting their own unique personal brand. The integration of Nike's manufacturing prowess with their branding and marketing expertise is further exemplified in the workflows supporting shoe customization. For Nike to make this product promise to customers and be able to deliver on it, they needed to define the specific level of product and mass customization they would specifically support as part of the brand promise as well. This is the most critical aspect of the website form a customer perspective, as the expectations created of unique, high quality and very personalized shoes must be met or the site would fail. The following graphic shows the various levels of mass customization through product configuration strategies that Nike had to consider in building the NikeID website (Kumar, 2007) (Nike Investor Relations, 2013).

Figure 1: Nike's Decision Matrix of Product Configuration for NikeID

Sources: (Deng, 2009) (Kumar, 2007) (Kumar, 2004) (Nike Investor Relations, 2013)

Nike chose to pursue a configure-to-order (CTO) strategy on this website as it provided for customers to have a very high degree of freedom in defining their shoes, stopping just short of defining the contents of the fabric itself (Nike Investor Relations, 2013). Going to that level of detail would have made the site engineer-to-order (ETO) ads unscalable over time. Instead the CTO strategy gives the website customers a very wide breadth of options to choose from and also drives the most critical aspects of this site's strategy, which is increasing customer loyalty and retention over the long-term (Nike Investor Relations, 2013).

Inherent in any mass customization and product configuration strategy is also the ability to generate higher margins as a direct result of selling highly unique, therefore more valuable, products. This is one of the primary factors driving Nike to invest so heavily in the performance and speed of this website, in addition to making the decision to launch entirely new versions of their shoes as well (Nike Investor Relations, 2013). This strategy has also led to an entirely different series of analytics and metrics of performance that Nike uses to manage this aspect of their business. Table 1: NikeID Performance Analytics and Figure 2: NikeID Performance Results illustrate how Nike tracks performance of the site and what their expectations are from a mass customization and product configuration strategy for the future as well (Nike Investor Relations, 2013).

In conclusion, the NikeID website is noteworthy it is focus on how to create a highly differentiated, valuable customer experience online. Nike had to also create an entirely different product strategy to support this initiative, further supporting the unique value proposition of NikeID by delivering a highly differentiated customer experience.