Nike+ Ipod Sport Kit

EXECUTIVE SUMMARY

The purpose of this report is to analyze Nike, Inc to assist the company increasing market share and sales through the product of Nike+ iPod Sport Kit and Nike+ shoes by the end of 2008. The key issues facing by Nike in marketing this product are narrow target segment and inappropriate buzz promotional strategy. There is also a minor issue of the kit's limited functionality which hinders for product growth. As a result, the current target segment of elite runners should be redefined and expanded to include the "sport fashionistas", technology savvy footwear customers, and people who are interested in sports in general. This would make the product appeal to a broader general public and increase sales potential. As for the marketing strategy, Nike should turn to traditional advertising campaign in massively broadcasting the product at different media outlets, and also sponsoring various sports events to raise awareness. Increasing efforts on the Sport Kit's research and development to continuously improve the Sport Kit's functionality should also be taken underway to secure the customers from switching to other competitors' products. With the recommendation implemented, it is expected that Nike would enjoy a higher awareness of the product, and thus lead to larger sales volume and market share in maintaining its position as the industry leader. The promotion of the Sport Kit product would also reinforce Nike's image as innovative and technological advanced to continuously attract loyal customers.

INTRODUCTION

Nike, Inc Background

With revenue of $15 billion in fiscal 2006 and the largest market share in the footwear industry, Nike, Inc. (Nike) is the leading company in the sports and fitness industry. Since its initial launch in the 1970s, Nike is committed to bring inspiration and innovation to the athletes. It positions itself as having cutting-edge technology while enhancing athletes' competitiveness. (http://www.nike.com/nikeplus/ Retrieved November 26, 2006)

Nike+ iPod Sport Kit

Nike and Apple formed branding alliances, hoping to utilize each other's popularity and reputation to increase the sales of their own products. (Proudfoot, 2006) The first product launched by the companies is Nike+ iPod Sport Kit (Sport Kit), which is a wireless system that allows certain designated Nike shoes, Nike+, to send data to an iPod Nano. As the users begin exercising, information on time, distance, calories burned and pace is stored on the Nano. (Mossberg & Boehret, 2006)

This co-branding effort generates several benefits for both parties. Firstly, this ground-breaking product will reinforce each company's image as innovative and increase their brand equity. Also, the Sport Kit can invigorates and stimulate sales in the mature market for both companies. (Anonymous, 2006)

This report is to analyze Nike, Inc, whose goal is to increase both market share and sales, in order to maintain the leading position in the industry. We will provide recommendations to increase market share through the sales of Sport Kit and Nike+ shoes by the end of 2008.

ISSUES & PROBLEMS

In order to increase market share and sales over the next two years, Nike must solve two of its major issues: narrow target segment and negative impacts of buzz marketing strategy. In addition, the minor issue of limited product functionality should also be overcome.

Currently, the target segment for Sport Kit is the elite runners, who are more likely to purchase shoes from the running brand, such as New Balance and Asics. Moreover, they may prefer exercising gear with greater accuracy and more advanced functionality. (Ryan, 2006) It is also a narrow target market, in which Nike may confront barriers as most of its sales are generated from the general sports market instead of professional athletes. (Anonymous, 2006) Therefore, the current target segment is not large enough to generate sales or potential future growth.

The other major issue is Nike and Apple's marketing strategy. There are no media plans to promote this product and the companies are depending on buzz marketing or word-of-mouth referral to raise interest for Sport Kit. The disadvantages of this tactic are that it does not raise enough awareness and it provides competitors opportunities to spread negative or even false information about the product. (Anonymous, 2006)

A minor issue with this product is its limited functionality. One of the important features value by the runners is to be able to monitor their heart rate. (Mossberg & Boehret, 2006) While many training devices can now record heart rate, consumers may resort to competitors' products if the functionality of Sport Kit is not improved.

SWOT ANALYSIS

Strength

One of the major strength is Nike's strong brand image in innovation and technological advancement. The newly launched Sports Kit would help Nike in gaining more reputation as a pioneer of developing cutting-edge technology. Secondly, Nike has a large scale of expansion in the worldwide market. As of fiscal year 2005, Nike has a presence in over 160 countries and operates 370 retail stores (Anonymous, 2006). Moreover, with Nike's strong brand image, many of the customers are brand loyal to Nike. These loyal customers are more willing to adopt Nike's new products and are more often engaged in repetitive purchase. Lastly, the introduction of the Sport Kit also brings convenience and a new experience of running to the consumers. People are now able to have an analysis of their workout regardless of where they want to exercise.

Weakness

Since 1996, Nike has been accused of labour abuse in Vietnam and other Asian countries (Nguyen, 1997). Although Nike has taken actions in dealing with these accusations, Nike's brand and corporate image have suffered. Some customers may refuse to purchase Nike's products due to its malpractice from manufacturing, and there are also campaigns that gather people to boycott Nike in tempering Nike's sales and brand image. Moreover, the Sport Kit has the weaknesses of limited functionality and low profit margin which hinders the potential for product growth. The kit has no measurement of heart rate, and problems of accuracy and irreplaceable batteries. The manufacturing cost of a 30 dollars kit is around 7 dollars, so the profit margin is 20 dollars per unit (Carey, 2006). This profit margin is far lower than selling a pair of Nike shoes which usually have a price