NIKE’S BIG DIGITAL ARSE: intro + segmentation

Nike is a fascinating company that has grabbed digital and non-traditional marketing strategy by its fragmented golly wobbles and given it a damn good shake.

So, in honour of my approaching exams (which may or may not be using Nike as a case study), we’re going all Consumer Behaviour on Nike’s digital strategy.  How has Nike successfully leveraged off the tenants of consumer behaviour?  What digital wins and fails can we take out of its story to date? And can I manage to cover all 11 core consumer behaviour topics before my exam on the 12th of June?  Only time will tell… (I’ll be trying to cover off: segmentation, consumer motivation,  personality and self-concept, perception and emotion, learning and memory, attitude formation and change, culture, social influences, diffusion of innovation, situation influences, consumer decision making.  Well, wish me luck.)

image credit: Wieden+Kennedy, London

We all love a company with a humble physical beginning that’s conquered hurdles to be roaring digital success, and Nike has that Hollywood-esque cliché down in spades.  Its first retail outlets were a 1960’s car boot and Phil Knight’s Dad’s basement; today it is the world’s leading sports apparel company.  In the 2011 fiscal year, its sales reached $20.6 billion[i] a full 30% bigger than its closest rival Adidas[ii].  Its digital mojo is huge, with its $100 million plus campaigns using online as the first (and arguably primary) touch point.  As Cendrowski notes “What’s all the more impressive is that Nike shouldn’t be good at this…biggest is rarely the best in the brand game, where niche players routinely run circles around lumbering giants, especially in the new digital world.”[iii]

To put it bluntly, Nike’s digital arse is a global mofo.  Once upon a time, the biggest audience Nike could reach on any one day was 200 million Super Bowl viewers, at absolute maximum, once a year.  Now, across all its digital touch points, it can hit that number any day of the year.  This digital, global audience is very valuable as 58% of Nike’s sales come from the (non-USA) international market[iv].  With such a culturally vast audience, understandings of local-level and global level segments are essential to keeping Nike on top of its game.

To understand the core segments that Nike targets today, let’s take a short time trip back to the 60’s, where a Stanford graduate and his former track coach were peeved off at the quality of their sports shoes.   When they started off with the ‘Blue Ribbon Sports Company’, Knight and Bowerman focussed exclusively on the elite athlete community.  Their aim was to bring quality (and cheap) shoes in from Japan (Onitsuka Tigers no less!) to give their local US sports elite the top training shoes that were hitherto inaccessible to them.   In the 70’s (and, I believe, post a falling out with Onitsuka) Knight and Bowerman launched a market-first impact-absorbing sole and continued to target serious athletes.  As Stonehouse and Minocha[v] point out, as most serious athletes are young men and women,  Nike’s first target audience were mainly in their late teens, early 20s.  After their launch of their market-first technology and the Nike brand in 1972 many high profile US Athletes adopted Nike’s training shoes[vi], giving the distinctive Swoosh a lot of visual presence in the US Olympic Track and Field trials that very same year.

A great cultural shift was also happening around the same time:  the young hooligan was developing.  There was a huge push in youth fashion towards casual wear and a consequential expansion of the ‘street wear’ fashion market.  Those same young hooligans started to copy their athletic celebrities as their ‘aspiration reference group’ and wear the popular sports shoe, Nike, as part of their daily wardrobe.  This change in the social context of dress code, saw the development of a new market segment.   Nike recognised that while these consumers evidently admired elite athletes, they were also in their late teens and early twenties and often going through a quite rebellious stage. (Ah, those hipsters of the 70s!)  This segment’s indirect and aspiration reference group would therefore likely be athletes who were successful, but also had a rebellious streak. (Unlike some of today’s punks who idealise scrawny vampires – see figure 1).  We can see this audience segment still be actively targeted by Nike, through heavy sponsorship of controversial sports characters like Dennis Rodman, Charles Barkley and Tiger Woods.

Figure 1. (author would like to note that she exists in the generational Switzerland between these two)

Charles Barkely – Famous for his on and offcourt outbursts

Tiger Woods – Spoof ads of the controversial golfer and his relationship with Nike are quite common…. Any PR is good PR?

As Nike’s core product offerings increased, they segmented their market into footwear, apparel and equipment.  In 2011 they redefined their core product segmentation into running, basketball, soccer, women’s training, men’s training, action sports and sportswear.[vii]

These categories have been expected to generate 75% of the Nike brand’s growth.[viii]However, overlapping this product segmentation is the vast global audience.  The Nike Oregon HQ segments this audience into developed markets (North America, Western Europe and Japan) and developing markets (Greater China, Central & Eastern Europe and other Emerging Markets).  These segments openly appear in Nike’s investor news and colourful letters from the CEO.

However, it is clear that Nike’s segmentation strategy must have yet more layers if it wishes to effectively position product strategy within each local market.    Nike Digital Sport must be keeping its door closely guarded for some reason[ix], well beyond what is shared in their investor memos.  A deeper understanding of the needs of their different market segments is bound to be a big part of their product/media development strategy.  Their recently released FuelBand, this and the well known Nike+/iPhone/iPod/Sneaker hybrid is feeding back streams of data usage habits that is getting the Nike brand even closer to understanding exactly how their consumers use their products. This rich data source would need to be cross referenced with consumer segments in order to gain useful managerial insights.

Wisenbilt’s four bases for market segmentation shows that consumption specific facts such as usage rates and usage situations can be a useful hybrid market segment when combined with empirical personal features and demographic data.  Using consumer sign up data such as age, gender and location, alongside usage and purchase behaviours of consumers forms powerful body of knowledge for the Nike brand to leverage off.

Nike are also able to adapt these global understandings with a ‘bottom-up’ approach that allows it remain locally relevant to each of its market sectors[x].  Part of this process allows middle management groups of all regions to act as both a source of information and influencers to the executive vision of the future.   Effectively, I would imagine we are looking at Nike using ‘grass roots up’ knowledge management strategy to address cultural specifics within each segment.  This information allows the top level direction on addressing the consumer segments to be translated into local specifics.  As Mark Parker notes in his 2011 share holder letter: “Within the next 20 years, as much as 65 percent of the world’s population could be middle class – most of that in China, India and Brazil.”[xi]  Nike’s knowledge of these developing markets requires it’s multi-tiered segmentation to be a framework that both shapes and is shaped by local market strategies and knowledge.

Nike’s early audiences of elite athletes and those rebellious, fashionable teens and young adults have expanded out exponentially, in part guided by the expanding product range.  The new segments that Digital Nike gets to deal with are even broader still, even if just in their sheer breadth of data that this team is now collecting on its consumers.  The only way to make that data useful is by applying both top level strategy and bottom level local knowledge to extract audience segments from the immense noise of digital input they have from all their digital products and media channels.

Market segmentation is a complicated beast and can be done to varying levels of granularity. As we delve into the other core consumer behaviour topics, we’ll be able to take a closer look at the personality traits and psychographic profiles that Nike may be placing behind some if it’s segments and how this is informing their digital strategy.

See you soon with the next section on Nike’s big digital arse!






[i] “Key Developments: Nike Inc”, Reuters. accessed 19/05/12

[ii] Cendrowski, Scott.  “Nike’s new marketing mojo” Fortune Management. accessed 04/05/12

[iii] Ibid.

[iv] Note, this was in 2010

[v] Stonehouse, George. Minocha, Sonal. (2008) “Strategic Processes @ Nike – Making and Doing Knowledge Management” Knowledge and Process Management. V15#1 p.25

[vi] Including Steve Prefontaine, who became the first athlete to officially endorse Nike

[vii]“Company Updates Progress on FY 2015 Global Growth Strategy; Strong Innovation Agenda Drives New  Revenue Target” accessed 20/05/12

[viii] Holmes, Stanley. (2007) “Can Nike Do It?” Bloomsberg Businessweek Feb 7. accessed 19/05/12

[ix] “Few outsiders have visited the third floor of the Jerry Rice Building at Nike’s headquarters. Even most Nike employees know little about just what the staffers working here, on the north side of the company’s 192-

acre campus in Beaverton, Ore., actually do. A sign on the main entrance reads RESTRICTED AREA: WE HEAR YOU KNOCKING, WE CAN’T LET YOU IN, and it’s only partly in jest. Inside, clusters of five or six employees

huddle in side conference rooms where equations cover whiteboard walls. There are engineers and scientists with pedigrees from MIT and Apple. Leaks are tightly controlled; a public relations man jumps in front of a visitor who gazes at the computer screens for a little too long. Once upon a time, the hush-hush plans and special-access security clearance would have been about some cutting-edge sneaker technology: the discovery

of a new kind of foam-blown polyurethane, say, or some other breakthrough in cushioning science. But the employees in this lab aren’t making shoes or clothes. They’re quietly engineering a revolution in marketing.

This hive is the home of Nike Digital Sport, a new division the company launched in 2010. On one level, it aims to develop devices and technologies that allow users to track their personal statistics in any sport in which they participate. Its best known product is the Nike+ running sensor, the blockbuster performance-tracking tool developed with Apple (AAPL). Some 5 million runners now log on to Nike (NKE) to check their performance. Last month Digital Sport released its first major follow-up product, a wristband that tracks energy output called the FuelBand.” Cendrowski, Scott.  Ibid.

[x] Stonehouse and Minocha  explore the fascinating knowledge management process employed by Nike’s strategic planning department.   Ibid.

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