Marketing of Nike in India

INTRODUCTION

The company taken into study is Nike and the scope of study is the marketing of Nike in India. Nike is the largest seller of athletic footwear, apparel and equipment in the world with subsidiaries in over 200 countries across the world. Nike appeals to customers with a marketing strategy centered on a brand image that is attained by distinctive logo and the advertising slogan “Just do it”. Nike’s logo, the ‘swoosh’ is thought to be one of the best logos ever designed and has had a high level of recall value. Nike’s operations in India began in 1996 when the athletic footwear market was dominated by Reebok and Adidas.

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SITUATIONAL ANALYSIS

POLITICAL FACTORS

The government of India had highlighted on the development of local apparel production and the dominance of local brands within the national market to develop the Indian apparel industry. This policy marked the increased resistance towards the entry of foreign brands into the country. Rules stated that the operation of foreign brands within the country required an agreement with a Indian partner where the latter holds majority of the company’s share. The late 1990s has marked the linearization of the Indian economy and restrictions towards international fashion brands have been removed. The favorable government policy has opened the doors for Nike India to establish independent and fully owned subsidiaries to increase its presence in the market.

ECONOMIC FACTORS

Worldwide operations of Nike have been affect by the Asian economic crisis. Nike footwear and clothing production is concentrated in Asia. The increase in material and labor costs has added to the fall in revenue. Indian economy has been one of the best performers in the world in recent years. The annual growth rate of 9.6% and 9.2% in 2006 and 2007 have been impressive and added the purchasing power of middle-income group in the country. However, growth has been vulnerable during the recession. As a result, growth projections for 2009 have been revised down to 6.5%.

SOCIAL FACTORS

The younger generations quest for involvement and professionalism in sports have determined the success of marketing campaigns. People are more fitness conscious. Consequently, exercise and fitness clubs are gaining reputation. The resulting surge for quality sports apparel and equipment has increased prospects for development. Upscale of labor and factory conditions in production facilities at manufacturing units and the sponsoring of social events has increased the ‘Social Responsibility’ image of the company.

TECHNOLOGICAL FACTORS

Quality of product owes in large part to the use of valuable information technology and its application in production and distribution function. Advantages of economies of innovation, design, segmentation and differentiation have depended heavily on the effective use of management information systems. Nike India leverages technological advantage from its leadership status and strong international presence.

COMPETITOR ANALYSIS

Competition is very fierce due to the number of multi-national and Indian companies competing for sales. The Indian market represents a complex structure where sportswear brands like Nike, Reebok and Adidas as well as lifestyle brands like Puma, US Polo and Indian Terrain are fighting it out in the sports lifestyle segment. India is the only market where Reebok has sprinted ahead of Nike and Adidas. Reebok owns 40% of the market share, followed by Adidas (20%) and Nike ( 15%).

SWOT ANALYSIS

STRENGTHS

Nike as a brand, has crossed the fields of fame through a myriad collection of products. Mainstream of Nike’s profits are earned outside the United States. Nike has expanded operations by acquiring international brands like Coverse and Starer that have created novel trends with the younger generation. Nike leverages its strong global presence and its position as the largest athletic footwear and apparel supplier in the world. Nike India benefits from the economies inherent in design, development and worldwide marketing of the Nike brand. Nike boasts of the largest portfolio of sports ambassadors to boost its marketing campaign.

As Nike’s Production is outsourced minimum investment in production infrastructure and manufacturing workers has enabled the company to allocate surplus funds for research and design. Supremacy in innovation, research and development has laid the foundation for the company to emerge as the market leader in the industry. Production of Nike footwear and apparel is concentrated in the Asian continent with India as a premium production hub. The costs of transportation are minimum as production facilities are located close to the market.

WEAKNESS

Globally, Nike is a trendsetter in terms of design and technology. In India, however, Nike has been relatively slow in bringing the latest designs. Brand awareness among Indian youth is increasing and delay in introducing the latest fashion trends in the Indian market has affected the market share of Nike. Allocation of funds for marketing of Nike in India is significantly low when compared to its international advertising budget. Increase in marketing expenditure is required to penetrate a market that is already dominated by global giants Reebok and Adidas.

Controversies regarding the allegations of having inhuman sweatshops in overseas factories have trimmed down brand image. Although sweatshops can be seen as an advantage for production and cost, they alter the representation of a socially responsible organization.

Fully owned retail establishments of Nike has been an integral part of Nike’s distribution worldwide. Nike in India operates in a partnership with Sports Station India Private Limited. Nike does not control the distribution network. This association proscribes the establishment of Nike’s own retail outlet in India.

OPPORTUNITIES

Athletic shoes and apparel have become a staple in wardrobes worldwide as a result of increasing fitness and fashion quotient among both men and women. India’s huge population base, rapidly growing economy, rising income levels, changing lifestyle and consumer preferences has boosted the growth of sportswear industry. Large youth population and increased brand awareness among younger generation allows Nike to leverage its international brand status and market effectively. Nike is increasingly been perceived as a fashion brand and the trend for fashion merchandise creates opportunities to develop increased variety of sports and fashion accessories that tend to be associated with higher profits. International operation enhances scope to utilize global marketing events to support the brand locally. The emergence of e-retailing and customer designed internet merchandise has resulted in elimination of middle men in the distribution chain.

THREATS

A part of manufacturing components are sourced from foreign countries. International operations are exposed to fluctuations in exchange rates. Purchase and sale of goods are contracted in different currencies that are not stable over long periods. Such an exposure could result in manufacturing or selling at a loss. The retail market for sports apparel and footwear is highly competitive. Reebok and Adidas dominate a lion’s share of the Indian market. The acquiring of Reebok by Adidas will earn the Adidas group significant competitive advantages worldwide. The market trend is witnessed by increasing cost of production inputs and labor costs supplemented by a highly price sensitive customer base. Increasing inflation in the Indian Economy may spark a cut in customer spending.

MARKETING STRATEGY AND ITS IMPACT ON SALES GROWTH

The marketing strategy of Nike in the Indian market can be analyzed by dividing the timeline of Nike’s existence in India into two distinct components

• Embracing International Endorsements
• Manipulating customized Indian Promotions

EMBRACING INTERNATIONAL ENDROSEMENTS

Nike has earned international reputation through its strong brand endorsements worldwide. Our belief in performance-oriented shoes backed by high value advertising has enabled us to stay ahead in the race for leadership in the sportswear industry. Over the years, Nike has become synonymous with sports celebrities like Michel Jordan and Tiger Woods. Our marketing in India hasn’t had a head start despite our advantaged brand awareness enjoyed in the market even before the establishment of Nike stores in the country. This was a period when India didn’t really figure in Nike’s marketing promotion activities.

Indian sportswear market had been characterized by unprecedented complexity and market dominance by Adidas and Reebok that had entered the market prior to Nike. Adidas and Reebok enjoyed a lion’s share of the Indian market. Nikes penetration into emerging markets like India and China had to be backed up by high advertising expenditure. However, Nike’s marketing budget globally was $5 billion (ranging from 11% to 15% of sales annually) whereas the spending in India was significantly lower.

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During this phase, Nike carried its international brand image into the Indian market. The marketing strategy aimed at capturing the Indian market by airing Nike’s portfolio of athlete endorsements. Though this gave the impression of a cost saving system that completely wiped out advertisement developmental costs, its effectiveness was at a low level. The rate of increase in sales in the Indian market was measured. Advertisements endorsed by international athletes were highly represented football, basketball and golf etc., which were the centre of attraction in Europe and America. However cricket, football and tennis dominated sports in India. A basketball advertisement endorsed by Michel Jordan was besides the point to the masses.

Reebok, on the other hand Indianised its ad campaigns right from the start, signing on high profile sportsmen like Mohammad Azharddin (Captain – Indian Cricket team ), Bhaichung Bhutia ( Captain – Indian Football team) and Dhanraj Pillai ( Captain – Indian Hockey team ). Reebok built its promotions around cricket, not only through endorsements but also through sponsorships of regional and local cricket associations. Even Adidas changed its advertising approach by signing Indian tennis star Leander Paes and Cricket icons Sachin Tendulkar and Virender Shewag. Nike owned close to 40 stores at the end of 1998, whereas Reebok through its aggressive marketing had earned market dominance and invested in nearly 100 retail outlets by that period.

MANIPULATING CUSTOMIZED INDIAN PROMOTIONS

The year 2005 marked the launch of customized Nike promotions for the Indian athlete. Nike launched its Cricketing arm and introduced its first cricket shoes – AIR ZOOM YORKER. This was followed by the launch of cricket shoes for batsmen – AIR ZOOM OPENER. A marketing strategy to be successful in India had to design promotions pitched around cricket. The marketing department pointed out that it was critical to connect emotionally with the customers. The same year Nike wrestled its rights to become the official kit sponsor for the Indian cricket team for the next 5 years, beating Adidas and Reebok. The privilege was earned by paying Rs.1.96 billion to the Board of Control for Cricket in India. Nike Cricket was a new wing and the contract showed the fans Nike’s loyalty to Team India, and its commitment to the market. The deal bought in fresh momentum to Nike India. Besides, the contract with BCCI allowed Nike to launch official BCCI cricket merchandise comprising of replica team T-Shirts and jerseys, kit bags and backpacks. The deal was a huge branding opportunity and sale of licensed merchandise during 2005 earned $20 million. The same year Nike aired its first Cricket Advertisement during the World Champions Trophy cricket tournament. The sales figures for the year were an illustration of the effectiveness of the cricket-based promotions. Sales for the year increased by 40%. The success of the Cricket promotions was followed by Nikes foray into cricket accessories and equipment.

GEARING UP THE NEXT GENERATION ATHELETE

In 2006, Nike was pushing hard globally by finalizing the sponsor of the 2008 Olympic games in Beijing. In India, Nike was taking commitment to sports to the grassroots level. Across the world, the core audience of Nike is between 12 to 17 years, and Nike India directed efforts towards inspiring youth to become serious about sports that interest them. Nike India tied up with BCCI’s National Cricket Academy in March 2006. A new cricket ad was targeted exclusively at the youth by showing the moments that highlighted the achievements of cricketers. Youth were the focus of marketing and cricket shoes and replica gear in small sizes were added to the product line.

The association with the national cricket academy was trailed by similar partnerships with Bhupati Tennis Academy and the All India Football Federation. The deal with Bhupati Tennis Academy consented that promising players in the under-12 and under-14 categories will get a chance to participate in the Nike Junior Tour’s International Masters Championship. Football players under the age of 15 were given the opportunity to participate in the Manchester United Premier Cup and the winners were flown to Bangkok to participate in the South East Asia leg. Further, The signing of India’s football star Bhaichung Bhutia to endorse our products had inspired football audience across the country.

Addressing the equipment and training gear requirements of academics, has had an added advantage as the academics work with Nike India’s Research and development to understand the product requirements of the players. Primarily, the association has created brand loyalists at a young age and enhanced brand awareness in the sporting community.

RECCOMONDDATIONS

THE NIKE PLUS PACKAGE – ESTABLISHING A BETTER DEAL

Nike has attempted to keep itself on the cutting edge of technology backed by innovative advertisements. Nike plus has been the latest addition to our technologically evolving sportswear collection. Nike Plus was expected to escalate sales as the pioneer in enabling the customer to measure the distance covered and calories burnt on the run outdoors. However, with the sale of iPods and iPhones mounting in the country, Nike’s new range of Nike Plus compatible Lunarglide model shoes haven’t accomplished targeted sales. Nike plus shoes are prices at an ambitious starting price of Rs.8500 (GBP 115). The Nike plus accelerator that has to be connected to the shoe in order to function with the iPod comes at an additional cost of Rs.1500 (GBP 20). Nike plus shoe and accelerators are considerably overpriced at a total of Rs.10000 when the comparative price of the iPod amounts to only Rs.11250. Nike plus targeted sales can be achieved by offering additional sports kits or iPod compatible packages on purchase of its Lunarglide shoes. These additional packages can come at an additional cost, but they will represent a much better deal for the customer.

NIKE TOWN – MORE THAN A RETAIL STORE

Nike India’s 7-year contract with Sports Station India Private Limited having come to an end in 2004, Nike India is now a subsidiary of Nike Inc. The Indian market is growing in terms of retail consumer awareness and spending. Nike India can cash in on these opportunities as early as possible by establishing Nike town – Nike’s independent retail outlet in the country. The Nike town experience is highly rated by customers. Nike town offers more services than just being the base for retailing Nike products. Nike Town services like individual and group audio visual programs broadcasting the benefits of the Nike technology (Presentations have help in conveying the customer, Nike’s Position as the technically advanced brand in the sportswear industry), instant customization of customer designed shoes and fusing of names and chest numbers of customers choice on their jerseys and sweat shirts are not made available in other retail outlets. Running clubs organized in Nike town outlets have turned out into valuable social gathering of Nike users and moreover an additional every day involvement with the brand and its services. Customer involvements with Niketown showrooms in Europe and America have created long lasting relationships and customers have often stated that Niketown’s collections and services as superior to other retailers. During the first phase of establishment, Niketown’s can be setup in Tier 1 Metropolitan cities of Mumbai, Bangalore, Chennai, Delhi and Kolkata where Nike India has achieved 70% of sales in the country.

INDIAN PREMIER LEAGUE – AN INDIAN SPONSORSHIP FOR THE WORLD AUDIENCE

A football frenzy crowd dominates market for sports goods in western countries. However the game of football has radically changed since the establishment of English Premier League in 1992. The competition between countries has now paved way for competition between football clubs within the same country. Football fans in Europe are passionate about the clubs they support and have a high degree of attachment with the brands that sponsor the teams. Similarly, the game of Cricket is evolving and focus has shifted from test matches and one day international tournaments to Twenty Twenty tournaments. Cricket in India has seen the rise of Indian Premier League in 2008. The addition of international players in the league has created a global fan base for the league among cricket lovers. Reebok, Adidas and Puma have already won sponsorship deals with IPL teams. Reebok is leaving no stone unturned and is sponsoring 3 of the 8 IPL teams. Snap polls have indicated that every match attracts 18 million audiences worldwide. Nike’s GBP 303 million sponsorship deal with Manchester United Football Club and GBP 130 million deal with Arsenal Football club have accounted for 20% of Nike’s merchandise sales worldwide. Nike’s foray into IPL sponsorship will increase brand awareness among cricket followers globally. Moreover, Nike India can increase its collection of merchandise by including replicas of IPL jerseys of teams that have been sponsored by Nike.

ADVERTISING MEDIUM – INFORMATION AGE

The young Indian generation associates itself as a distinctive trend and has its own aspiration levels, which is a combination of their learning form the West and the evolution of the Indian mindset. The new generation is more internet-savvy, and has a much higher aspiration value. 70 % of India’s 18.2-million web population are under 30 years old, and are growing the power of blogs in the market as a mechanism for self-expression. As this next generation gains momentum, Nike’s marketing focus should shift towards Internet advertising and partner the youth in their movement by communicating Nike as a forum for expression and not as a sales-focused giant.

EXPERIMENTAL MARKETING – DEVELOPING THE EMOTIONAL CONNECTION

In recent years the concept of creating an experience for customers to help them form an emotional connection to a brand has become more specialized. Consumer products, insurance, services etc. are already tapping the youth with the emergence of a whole new communication and branding strategy focused on experimental marketing. Nike India’s marketing could also move from sports celebrities to the target audience itself, at least for a short period of time, to enhance their involvement with the product and in turn, the brand.