Marketing strategies are changing to cope with competitive external environment. In response to such an environment, marketing has become increasingly strategic so that a firm views its marketing communication as a source of competitive advantage. This paper will investigate the marketing strategies of two established sports clothing makers, namely Nike and Adidas. Nike is the largest manufacturer of athletic footwear in the world with a global market share of 33% and with operations across the USA, Europe, Asia and Africa. Moreover, Nike manufactures sports apparel and equipments. At present, Nike invests up to 13% of their revenue in marketing which takes any traditional form, including television and print advertisement. On the other hand, Adidas is the second largest producer of sports apparel with a market share of 21.8%. Adidas strives to be the leading sports brand in the world; however, currently, it falls short of the competitive strategy put in place by Nike. Apparently, the company uses the mass media for most of its advertisements.
The promotional strategies between the two companies can be seen in their efforts to sponsor the World Cup. For example, during the 2010 World Cup in South Africa, both firms took star players and transformed them into cartoon characters. However, in reality, the strategies of the two firms are distinct (Tony, 2014). On the one hand, Nike’s ‘make the difference’ campaigns highlight passion of key players such as Rooney and Arshavin. The company aimed at showing that Nike can make people better players, for instance, with a purchase of a new pair of football boots, the consumer has access to online training tips. On the other hand, Adidas places greater emphasis on the whole team rather than individuals (Tony, 2014). Thus, it highlights the power of playing collectively. In fact, this is seen to be a symbol which can be easily projected globally. Furthermore, the Adidas logo for the game featured eleven colored threads in the shape of a basket, which represented 11 languages spoken in South Africa.
However, with the rise of social media, Nike has recently invested in online promotions in order to reach their target markets. Furthermore, celebrity endorsements epitomize Nike’s approach to marketing. For instance, campaigns featuring championship footballers have led to a 15% surge in company expenses (Tony, 2014). However, the modern-day consumer strives for the attraction of large names. Hereby, this links to consumerism theory in which consumers purchase products for pleasure and social acceptance. In other words, the product is seen to be more pleasurable if it is associated with a famous celebrity (Tony, 2014). However, such endorsements can have a negative effect. For example, after many years of working with Tiger Woods, Nike found itself in a difficult position when its reputation came into question. Apparently, this cost the company profits, and thus, the company must now make careful decisions with regard to further development and implementation of its marketing strategy.
Using Market Information to Have a Competitive Advantage
In order to maximize its competitive advantage, a company must find the best way to position itself against its competitors. Therefore, this requires the company to use business-level strategy to make decisions regarding the customer needs, customer groups and distinctive competences (Hill & Jones, 2011). Consequently, Nike should search for the ways of making these three decisions in an effort to overcome its rivals. For one, customer needs are desires that can be met by the means of characteristics of a product or service. With regard to product differentiation, it is the process of creating a competitive advantage by designing goods and services in order to satisfy customer needs (Hill & Jones, 2011). In this case, Nike must use marketing information in order to differentiate their products to a certain degree in an effort to attract customers and satisfy some minimal level of need. For instance, Nike can offer its customers a low-cost product without engaging in much differentiation. Secondly, it can seek to endow their product with some unique attributes so that the product satisfies the needs of the customers in ways the products of competitors cannot (Hill & Jones, 2011). The uniqueness of the product can be related to its physical characteristics such as quality and reliability.
Talking about market segmentation, it is the way in which the company decides to group customers based on important differences in their needs and preferences in order to gain a competitive advantage (Hill & Jones, 2011). For example, Nike can group its customers according to the amount of money they want to spend or can afford to spend. For each group, the company will create products which range to low-cost to high-priced ones. Alternatively, Nike can choose to develop constituents and manufacture a product to suit the needs of each group (Hill & Jones, 2011). Market segmentation will increase customer demand for Nike’s products, thereby generating more revenue rather than offering just one product for the whole market.
In order to win a highly competitive marketplace, companies such as Nike must create brand preference among consumers that will lead to long-lasting relationships. Hereby, brand building sales promotion will help Nike to build long-term brand loyalty and value among consumers (Kazmi & Batra, 2009). The reason is that it helps to strengthen the bond between the brand and the consumer. Common characteristics of such consumer-oriented approach includes the facts that they are less frequently related to price, offer promotional rewards for repeat purchases and are valid for an extended period of time. Thus, companies use this approach to gain new customers and retain the current ones (Kazmi & Batra, 2009). Moreover, sampling and free trials help to attract new customers who may eventually become repetitive buyers. In addition, loyalty marketing programs help to retain customers by rewarding those who make regular purchases of certain products. Carefully selected premiums that reinforce the image of a brand are also effective (Kazmi & Batra, 2009). Premiums imprinted with the brand’s name and logo act as a reminder and a brand builder. For example, Nike can offer free fitness tips to the customers who buy a new pair of sneakers.
A growing number of companies are developing tie-in promotions. In fact, this is a joint promotion of two or more products or services. The intention of this type of promotion is to increase brand awareness and sales of both products (Ferrell & Hartline, 2012). Tie-in promotions are more effective when there is a logical connection between the brands. For example, Nike can offer a tie-in promotion so that customers who buy a pair of football boots can earn extra points that they can redeem to get free balls. Tie-in promotions are cost-effective because the cost is shared among multiple brands (Ferrell & Hartline, 2012). Moreover, they also give companies a broader market presence, enabling them to attract new customers. Consumer-oriented sales promotions also allow consumers to reduce the time spent on making buying decisions by taking advantage of a promotional offer. They also have a chance to try a product they otherwise would not have tried (Ferrell & Hartline, 2012). Customers can also get higher quality products for lower prices and save money through the use of coupons and price deals.
There are numerous pricing objectives. Apparently, some of these are survival, maximum short-term profits, market penetration and product quality leadership. Nike has used demand analysis to measure the relationship between the price and demand for their products. The management at Nike has strategically used the non-price competition to make some of the pricing decisions (Hill, Jones, & Schilling, 2014). Moreover, the company maintains stable prices and tries to improve its market position by adding new features, product differentiation, aggressive advertising and promotional activities. Furthermore, the company tries to build brand preference by competitive methods such as product innovations, attractive package, advertising and after-sales services. For instance, Nike is involved in cold war with Adidas and Reebok through advertisements (Hill et al., 2014). Nike obtains amazing success from this pricing model which is mostly based on differentiation. In fact, its strategy was to design state-of-art athletic shoes and then publicize the qualities of the shoes through intensive and dramatic marketing. The pricing decisions are designed to meet the objectives to persuade customers that its products are fashionable and a necessary part of lifestyle based on sporting and athletic interests (Hill et al., 2014). The strategy to emphasize the uniqueness of its products brought success as its market share soared.
However, in 1998, its sales began to fall, and it was becoming more difficult to design new shoes that the existing customers would perceive to better and be worth their premium price. In other words, its strategies of market penetration and product development are no longer paying (Hill et al., 2014). Moreover, initially, Nike focused on making shoes for track and baseball market segments and shunned other sports like golf and rollerblading. However, when the sales started to fall, the company realized that market penetration could grow sales and profits once again. Thus, Nike decided to take its existing design and marketing competencies to craft new lines of shoes for new market segments. For instance, it launched a new line of soccer shoes and in mid-2000s, it transformed into the market leader defeating Adidas, and its profits and market share has continued to increase.
On the other hand, Adidas has to compete with Nike in the international market. The company needs to monitor the international market environment for sports goods. Moreover, it should specifically identify a global customer segment that it can serve and understand the purchasing behavior of those customers (O’Guinn, Allen, Semenik, & Scheinbaum, 2014). In building its international profile, Adidas can create awareness through sponsorship deals of both the teams and individuals. Secondly, the management at Adidas should develop a promotional mix. In fact, this is a common approach for a company to use one or more elements when they are in a marketing communications campaign. The elements of advertising, sales promotions, direct marketing, personal selling and public relations should be designed to complement one another (O’Guinn et al., 2014). For instance, if one kind of new sport shoe is promoted by an advertisement, the direct marketing should be used after the advertising it on public. The mix of these elements should work towards the promotional objectives that have been set.
Effective Advertising Media
There are different forms of the media that companies can use to advertise their products and services. However, for the Nike’s product, the most effective media would be the use of internet through social news websites (Masteralexis, Barr, & Hums, 2011). These are sites that allow people to discover and share content on the internet by submitting links and stories to a central service. They are rather efficient and beneficial and can even help get the right product or service to a viral status. For example, Nike can use cartoon-based pictorial representation to show the images of their products to attract new customers (Masteralexis et al., 2011). Social media are important tools for brand managers who are keen on establishing and maintaining a brand image, reputation or position. The management must track what is being said by consumers and interpret it in a way that will satisfy the needs of the consumers (Rangan, 2006). Through the internet, Nike can be able to enhance their brand visibility to those people who cannot have physical access to the company. Moreover, the nature of shopping has attained a hybrid status. It is now easier to order and buy products without having to incur travelling costs. In other words, with the use of social media, Nike can effectively achieve interactivity, integration and target market selectivity through a trail of posts, videos and photos about the brand (Rangan, 2006).
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Conclusively, both Nike and Adidas are among the leading companies manufacturing sports apparel. However, the two companies should change their marketing strategies in an effort to cope with a competitive business environment. On the one hand, Nike has a large market share which could be attributed to its strategy to adopt the non-competitive pricing. The company has also used market information to facilitate market segmentation and product differentiation. On the other hand, Adidas can use global customer segment, understand the purchasing behavior of those customers and develop products that will satisfy them. Secondly, Adidas can create awareness through sponsorship deals of both the teams and individuals. In addition, due to the changes and access to technology, the use of social media will serve as the best advertisement media for Nike. With the help of this media, customers can buy products online without incurring travelling costs.
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