Author: Elizabeth Matsangou
7 Sep 2015
Starting out by selling running shoes from the back of a car, Phil Knight, along with co-founder Bill Bowerman, turned Nike into a global powerhouse – a company so influential that it has left a permanent impression on modern culture, spanning multiple industries and sections of society. Nike needs no introduction; its footwear and apparel are synonymous with sports and athletics. Known and worn by millions around the world, the brand has grown to such levels that it infiltrates a deeper level of social consciousness than most consumer goods could ever hope to reach. Nike products are more than what someone wears; they are a state of mind enshrined by the story of the hero, the holy grail of improving oneself through better health and fitness.
According to Forbes, Nike is the world’s most valuable apparel brand. The company has a global market share worth $86.2bn, outdoing its closest rival Adidas with ease, by around 30 percent. And it all started with a shoe. “Phillip Knight helped change what Americans wore on their feet, in an analogous manner to Julia Child, who changed what Americans cooked”, said Stephen A Greyser, Professor of Business of Sports at Harvard University.
Knight recognised that by working with sports heroes, he could capture the imagination of consumers on an emotional level
Track and field
Knight studied journalism at the University of Oregon, during which time he trained as a middle-distance runner under the guidance of Bowerman, then his college coach and a former Olympic medallist. During his MBA studies at Stanford, a marketing assignment gave Knight the idea of establishing a company that sold running shoes. He put the idea to Bowerman and the pair thus formed Blue Ribbon Sports in 1964, with an initial investment of $500 each, initially distributing for Japanese trainer manufacturer Onitsuka Tiger.
Knight and Bowerman were both runners. Herein lay the secret to the initial success of Nike; they knew what runners needed in a training shoe and they knew athletes personally. Believing that a shoe could be developed to improve performance on the track, the duo parted ways with Onitsuka Tiger in order to start making their own product. The shift in business model gave rise to the suggestion of a new name. Eventually, the Greek goddess of victory was suggested and, despite Knight’s initial dislike of the name, Blue Ribbon Sports became Nike in 1971.
When the running track at Oregon changed from cinder to an artificial surface, Bowerman decided to create a shoe without spikes that could still provide good traction. He famously took his wife’s waffle iron to a rubber sole, thereby creating the ridges that have since become a standard feature of athletic shoes. The design itself had functionality rather than style at its core, with the purpose of making the shoe lightweight in order to help runners go faster. With a product that worked and a customer base that the two knew personally, sales for the Waffle Trainer, as it was amusingly called, soared, and it became the most popular training shoe in the US.
A big tick
During the same year as the name change, Knight paid a designer from the graphic arts department at Portland State University $2 an hour to design the company’s logo. Seventeen and a half hours later, the legendary symbol was born. “The swoosh is one of the most significant identity elements in modern society or culture. It’s one of those symbols that is recognisable immediately without the name; you do not have to see the word Nike to know that its Nike”, Greyser noted. The logo’s simplicity and inference contributed to Nike’s success in part, but it was Knight’s strategy that cemented the brand’s place in the hall of fame.
The Nike Cortez was the first of the company’s products to wear the swoosh symbol. Bowerman designed the shoe to have an extra-thick sole for durability, which also alleviated pressure on the heels and reduced the risk of injury. Athletes loved it. While innovation and performance formed the basis of Nike’s sales strategy and won over professionals, the company’s transition to a new plateau came via its interaction with sports heroes. In the 1972 Olympics, Knight had ensured that the Cortez was worn by athletes throughout the competition, thereby earning the brand worldwide coverage and raising demand to a whole new level. The unique design and range of colours was unlike anything else on the market. “Nike offered an alternative to what, at the time, were bland sports goods”, claimed branding expert Jonathan Gabay. Timing was also key for the pivotal product; by playing to two major consumer trends, increased spending and the fitness mania that was working its way through the US, the Cortez had become a major hit.
Learning the hard way
After a steady rise in profits throughout the seventies, Nike faltered during the subsequent decade. An attempt to expand the business into causal shoes was a huge misstep; instead of gaining new consumers, the product managed to lose much of its base of existing fans. The casual models simply did not appeal to » consumer tastes at the time, while a dilution of what the brand represented was off-putting for athletes.
As sales dipped, Nike was forced to re-examine its strategy and image. Although a persistent drive for innovation continued to improve the performance of training shoes, style was lacking and the product wasn’t speaking to the general public. Realising the need to get to grips with what consumers actually wanted, Nike began conducting extensive market research at the grassroots level, spending hundreds of hours at sports games, in gyms, and hosting discussion groups – a policy it has maintained to this day. Truly understanding the consumer and current trends resulted in a new emphasis on design that now defines Nike’s products. Knight and his team also understood they had to carve out a clear-cut identity in order to return to a pattern of increasing profits. By conveying a consistent marketing message – namely, excellence in sports and fitness – throughout the subsequent years, Nike successfully created a strong image that consumers born in later years have grown up with.
The final part of the overhaul of the firm’s strategy during the eighties came when Knight realised the power of marketing and affiliating with athletes. “The talent of Nike was to recognise that athletes could become not just partners, but co-branding partners”, Greyser explained. “We use the word co-branding where there is a linked identity and a strong association in the minds of consumers or other stakeholders, business-to-business customers and others, around the fact that a company and an athlete co-brand, and its good for both of them.” Seeing the impact that the 1972 Olympics had on the Cortez’s popularity, Knight recognised that by working with sports heroes, he could capture the imagination of consumers on an emotional level.
The defining moment for Nike in this area of its marketing was the legendary partnership with basketball superstar Michael Jordan. The NBA hero was so integral to Nike’s foray into basketball shoes that Jordan has his own Nike range, and the deal became the most successful sports sponsorship move of all time. The collaboration of the two icons spoke to consumers in a deeper way than normal celebrity endorsements. Jordan was the best; his near-mythical status represented excellence, and he played with the kind of magic that captivated the American people and celebrated their love of sport. When Jordan danced around his rivals and spiralled through the air towards the hoop, he inspired basketball fans around the world; millions wanted to be just like him and wear the shoes that helped him perform.
In Jordan, Nike found the ideal star – not only because he was the best, but also because he had style, personality and strength of character. The collaboration was so important that Jordan continued to wear Air Jordans, even when the shoe was banned by the NBA, with Nike gladly footing the bill for each fine the star received. The shoe was banned due to the lack of white in the Chicago Bulls-inspired colour scheme, but Nike took the opportunity to hint that Air Jordans conferred an unfair competitive advantage. This anti-establishment, rule-breaking image just added to the allure of Jordan and his forbidden footwear – simply put, the two were cool.
Throughout the years, Nike has gone on to recruit the world’s best athletes in a range of sports, creating new lines and sub-brands to reflect each icon it recruits. The group’s expansion into the tennis market can be marked by its alliance with tennis legend John McEnroe, and then with Andre Agassi, each ranked as the world’s greatest player at their peak. Agassi had all the makings of a Nike co-brander, not only due to his status but also because he played aggressively and was different. With the help of Bo Jackson, named by ESPN as the greatest athlete of all time, Nike created an American football division.
What made the partnerships so successful went far beyond these cherished stars simply wearing Nike footwear – the products were actually made with them in mind. Designers would spend around 18 months shadowing an athlete, learning their personality, as well as their style on the pitch, drawing inspiration for colours, designs and product functionality. The footwear provided what the athletes needed in terms of performance, and also reflected their personalities through style and design. In Nike’s tennis range, Agassi’s shoe was loud and colourful, in stark contrast to the classic style inspired by McEnroe. The two thus formed two distinct product lines, appealing to different consumers and personalities.
Since Jordan, Nike has maintained special relationships with the stars it sponsors. The firm seeks and carefully selects those with potential and the right characteristics that fit into what the Nike brand represents from a young age, often staying with athletes throughout their careers. “Nike has built this aspect of its strategy into its philosophy – they are loyal to their athletes unless or until they turn out to have what might be called feet of clay”, observed Greyser.
Up to speed
Nike’s television advertisements became a big hit among consumers when they first aired in the 1980s, starting with the Nike Air range. The medium enabled Nike to enhance its emotional bond with consumers, hitting hard with its brand message and attributes associated with sports – determination, endurance, passion and personal achievement. Although Nike was a billion-dollar business prior to its foray into television marketing, the advertisements enabled it to drum up excitement and solidify its place in the hearts of consumers across the globe.
A crucial key to success in both the world of business and marketing is to constantly evolve with changing trends and new technology. Knight truly understood this need to develop and adapt. As such, Nike has taken its marketing expertise to the digital world, using platforms such as Facebook, YouTube and Google to reach young audiences and capture the loyalty of millennials. “He always understood that, like many consumer goods, it’s not just about the physical product alone, it is about the means to be the best in an entertaining fashion”, Gabay noted.
This pattern of continuous improvement also applies to Nike’s products, as it has done from the very beginning. “Nike has maintained its focus on product development, unlike some companies, and Polaroid was of them, that had a great product but failed to recognise changing technology or changing consumer behaviour in ways that left them where they were instead of keeping them where they wanted to be”, said Greyser. Take the example of Nike’s latest invention, the Flyease basketball shoe. When a teenage boy wrote an open letter to current CEO Mark Parker asking for a shoe that could circumvent his inability to tie shoelaces due to cerebral palsy, Nike answered. In fact, they had already been working on a product for consumers with motor skills difficulties. Not only does the feature help thousands, the design is so on-trend that it has already garnered popularity across the spectrum of Nike’s customer base.
Along with his announcement that he would be stepping down as Chairman, Knight stated in a company press release that he would continue to “stay involved” with the business. This will be achieved through Swoosh, a separate entity that will hold the majority of Knight’s shares, which equates to approximately 15 percent of Nike’s total outstanding shares. As Knight and Parker are among the directors of Swoosh and Nike’s class-A shares are not publicly traded, Swoosh has the power to elect three-quarters of Nike’s board, thereby enabling Knight to hold onto some degree of power within Nike. “One can step down as chairman, but one can never step down from being co-founder”, Greyser observed. With this in mind, together with Knight’s parting statement, it is safe to assume that Knight will continue to wield influence at the world-leading brand.
Knight revolutionised the way that sportswear is marketed, giving rise to a culture of celebrity endorsements that has since become a mainstay of high-end advertising campaigns. Through partnerships with sporting legends, Nike connects emotionally with consumers, while also turning athletes into heroes and creating a cultural significance around the products they promote. Knight has nurtured Nike, making it the world’s leading sportswear brand, and has ushered in a new era for marketing and advertising. “In my view, Phillip Knight is truly an iconic figure in the world of branding”, said Greyser. Of course, it has not always been plain sailing for the group. “They have had bumps in the road with competition, and now they have Under Armour, which is a strong growing competitor, but no one has the breadth, as well as the depth, Nike has – at least I think that’s the view of most observers of the industry.” While the firm must certainly be sorry to lose Knight’s leadership, particularly as new challenges arise, Nike will never lose the ingenious philosophy he imparted.