Nike’s Growth & Marketing Strategy: How it Grew Into an Icon

Photo of a pair of Air Jordans
 

By Tricia McKinnon

“History is one long processional of crazy ideas,” said Phil Knight, co-founder and former CEO of Nike. There are a few brands that make everything look so easy. Nike is one of them. Nike has faced a lot of competitors throughout its history, from Adidas to Under Armour but it keeps rising to the top making more than any of them with sales of $46.7 billion in its 2022 fiscal year. 

Most things that seem easy are not easy at all. They are the result of carefully crafted strategies executed with  a high level of discipline over many years. Nike’s strategy for success is based on taking risks, crazy ideas that turn into bestselling products and a level of marketing genius that perhaps only Apple can match. If you want to know how Nike has grown into an iconic brand then take a look at five of its strategies for success.

1. Take risks. Nike has never been a company to shy away from taking risks. In Nike’s early days it decided to go “all in” on a young basketball player. It was a bet the company kind of move, offering the player a deal worth $500,000 per year in 1984 for five years plus stock options which amounted to $7 million in total. Nike put nearly all of its marketing dollars behind Michael Jordan with that contract. Today the idea of signing Michael Jordan seems obvious but at the time it was a risky move for Nike which didn’t have the money to afford the deal. 

Nike’s risk taking didn’t stop in its early days. In 2018 Nike took another risk during its 30th anniversary marketing campaign. The campaign which was called Dream Crazy started with Colin Kaepernick tweeting: "believe in something. Even if it means sacrificing everything. #JustDoIt." Then a video followed that Kaepernick narrated highlighting how athletes like Serena Williams and LeBron James have followed their dreams. Kaepernick is seen as a controversial figure for choosing to kneel during the national anthem of NFL games as a stance against racism and police brutality. 

Many thought Nike should have stayed out of the controversy surrounding Kaepernick. Critics believed the ad would cause considerable harm to Nike’s brand. The exact opposite happened with Nike’s sales increasing by 31% in the days after the campaign launched.

When a company makes a risky or controversial move it always seems like the course of action that should have been taken when looking backwards. But in the present moment the decision to do something unorthodox can be debilitating, causing most companies to take a middle of the road approach. But that approach over times is usually what causes a company to lose relevance. Knight has said: “our basic philosophy is the same throughout the business: take a chance and learn from it.”

2. Constantly innovate. Nike became a billion-dollar company before it even ran its first TV ad in 1987, 23 years after it was founded in 1964. How did Nike create a billion-dollar company without formal marketing? Product innovation led the way. Perhaps we take Nike’s comfortable high-performance shoes for granted. But Nike has a history of product innovations. It started with the Nike Waffle Trainer which launched in 1973. The shoe’s creator, Nike co-founder, Bill Bowerman, created the sneaker after pouring rubber into a hot waffle iron. The shoe he created featured a waffle like sole that made it easier to grip the ground. The shoe went on to become the best-selling training shoe in the United States. 

Fast forward many decades later and many more innovations. In 2015  Nike introduced self-lacing shoes. Controlled by a small motor in the shoe the laces can either be tightened or loosened by the touch of a button on the shoe or by using a smartphone app.

In 2019 Nike created the Nike Vaporfly sneaker which was worn by marathon runner, Eliud Kipchoge, when he ran a sub two hour marathon, the first time in history that time was ever achieved. The shoe’s carbon sole reduces the amount of energy that is lost with each step a runner takes making them faster. The sneaker is so fast that many running experts want it banned.

Nike has even taken its approach to product innovation to its stores. In 2018 Nike opened its House of Innovation 000 store. Using Nike’s “Scan to Try” functionality in Nike’s mobile app customers can scan the barcode on any product in the store using the app to learn more about a product and see what colours and sizes are available. With the app customers can also see if a product is in stock, or if it is available at nearby stores or online all without speaking to anyone. Using the app customers can also request that a sales associate bring items to designated locations in the store or have items placed in a fitting room. Nike has found that customers that shop at its House of Innovation stores spend 30% more over the next few months than customers shopping at other Nike stores.

Constant innovation keeps customers excited about a brand and coming back for more and has been one of Nike’s key to success. Nike even called itself a tech company now after it launched  Nike Fit, a virtual reality app that records shoe sizes using a smart phone. Michael Martin, former vice president of Nike direct products, growth and innovation has said: “fundamentally, at this stage, Nike is a technology company. It’s a technology company that builds upon its historical strengths in footwear design, storytelling and inspiration, and it’s able to use those in combination to solve problems that no one else can solve.”

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3. Become a world class marketer. Just do it. Within seconds anyone can recall Nike’s quintessential marketing message. But three words do not create brand recall or brand loyalty. It’s Nike’s ability to tap into our emotions that has made Nike a prolific marketer for decades. 

Nike’s marketing finesse was demonstrated in a 2018 Nike campaign featuring Serena Williams. The 60 second spot featured clips of Williams playing tennis with her dad when she was a kid. Her dad who was coaching tells her to imagine that she is actually playing at the U.S. Open then the following clips show Serena Williams actually playing at the U.S. Open decades years later. Anyone watching the clip who has a dream of doing something great is inspired by an ad like this. Focusing on that emotional connection is key, the things that as humans we can all relate to. 

While it may seem as if Nike has always been the best at marketing there was a time when it wasn’t. Speaking about this Knight said: “for years, we thought of ourselves as a production-oriented company, meaning we put all our emphasis on designing and manufacturing the product. But now we understand that the most important thing we do is market the product.”

4. Focus on what you do the best. Nike knows what it stands for and what it does best but that was not always the case. In the early 1980s Nike launched a line of casual shoes as a way to add a new avenue for revenue growth since sales of Nike running shoes started to slow down. The line failed and it provided Nike with a valuable lesson that it should stick to its roots. 

Speaking about Nike’s move into the casual shoe market Phil Knight said: “understanding the consumer is just part of good marketing. You also have to understand the brand. That’s really the lesson we learned from casual shoes. That whole experience forced us to define what the Nike brand really meant, and it taught us the importance of focus. Without focus, the whole brand is at risk. Just because you have the best athletes in the world and a stripe everybody recognizes doesn’t mean you can take that trademark to the ends of the earth.” “Once you say that, you have focus, and you can automatically rule out certain options.”

Another retailer that has also faced issues due to a lack of focus is Under Armour. Speaking about Under Armour’s struggles in 2017, Anthony Riva, formerly a retail analyst at GlobalData Retail said: “while the overall brand remains visible, there is evidence to suggest that it does not have the clarity or a sense of purpose in the way that Nike does. Our consumer data indicate that many people are increasingly uncertain of what Under Armour stands for, or which parts of the sports market it specialises in.” 

“This is partly a consequence of Under Armour wanting to ‘own’ many different segments of the sports performance category, but in a softer demand environment where consumers are more selective about what they buy, such a lack of focus is harmful.”

Every company is looking for its next wave of growth but expanding into too many areas before mastering one can is a costly game. One of the reasons why Apple lost its way in the late nineties was because it was focusing on too projects. When Steve Jobs returned to the company he founded in 1997 he drastically reduced the number of projects the company was working on so that Apple was focused on just four products.

5. Carefully manage distribution. It is Nike not Supreme that pioneered the concept of limited quantity drops. One of the reasons the Jordan brand grew in prominence was because the shoes were hard to get. For many years Nike’s strategy was to only release limited amounts of Jordans to ensure that demand was less than supply.

This a practice analysts have agreed with. For example, In 2017, Sam Poser, then at Susquehanna Financial Group, said "Nike should be aggressively reducing the pairs available for the Jordan Retro launches so not to leave residual product in the marketplace which would likely damage the brand's cachet."

Tricia McKinnonStrategy & GrowthComment