Follow the Product: The 4Ps

The product I chose are the Nike Air Max 87, also known as Air Max I, because they were the first shoes launched from the Air Max collection. Below I will talk about the marketing mix of Air Max One.

First of all many shoes from different companies like Adidas or Puma are competing with the Air Max, but they still differentiate themselves from their rivals. To start with is the weight of the product. Air Max are known for their very light weight, which is the reason why they are called ‘Air’ Max. It is said that their soles are loaded with air, which makes them so light and is a USP of the product. Another point would be the flexibility, as Airs can be worn with all kinds of sports. This is a great benefit for the product and especially for Nike as their competitors mostly produce footwear directly aiming towards a sport, which does not give them the same popularity as Air Max One. Furthermore the padding is another point that differentiates Air max 87 from other product in the market, as it gives clear medical advantages. Because the products soles are loaded with air, when the player puts load onto their feet, through moving, the padding retains the effect in the shoe instead of passing it onto straining the body. Lastly the strength of Air Ones is noticeable as they give a very strong feeling to the playing and ensure that the air in the soles stays there. One of their unique selling points would be that the customer has the possibility to personalize their show, which is very popular with the Air Max One. It creates a desire for the customer, because they could have any model they like and order it in the color or design they want. All in all Air Max One are being bought, because of their casual look and their great comfort.

 

Moving on the price for the shoe varies. First of all it depends if it is for adults or for children. For children the price of the shoes varies from 50€ to 100€. For adults the price can start from 100€ to 180€. Buying the shoes online in the Nike online store would cost the same as buying the shoes at the local Nike store in town. Even recommended retail prices, like Zalando or Footlocker, do not differ with their prices. This is also because they have cooperation with Nike, which means that they have to adapt the price from Nike, Inc. to the shoes. Noticeable was that Psychological pricing was not used for any of the websites or any store, as they tend to sell air max at a round price, rather than selling it for .99€. Furthermore price leadership is being used, which is a strategy often used for the best selling product or brand of a particular market. This would apply to air max one and to Nike, Inc. as Air Max are one of the most popular products of Nike and the firm is the market leader(has highest market share) in the athletic footwear market. Other rivals like Adidas use the ‘follow the leader’ strategy, as the prices of their product do not differ very much from the prices of Nike. Although Nike and other retailers do not use a lot of pricing strategies like technological firms or for services, they tend to reduce the price of the product, after a while. This is mainly caused by the season, and if the product is becoming out of season and if it was unpopular.

 

For place, Nike has several channels of distributing. This would include through their stores and retailers, both through e-commerce and through stores. One would be a zero-level channel (Nike Stores), where the producer/company directly sells to the customers. Then the one-level channel, where the product is first sold to retailers, agents or distributors. This would apply to Zalando, Footlocker or Snipes, which are all known for selling Air Max. Nike Air Max One are being sold in different kinds of retailers. For example they are sold in independent retailers, which are selling a very small range of products; multiple retailers might also sell Nike shoes. Furthermore Nikes would even be sold by hypermarkets and department stores. A rather not so often used channel of distribution would be the two level channel. This process happens through selling the product from the producer (Nike) to a wholesaler (Makro) to a retailer and then to the customer. There are several wholesalers online, that purchase large amounts of Nike products and resell them, but it is not as often used as for other products. Other channels of distribution would include telemarketing, which is not very popular anymore nowadays, but can be very helpful for a company as it reaches a different audience, which Nike would maybe not reach through the internet. Because the Nike Air Max One have been around since 1987, this used to be very poplar to increase the sales. Adding to that, e-commerce is very popular for selling Airs, as it reaches a wide international audience. This happens through the online Nike stores and online retailers, which might be different in every country. All in all Nike, Inc. is very up to date with their channels of distribution, which is a cause of their high market share.

 

Lastly Nike, Inc. also uses promotion to boost up their sales. First of all they are using a lot of Above the line promotion, like TV advertising, cinema ads, magazines advertisements, outdoor wallpapers and especially internet ads. First of all TV and Cinema ads would be more likely the same as it is an advertising spot, before a movie. Then Magazine and outdoor ads would also be similar as they have a paper with all the information of the product. The ad would especially occur in fitness and health magazines, but maybe even in fashion magazines, because Airs seem to be a new fashion statement nowadays. On the other hand, Nike, Inc. also uses Below the line promotion, like branding, which is very effective for Nike as they are the most recognized shoe company, which also is caused through their slogan and their logo. Both slogan “Just Do It” and their logo “Swoosh” are recognized by a wide range of people internationally. This brand recognition might even go beyond their customer base and their target market, as people who do not buy Nike products are also very familiar with the brand and its products. Even their packaging is very effective, because it creates greater brand recognition by showing the brand logo and name. Direct marketing is also used by Nike, Inc., because they aim to sell their product directly to the customers rather than to rely on retailers. Even publicity is used very much, because they use different celebrity to promote their products, either in a spot or by them wearing them in their free time, examples LeBron or Rita Ora. Lastly sponsorship is also commonly used of Nike. The company sponsors a lot of sports events/tournaments, like the Olympic Games or any world cup. They even sponsor famous athletes (Jordan, Mario Götze). Nike also uses the promotional mix (AIDA). First of all they want to raise their brand awareness by grabbing the customer’s attention. This could happen through any kind of advertisement. Then they want to make the customer interested in their product, this happens through could happen through sales promotion or their USP. Furthermore a desire is created, in order to make the customer think they need or want the product. This could also happen through the USP or in Nikes case through the possibility of personalizing your shoes. Lastly the action takes place, through promotional methods. Also by having the possibility of ordering the product very fast only and having much flexibility encourages the action of the customer.

 

All in all Nike uses the marketing mix very much, which resulted in a lot of benefits over the time, since the first Air Max were launched. The product life cycle of air Max One is very long and they have been in the maturity stage for very long now, all through extension strategies, which resulted for them ending up as the market leader.

Follow the Product: Background

 Week Beginning: 09.02.2015

The Nike Air Max 87, also called Air Max I, were the first shoes from the Nike Air Max line, which launched in 1987. The Air Max I are one out of many sportswear products Nike, Inc. produces. The shoes were first designed by Tinker Hatfield in 1985, who also created the Nike Jordan. Nike, Inc. was founded in 1964 by Bill Bowerman and Phil Knight as Blue Ribbon Sports and officially became Nike, Inc. in 1971. The brand has its name from the Greek goddess of victory. In 2014 the brand was valued at $ 19 billion being the market leader among sport businesses.

The company’s slogan “JUST DO IT” is one of the best known taglines ever and one of the core components of Nike’s brand. The slogan was established at an advertising agency meeting, of Wieden+Kennedy agency, in 1988. The founder of the agency, Dan Wieden, credits the slogan to Gary Gilmore’s last words. The “Just Do It” campaign increased the market share of Nike from 1988 to 1998 of the North American domestic sport-shoe business from 18% to 43%.

Along the Slogan “Just Do It” the logo, known as the Swoosh, is a trademark for Nike, Inc. The Swoosh (Nike Tick) is one of the most recognized brand logos all over the world. The logo was created in 1971 by Carolyn Davidson. In 1972 the first running shoes by Nike bearing a Swoosh were introduced at the U.S. Track and Field Olympic Trials. Until 1995 the official logo of Nike showed a Swoosh and the name Nike in bold cap font letters. After that the company decided to use the Swoosh only as a brand corporate logo and continue to use it till today.

The Nike Air Max I are one of the most popular models from the Air Max series. For customers there are many buying motives for this product. One would be the quality of the product. Many customers know that if they buy Air Max 1 they will receive a quality product, like all of the shoes in the series. Especially the padding and the strength of the material are different than the competitors’ products. Secondly the weight of the product has to be considered. Air max are very useful for sports due to their light weight, which makes wearing them more comfortable. Adding to that is the flexibility of the product. Nike Air Max 87 can be worn for many sports and even in the free time, which could be their unique selling point.

Nike is the market leader in the sport footwear and apparel, with a worldwide market share of about 28%. In the United States Nikes market share is almost 60 % in the sport footwear market. Adidas would be the closest rival for Nike, Inc. with a worldwide market share of almost 20%. In the US however their market share is only about 10 %. Other companies like VF Corporation and Puma, which operate in the same market have a market share lower than 10%.

Nike Air Max 87 or in general Nikes are targeting to people with an active lifestyle, like OPALs (Old People with Active Lifestyle) or just any person interested in sports. Adding to that they are targeted to people, that do sports as their profession. Through time especially Air Max became popular as footwear for free time and leisure activities. Therefore Air Max 87 (in general Air Max), which are very popular with teenagers, are targeted to younger people with much free time and flexible lifestyle.

All in all Nike Air Max 1 is the most popular model among the Air Max 90. This links to Globalization of the CUEGIS, because Nike could not have such big success without being a multinational company which operates all over the world. Through globalization customers in different regions tend to have the same taste in clothing, which makes it much easier for Nike, Inc. to have success, as their target market tends to be the same in many countries. Adding to that this has a link to Change of the CUEGIS as the product, Air Max 87, changed over time. The company has many different models included in the Nike Air Max line. The different shoes also change over time and become improved. At the same time it links to Innovation, because at the time when Nike was established, having such fashionable sportswear seemed very innovative, especially when the first Air Max were launched. Although the Air Max exist very long for a shoe model, their sales do not seem to decline, which defiantly still puts them into the section of the cash cow. This is caused by the several extension strategies Nike, Inc. uses. The company extended the maturity for the Air Max 1 with redesigning and brand extension, which worked very well for them. They even might have extended the product life cycle with market development, as they introduced Air Max to non-athletic people. All in all Nike is forecasted to have more success in the future. 

 

 

Xbox One Price Drop

Week Beginning: 02.02.2015

Microsoft lowered the price for their latest console, the Xbox One. The original price was $399 and was reduced to $349, which is a $50 discount. The company explained that it was thrilled to have a “record-setting holiday”. On Xbox Wire, Microsoft announced that their most popular console is now available for the special price of $349. Adding to that they wanted to thank their customers for the excitement over their products and are happy to offer their fans the amazing games line-up, Xbox Live gaming community, and the continuing innovated products by the company which many customers seem to enjoy. Furthermore many people argue if the discount is for a limited time frame or if the prices will stay so. It was announced that the prices will be lowered from the 16^th of January 2015, but there was no final ending date announced. On the other hand people discuss that the temporary price drop was done to give momentum to their sales picked up from the holiday season. Although Microsoft has received a huge amount of publicity through this decision, the Xbox One sold with Kinect bundle remains at the same price for $499. Microsoft has had a better sale performance during the critical season for retailers. Figures show that the company has sold more games in November and December in the US than others. Further on fans logged in more hours playing the Xbox during this holiday than before, due to the strong game line up. Lastly Microsoft focused very much on the customers’ feedback they received since last year, which was very helpful for product development. All in all 2015 will be a great year for gamers, Microsoft and their Xbox.

Last week in Business Management we discussed Price of the Marketing Mix. This article refers very well to this topic as they are different Pricing Strategies to increase the sales of a company/product and make more profit. Microsoft is definitely using pricing strategies, because as they stated they need to have a “record-setting holiday”. One strategy that is used would be Skimming pricing, as the company set a high price at first and only  gradually reduced the price for this product. Looking at competitors this pricing strategy works, because the organization always seems to lower the prices for the Xbox One during the holiday season, from which they also benefitted in November and December (Black Friday/ Christmas). Adding to that Psychological Pricing is also done to some extend as the price for the console is always a 0.9 to make the customer think it is sold at a lower/cheaper price.

Furthermore this links to Strategy of the CUEGIS, because Microsoft is using a strategy (pricing strategy) to increase their sales and maybe even to become the market leader for gaming consoles. Although they are not yet the market leader their stategy resulted in great sucess for the company and made the sales increase immensly ever since. It also links to Change of the CUEGIS as it is change of price and therefore also a change for the company. By changing the price they are hoping that more gamers buy the Xbox One. Also now as Valentine’s day is coming up some people might think about buying their loved ones presents, which explains why they want to achieve a “record-setting holiday”.

 

Still Sweet on Coke and Pepsi?

Week Beginning: 26.01.2015

Bloomberg View recently posted an article about the competition between Coca Cola and Pepsi. At the time the soda-pop business is at its purest form. As the article stated it is sublime and ridiculous at once. 

First of all it is ridiculous, because it involves selling sugar water and second of all it is sublime, because the firms main responsibilities are branding and producing a secret syrup that someone else mixes with carbonated water and serves at restaurants or sells in supermarkets. However both companies’ capital expenditures are low and their profit margins are high. The article mentions that Coca Cola s operating margin topped 25 % for years and years, which is remarkable for a company that is selling something different than iPhones or drugs. Adding to that Pepsi’s overall margins is lower, due to the fact that they are also selling snacks and are not fully concentration on their most popular drink. Things became more complicated for Coca Cola and Pepsi as they acquired their biggest North American bottlers in 2009-2010. After this their operating margins fell, so they reacquired them again. However the biggest concern for the companies is, that people might stop drinking soda-pop, as customers realized that too much sugar will affect their health. This is clearly shown by the decreasing home market, North America. The organization, Euromonitor, says that the market is shrinking at 0.7 % through 2018. This was also caused through the publicity that the President of Coca Cola in North America got, as he said that he cut down his consumption of Coca Cola. Since then both companies have focused on cutting down their costs, by removing workforce. All in all Pepsi is a little bit a head of Coca Cola but their profits are basically the same for December 2014.

This article links to the topic, Branding, which we covered last week. As stated in the beginning one of Coca Cola’s and Pepsi’s biggest responsibilities is branding. An example for that would be that there are many companies out there, which produce more or less the same product, but Pepsi and Coca Cola seem to make the most profit out of it. This is happening, because of branding. A customer buys the product, because of the brand name, its image or other features. Adding to that this article also links to Change of the CUEGIS as it shows that the soda-pop market is not as popular anymore as it was in earlier decades, therefore both market leader companies have to adapt to that change. Furthermore it also links to Strategy of the CUEGIS, because if Coca Cola or Pepsi is making less profit, their production cost will increase again. Therefore Economies of Scale need to be considered and the firms need to use certain strategies to cut down their costs. The article also touches on Ethics as it involves selling sugar water to people for  reliativly high price, compared to other brands, which might sell a similar drink. The only reason why the price is different is because of the branding of the firm. Therfore it is questioned if similar products should have different prices due to branding. All in all the article shows that Coke and Pepsi are slowly moving to the decline stage and becoming dogs, although they might still be in the maturity stage.