Introduction
The purpose of this assignment is to review marketing strategies used by two different companies in the same industry. The assignment evaluates types of marketing, pricing, and consumer-oriented promotional strategies that these leading companies within the product group use. Sports apparel companies, Nike and Adidas have been chosen for this study. Both Adidas and Nike are reputable companies in the world with sports apparel, sports equipment and accessories. Many buyers expect these giant companies to deliver the best products because of their premium prices. Overall, the assignment will show how companies’ marketing strategies could differentiate them from competitors and gain competitive advantage (Boone & Kurtz, 2013).
Promotional Strategies
A comparison of promotional strategies
Nikes has always focused on promotional strategies that involve celebrity endorsement. For instance, Michael Jordan, Tiger Woods and Serena Williams among others are celebrities that Nike has associated with its brand. On the other hand, Adidas has also increased its celebrity endorsement to gain international recognition.
During the 2012 London Olympic, however, Nike did not go for celebrity endorsers but instead focused on regular athletes to create brand exposure. This was an ambush marketing strategy to outdo competitors during the major event (Meenaghan, 1996). Although Adidas also featured the UK national team, its strategy did not achieve much exposure relative to Nike’s approach. During the soccer World Cup 2014, however, Adidas also launched an ambush marketing campaign way back in 2012 featuring soccer fans and celebrities, including Samuel L. Jackson.
Nike promotional strategies also feature different products such as Air, Converse and Umbro among others. These products are associated with different sports and individuals. Adidas, on the other hand, also features its line of well-known brands such Reebok, Rockport, Taylor Made to appeal to soccer players and other athletes.
Promotional strategies for both companies are highly flexible but offer various access to a wide customer base, including fans and sports teams. Nike and Adidas have found some of the most effective means to communicate with target customers through these promotional strategies. The use of celebrity endorsement has fulfilled the major marketing strategy objectives by creating widespread brand awareness and improving image with the overall aim of achieving sales targets.
Adidas and Nike also use sponsorship strategies to promote their brands with the goal of attracting target customers and sporting event audience.
It is therefore clear that these two sports apparel companies have similar promotional strategies. Nike has however maintained the edge over Adidas based on its competitive promotional strategies and sales volumes. Therefore, it remains to be noted whether any competitors will oust Nike out of the top position.
Marketplace Differentiation
Two ways to use marketing information for differentiation in the marketplace and to gain an advantage over its competitors
To sustain its leadership position in the market, Nike can rely on marketing information for differentiation and competitive advantage.
First, the company can demonstrate in its marketing information that its sports apparel are of high quality and have extremely special features for athletes. The company uses special technologies and innovative approaches to design its products. Nike should communicate such information to customers. As a result, the company’s products are superior and make high-end fashion statement, which appeal to consumers beyond the sporting world. In fact, Nike apparels have become lifestyle and streetwear.
Active sportswear is more fashionable and popular across different consumer segments. Designers and manufacturers have recognized these fashion trends particularly the relations between fashion and sports, which they have considered as major opportunities for sports textile growth. Nike can use these opportunities to differentiate itself from competitors and gain competitive advantage over competitors that still appeal to athletes only. This would create a new market segment for the company. Nike can further reinforce its marketing information by using celebrity endorsement from different social circles, including music (Palmer, 2004).
Second, the company can use marketing information to communicate its unique manufacturing processes and technologies to gain competitive advantage and edge over competitors. Today, how Nike makes its products can be a major means of setting apart its apparel products from competitors. Products and their production processes, therefore, should be critical tools for Nike to set competitive advantage. The company, for instance, uses natural and synthetic rubber for its Air-Sole cushioning. In addition, Nike uses plastic elements, leather, nylon and canvas among others to manufacture the same Sole. Advanced technology for manufacturing apparels can certainly create differentiation for Nike. For instance, Nike’s technical and high performance fabrics for sportswear have multi-functional, high-tech finish for protection, repelling and removing moisture outside and from the body respectively. The brand, therefore, will become synonymous with quality, superior products.
Consumer Oriented Promotions
Two uses for consumer-oriented promotions
Nike can use consumer-oriented promotions such as price markdowns and coupons to create awareness and maintain market presence for both short-term and long-term goals (Johnson, Scholes, & Whittington, 2005).
First, Nike can create awareness in the minds of potential consumers in major events by relying on coupons, price markdowns and other forms of sales promotions. This strategy can target potential consumers who have considered the company’s product as premium.
Second, consumer-oriented promotion can also help the company to maintain its market presence globally. Nike may use effective advertisement strategies to reach various segments of the market. The company may send promotional materials to its existing customers base and potential new customers. This would enhance the “brand value and promote long-term customer loyalty” (Johnson, Scholes, & Whittington, 2005).
Nike may boost sales and profitability particularly when the promotion is scheduled with major events such as the World Cup or Olympic Games. The company may also have increased sales for sports apparels with price markdowns and coupons (Palmer, 2004). This would automatically result in increased sales and profits for the year to counteract low trading periods. The company, however, will have to account for promotional budgets with the aim of driving additional sales volumes. If Nike customers know that they can always get promotional coupons or price markdowns, they will be induced to purchase the company’s products. Nike must develop effective strategies for sales and coupons so that they remain effective. Too common customer-oriented promotional sales would not convince customers to buy. Moreover, competitors may also introduce such promotions to counteract its efforts. Therefore, to overcome such challenges, Nike may have loyalty programs for customers for a long-term gain.
The company must focus on its promotional objectives. Creating brand awareness and increasing market share are important. At the same time, promotional activities should also meet communication objectives for Nike as long-term objectives. For immediate gains, promotions should convince customers to switch brands, encourage their purchasing behaviors and create strong loyalty (Solomon, 2006). Nevertheless, long-term profitability associated with customer-oriented promotions is vital for Nike to maintain its leadership position.
Pricing Decisions
The strategic pricing decision based on the pricing objectives
Product pricing is important for Nike as a component of its marketing strategies. The company strategic pricing decision should generate sales and profits. Usually, forces of the market should influence a company’s pricing decision, but such forces are not the only factors for the company to consider. Nike has used the following pricing objectives to drive business. First, Nike uses profitability objectives as a strategic pricing decision because it understands the impact of pricing on its business. Directly, Nike has strived to set prices that cover all costs associated with productions. At the same time, the company must also determine how its pricing decision will affect sales volumes and subsequent profitability. Nike must set prices that drive sales through economies of scale of the volumes sold. The ultimate and primary goal for Nike is to establish pricing strategies that drive profitability on a long-term basis.
Second, Nike can also use sales volume objectives for strategic pricing decision. The company may rely on this strategy to boost its current market share and sales volumes. It will evaluate past sales volumes against current volumes between selected periods to determine any changes that pricing strategies have on them. At the same time, Nike can also evaluate sales volumes from its major competitors to understand the overall industry performance. The company, however, must recognize that changes in sales volumes do not necessarily means changes in market shares. Nike should set the preferred profit levels and then focus on maximizing sales as a long-term objective rather than immediate profits with the ultimate goal of edging competition. As a result, Nike should focus on growing its sales and protect its acceptable profit margins. The company may also use other non-price objectives such as superior products and quality services to improve sales volumes.
Adidas, on the other hand, may adopt different pricing strategies to gain competitive advantage over other companies. First, Adidas may use penetrating pricing strategies by deliberately setting low prices (acceptable prices to the industry) to increase its market shares and sales volumes in different parts of the world. Once Adidas has gained competitive advantage, it may then increase its prices for sports apparel products. An increment in customer base would be effective to determine any achievements for the company.
Adidas may also adopt competition pricing to gain competitive advantage in the market. The company should set its prices against competitors’ prices. In this regard, Adidas could adopt one of the three options, including lower, same or higher prices to set its competitive prices. Prices, however, should match the product and service quality it offers customers.
Effective Advertising Medium
The most effective advertising medium
The most effective advertising medium for Nike is television. Relative to other forms of advertising media, in 2013, for instance, Nike spent more advertisement money on television than other media, including magazines. The company reportedly spent $40.8 million for television advertisement to reach a broad number of viewers, approximately over 115.6 million viewers in the US alone. The company directs some of its advertising spending to magazine so that it can reach potential customers who consume sports, health or fitness magazines. This has ensured that Nike has reached a small group of consumers who are mainly interested in health and sports issues and therefore can easily read sportswear advertisement.
According to Glenday, a study conducted in 2013 confirmed that television remained the most effective forms of advertising medium (Glenday, 2014). This outcome had re-affirmed the position of television as the most effective medium among all advertising media. Television offered the highest return on investments (ROIs) for companies than any other forms of media. The ROIs are driven by the increasing wider viewership, opportunities to integrate various elements, higher quality of ad contents and the declining prices of media advertising.
Television advertising medium can overcome unexpected economic and technological challenges and changes. The medium has continued to prove its value for companies as they focus on increased advertisement.
Television has also allowed Nike to create the ‘halo effect’ that ensure that its sports apparel gain market shares, create brand awareness, increase sales volumes and profitability. The company will also realize increased sales from other products, equipment and accessories not directly advertised. This creates the effectiveness of television as a medium of advertising for Nike.
Conclusion
Nike and Adidas are two major global brands in the sports apparel industry. It is however their different marketing strategies that have given them different edges and competitive advantages. Both companies use similar marketing strategies such as celebrity endorsement but strive to differentiate their products and services. Marketing strategies may aim to increase brand awareness, gain market share, increase sales volumes and profitability. These are usually both short-term and long-term objectives. The most effective advertising media should support marketing strategies to ensure that they achieve their intended goals.
References
Boone, L. E., & Kurtz, D. L. (2013). Contemporary business (15th ed.). Hoboken, NJ: John Wiley & Sons, Inc. Web.
Glenday, J. (2014). Thinkbox study reaffirms TV as most effective advertising medium. The Drum. Web.
Johnson, G., Scholes, K., & Whittington, R. (2005). Exploring Corporate Strategy: Text and Cases (7th ed.). Upper Saddle River, NJ: Prentice Hall. Web.
Meenaghan, T. (1996). Ambush Marketing — A Threat to Corporate Sponsorship. MITSloan Management Review. Web.
Palmer, A. (2004). Introduction to Marketing. Oxford: Oxford University Press. Web.
Solomon, M. (2006). Consumer Behavior. New Jersey: Prentice Hall Europe. Web.