Nike’s growth fuelled by deep customer insight

2 03 2013

This week Nike announced it was committing $50m to Michelle Obama’s campaign to get American kids more active, citing the high social costs of the “inactivity epidemic”. This commitment is just the latest example of the lesson Nike learned many years ago – to sustain growth, they must be customer-led not product-led. And when you consider they announced double digit revenue growth in December and Fast Company voted them the most innovative company in the world thanks to recent product and manufacturing innovations, you realise just how customer-focused Nike must be!

Losing sight of customer needs & market trends

In the mid 1980s, Nike’s growth stalled on the back of a failed brand extension into casual shoes. Despite Nike being a trendy brand, and casual shoes being a growth market, they failed to grab significant market share. According to founder Phil Knight, the problem was Nike had lost sight of who their customers really were. Their target market had always been performance athletes, reflecting their heritage in the legends of Bill Bowerman and Steve ‘Pre’ Prefontaine. Since Bowerman invented the waffle sole by pouring rubber into a waffle maker, Nike have been at the forefront of product innovation in every category they play in. In entering a new market, Nike took the same approach and produced “a functional shoe we thought the world needed, but it was funny looking and the buying public didn’t want it”.

Why this happened is a warning to sports organisations that’s as relevant now as it was when Phil Knight originally gave it. “In the early days, when we were just a running shoe company and almost all our employees were runners, we understood the consumer very well. There is no shoe school, so where do you recruit people for a company that develops and markets running shoes? The running track. It made sense, and it worked. We and the consumer were one and the same. When we started making shoes for basketball, tennis, and football, we did essentially the same thing we had done in running.”

Eventually this one-dimensional approach to customer insight became a weakness. “We were missing an immense group. We understood our “core consumers,” the athletes who were performing at the highest level of the sport. We saw them as being at the top of a pyramid, with weekend jocks in the middle of the pyramid, and everybody else who wore athletic shoes at the bottom. Even though about 60% of our product is bought by people who don’t use it for the actual sport, everything we did was aimed at the top. We said, if we get the people at the top, we’ll get the others because they’ll know that the shoe can perform. But that was an oversimplification. Sure, it’s important to get the top of the pyramid, but you’ve also got to speak to the people all the way down.”

Becoming genuinely customer-led

So what’s different now Nike are customer-led rather than product-led? Knight continues “whether you’re talking about the core consumer or the person on the street, the principle is the same: you have to come up with what the consumer wants, and you need a vehicle to understand it. To understand the rest of the pyramid, we do a lot of work at the grass-roots level. We go to amateur sports events and spend time at gyms and tennis courts talking to people.”

Within this story are several keys to organisations being genuinely customer-led

  • Be wary of using staff as a proxy for the needs of the customer, as this becomes potentially limiting if/when the actual customer base diversifies beyond the core customers
  • To understand customers, get out to where they are buying/using the products and services you provide – see how they use it, and listen to how they would improve it
  • To achieve scale, design products and services based on the common needs across target customer groups, rather than focusing on the differences between them.
  • Changing the focus from creating products to delivering solutions (as discussed in this recent post on ‘Re-evaluating the 4Ps of marketing for sport’)

In this context, Nike’s announcement of combining social responsibility with business growth makes good sense. Nike knows what’s important to their customers both now (a company that takes social responsibility seriously) and in the future (active and sports-aware kids will become the target customers of the future). It’s not just their innovation department that is thinking several steps beyond the current product line.

To read more about customer-led growth, click here

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What’s your sport? A look at what a sport’s brand means to you

6 10 2011

What’s your sport? What is running, swimming or football? As a current, lapsed, potential participant, or as someone that never wants to do it, what do these sports mean to you? What does each sport’s brand stand for, in your eyes?

Strong brands are ones that create an emotional response in people. When you ask them what the brand is, they don’t reply with a list of functions and features. Instead they tell you about it’s benefits or how it’s relevant (or not) to them.

Growth comes from understanding the needs and expectations of the target customers you want to buy/use your brand – a strong connection with them often means a disconnection with others. Those who don’t engage deeply with a brand will usually dismiss it as “marketing hype”. And that’s the point about great brands, they divide opinion precisely because they are distinctive enough for people to have an opinion, as the varying eulogies to Steve Jobs have demonstrated.

Brands drive growth
Growth of the iPad, Starbucks, Manchester United, Ikea – each has invented or re-invented their category and achieved growth and success way beyond the wider market or what was considered normal. Each brand has their passionate followers with whom they deeply connect, and they have passionate detractors with whom they often disconnnect equally strongly. But that doesn’t matter – if you create something genuinely relevant and meaningful, it can’t be relevant and meaningful to everyone.

If you ask someone “what is Manchester United”, you wont get a list of features about ground capacity, employees or their upcoming fixture. Instead you’ll get a story about the role the team has played through someones life, the glory of a great victory, the thrill of watching great craftsmen at work. Or you will get the complete opposite – I’ll stop there before my inner Fulham fan takes over. But regardless of where you stand, its clear they’ve succeeded in growing the revenue and success of the club, by becoming a brand that people want to be part of and engaged with, both on and off the pitch.

The same dichotomy occurs if you ask people “what is Ikea” or “what is an iPad”. But all these brands have achieved stellar growth because their brand has deeply connected with enough people to drive it.

Branding and participation
So in terms of sports participation, my question is this, “what is sport?”. Or to make it more specific: “what is swimming, running or football?”

I chose these sports to get a mix of what gemba sports research call “franchise” sports (those where the number of fans vastly outweighs the number of participants) and “grass roots” sports (where the opposite is true).

The sport of football has a strong brand for spectators and sponsors, whether people and companies choose to engage with it or not. Likewise with the Olympics around the corner, the spectator brand for elite swimming and running will get more and more coverage – which will delight some and annoy others. But that’s why the Olympics works, if everyone cared then no-one would care. It creates a deep level of inspiration and excitement, because it connects with most people but not everyone. If every elite sport became relevant to everyone, they would be passionately relevant to no-one.

But what do any or all of those sports mean to you, as a current lapsed or aspiring participant? What does running, going for a swim or playing football mean to you? Does the idea thrill you or fill you with dread? Are you constantly trying to get friends to join in, or are you always planning to start playing it “tomorrow”? Are you looking forward to your next session, or is it something you keep saying you will do but probably never will (like I do about parachuting)?

Please add your thoughts in the comments below…








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