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Nike Case Study Essay, Research Paper

Introduction

*Subject of the project The subject identified for this research project is the soccer boots of Nike, particularly the Mercurial. Nike was founded in USA and it is a global sports gear manufacturer. The company has four series of soccer boots, namely, Speed, 90 minutes, Tiempo, Training and Women’s. The Mercurial belongs to the Speed series. It was introduced to the market in the summer of 1998, while the World Cup 98 was taken place in France.

*Rationale

The reason for choosing Nike as the subject company of this project is that Nike is one of the major sports gear manufacturer which plays a dominate role in the global market. However, soccer boots is a recently explored product line for the company. The history of Nike’s soccer boots is not as long and famous as the other products of the brand. And, Nike’s soccer boots are generally set with a high prices: the price of Nike soccer boots are generally higher when compared with other brands in the same product category in the market. But still they can occupy a significant market share in soccer boots over its competitors.

The aim of this project is to investigate the market segmentation of the soccer boots of Nike, the Mercurial in particular, and analysis its marketing plan.

*About the Company

*Nike’s company image

Nike was founded by Bill Bowerman, a track coach and Phil Knight, a college runner. The company has two core attributes: the devotion to sporting excellence and an irreverence informality. The commitment to sports came from Knight’s background as a runner, and in the early days, the employees were also sportsmen and women.. The company treat creating great products, leading the athletic industry in innovation, and serving the athlete as its priorities in the business. With these believes, Nike is very much driven by its unique and strong value system in making market decision and market communications: Nike’s advertising is developed on the idea of ‘irreverence justified’. The company has a preference in using stars who shows their stance in sports and hence can keep a youthful enthusiasm for the brand. Two typical controversial endorsees are football star Eric Cantona and basketball player Charles Barkley.

*Nike’s soccer boots market

Nike manufactures a wide range of soccer products including soccer shirts, footwear and equipment. Nike’s soccer business has reached a new level in 1998. In 1998, the soccer footwear category of Nike showed increase over the prior years, enjoying an increment of 74% in sales. The soccer footwear and equipment area of Nike is gradually growing up in the recent years. In World Cup 94, Nike’s presence at the game was limited. At World Cup 98, six teams – Brazil, Holland, Italy, Nigeria, South Korea and the United States – were sponsored by Nike with footwear and apparel. Also the company has established new partnerships with U.S. Soccer and European club teams such as FC Barcelona and Inter-Milan in 1998 which has also enlarged their soccer products market.

*Market Segmentation

Market segmentation is an essential part in today’s business world. It is because not all customers have the same requirement and a market strategy which does not recognize this fact will result business failure. Market segmentation is the process of splitting customers, or potential customers within a market into different groups, or segments, within which customers have the same, or similar requirements satisfied by a distinct marketing mix. Nike has been successful in market segmentation for selling their soccer boots, which resulted in a significant market share in that particular product category in recent years.

*The Key Customer Value Table of Soccer Boots

Consumer Group KCV

1. Professional Soccer Players Good quality boots

2. Amateur Soccer Players Good quality boots

3. Young people Famous brand, can show identity

4. Students Economic, stylistic, durable

5. Indoor Soccer Players Training boots on hard grounds

6. Beginners Affordable, reasonable price

7. Female Soccer Players Suitable size and style

Fig 1.1a – KCV table for Nike soccer boots

The Key Customer Value (KCV) Table is an effective way to identify and split different consumer groups in the market. The company can tailor-made different marketing strategies for the product according to the identified customer groups.

As it is shown in Fig 1.1, there are generally seven customers groups for soccer boots:

1. Professional Soccer Players

Professional soccer players includes all the players playing football as their career. This segment is ranging from the players in the top of the world to those who are hardly recognized by people. Their needs for soccer boots is high, most probably the highest in the market. They need soccer boots which can enhance their performance: comfortable when running on the field and playing football and provide them with good ball control. Price is not a major factor for them when choosing a pair of soccer boots, because they are either having a high salary or they are sponsored by their clubs or even the manufacturers of soccer boots. What they need is a pair of high quality soccer boots which is a combination of well design and good materials.

2. Amateur Soccer Players

Generally speaking, all the people playing football not as a professional is considered as an amateur soccer player. But in this table the amateur players are defined as those playing football in a regular and formal manner, probably in a form of league in any particular place. The need of soccer boots for this segment is also high as they may also be playing for a club and they put much attention on their performances. Price may be one of the factor when choosing a pair of boots but that is not the major one as they may have sponsorship to a certain extend. They treat football seriously and would also demand a pair of high quality boots. They are more likely to be affected by the footwear which is used by those famous stars.

3. Young People

This is a large market segment. Young people are always considered as the group which consumes most in many product categories, and footwear is one major area they would spend their money. Price is not a major matter for them as they are independent and have income. So high price and famous brands may always be their choice. They are very much affected by advertisement and are most likely be influenced by football stars. The demand of high quality soccer boots is high but not as high as the style and product image. They may be playing football just for fun but identity in the peer group is important for them.

4. Students

This group has a lower consuming power than young people. Their requirements of boots is medium since they may play football just for fun. Quality is not so important for them but the style and price. Although they cannot afford expensive brands, identity may still be important for them in peer groups. They may also need boots which are durable as their expense is limited. 5. Indoor Soccer Players Indoor soccer plays on hard ground and so players need a different kind of boots (boots without studs). The size of this segment is relatively smaller when compared to the one of formal soccer, but indoor soccer (or five-a-side soccer) is becoming common in all parts of the world. Many soccer boots manufacturers are paying attention to this market and has already launched a vast number of boots for that particular use.

6. Beginners

This a potential customer group of soccer boots. For those people just began to play football, their demand of a quality and price is lower than those used be playing. However, their requirement will be gradually increased if they keep on playing. At the moment their choice of boots would be low price and less sophisticated. 7. Female Soccer Players Women are less likely to play football, so this segment is rather small. As it is not profitable, most company would ignore this group of customers in designing soccer boots. As a result female players have to choose boots which is designed for men. Nike Soccer boots’ Marketing Having identified the major customer groups, Nike has developed four series of soccer boots with different priced and designed to suit different market segments. In Nike’s market segmentation, they have the follow ranking for each customer groups:

Consumer Group Importance

Professional Soccer Players 25

Amateur Soccer Players 25

Young People 20

Indoor Soccer Players 10

Female Soccer Players 10

Students 5

Beginners 5

Fig 1.1b The importance table for Nike soccer boots

Nike’s soccer boots is usually set at a higher price than its competitors. For example, the price of the Mercurial of the Speed series is set at 80-100 Pounds, while commonly speaking the price of a pair of Umbro or Addidas soccer boots is around 30-40 Pounds. The high price also apply to the Tiempo series which is set at about 40-50 pounds. The price of the boots showed that Nike’s major target customer groups are those on a high income level, or those who are willing to spend on expensive items. So the ranking of the professional and amateur soccer players are high on the KCV table. The need of a pair of good quality soccer boots in the two groups is high and price is not their major considerations. Young people is also a main target customer group for Nike because the brand has been developed into a famous one and it is well-known for it high price and style. Nike’s footwear is said to be an expensive goods today. Consumers like the young people, who emphasis much on brand and identity is more likely to choose Nike. The “youthful enthusiasm” and “irreverence informality” images of Nike also encouraged young people to purchase their product.

Apart from targeting on the above customer groups, Nike has also put emphasis on the indoor/five-a-side soccer and women market. Nike has the Training series which is specially designed for the hard-ground football and also the Women’s series which is particularly for female soccer players. Nike is probably the only boots manufacturer which provides soccer boots for ladies. Nike noticed that the population of female soccer player is growing and has taken out the first step to explore the market.

*The Mercurial

After working with the two-time FIFA Player of the Year, Ronaldo, Nike introduced the Mercurial soccer boots in summer of 1998, while the World Cup 98 was taken place in France. The Mercurial belongs to the Speed series which is made of good quality materials and well designed. Also the style is trendy and stands out from the other three groups.

*The Product Decision

The Mercurial is engineered to be light in weight while enhancing the players’ touch and control of the ball. There are three colours for the Nike Mercurial Soccer boots, black, black and blue and silver and blue. The silver and blue version is specially designed for Ronaldo, the Brazilian soccer player, for the World Cup 98. There is a logo of “R9″ on the boot as a identity of the product. As the product is launched during the World Cup 98, the “R9″ version is the first one introduced to the market, while the other two colours were introduced later on.

*FAB of Mercurial

Features :

The boots is made of kangaroo leather with a special “First Touch control” coating placed on the surface. The inner part of the boots is an anatomically correct sock liner. The molded studs at the bottom is specially positioned with stainless steel on the tips of the studs.

*Advantage:

The materials of the boots allowed the product to have a lightweight. The kangaroo- leather-made outer part of the boots provide comfort and water retention to the feet without stretching. The “First Touch control” coating increases friction against the ball for better control. The anatomically correct sock liner inside the boots also provides in-shoe comfort. The position of the molded studs at the bottom increases traction and stability. Stainless steel tips of the studs also provide traction and greater pressure dispersion.

*Benefit:

The Nike Mercurial soccer boots allow the player to achieve a faster speed when running by both the light weight and well designed structures. Also the player can enjoy a higher responsiveness to the ball with the boots.

*The Promotion Decision

The promotion of the Mercurial is diversified into many ways. First of all Nike has sponsored Ronaldo to wear the boots throughout the tournament. The World Cup is a big sports event once every four years and the media coverage is tremendous. All the people in the world is watching Ronaldo with the shining silver and blue boots on the field and running after the ball. The promotional effect of this sponsorship would be the most direct and effective way to advertise the product.

Apart from the sponsorship, there are two TV commercials launched together with the sponsorship during the World Cup 98 Finals. There are two TV commercials for Nike at that period, namely the Airport Football and Beach Boys. Both of them featured Ronaldo and a large number of football stars and they are broadcast in globally so that every corner of the world could see the TV commercials. Nike’s market communications strategies has always been refined to adapt new approach which enabled them to sustain a long-lasting positions in the market.

*The Distribution Decision

As a large global sports gear brand, Nike has developed a tremendous and wide spread distribution network for its product. The Nike Shops, Nike Towns, Nike Factory Outlets and many authorized dealers in the market are positioned in every cities all over the world. Since there is already a comprehensive network for distributing the product, it is natural that the Mercurial series of soccer boots can be bought at every corner in the global market. The distribution of the Mercurial must go with the promotion, that is to say, the product should be available wherever the TV commercial could reach.

*The Price Decision

The Mercurial is set at a exceptionally high price. The cost may come from the great investment in promotion and sponsorship to players. However, the highly set price has an effect of separating the product from its competitors. Consumers’ perception towards high price product are always positive. Consumers are always led to draw the conclusion that high price equals to good quality or famous brand. Buying expensive goods can give consumers a sense of identity which make them feel standing out of the others to a certain extend. The purpose of setting the price high for the Mercurial is like that: People buy the product more likely because of the psychological factors than the physical benefits they can get from the product.

*Target Customers

The target consumer group of this boot would be in two areas, on the field: the professional and amateur soccer players, and off the field: the young people who are willing to spend on expensive goods. Mercurial is now widely used by soccer players. The product is attractive for young people because it is a sign of identity since it represents both Ronaldo, a successful and skillful Brazilian forward, and Nike, a famous sports gear brand.

*Cascading

Figure 1.2 shows the “WHO BUYS” cascade of consumers buying the Mercurial. In this diagram, only the cascade of the consumers who really buy the boots is shown. Therefore the professional side is ignored because some of the players are sponsored either by their clubs or the manufacturer and that makes the cascade more complicated. The cascade also discontinued at points for which they are not applicable in this project.

In the diagram, people who are not playing football as a career is put in the group of amateur players. The cascade discontinued on the “just for fun” level because people are not likely to pay high price for a pair of soccer boots if they are just occasional football player. It also discontinued on the “play on hard ground” level because the Mercurial is designed for use in grass pitches. Furthermore if the player does not pay much attention on the sports gear then he is less likely to choose an expensive pair of boots. Since the prices of Nike’s soccer boots are relatively higher in the market and one could buy boots of other brands instead if he does not really care about sports gear.

The last three levels are some personal preference. The buyer of the Mercurial should be in favour of the brand Nike and likes the player Ronaldo since the boots is an identity of the both.

The Key Discriminating Features

Category Variables Scores Cumulative Scores

What : Product Type Soccer Boots

: Material Good quality 10 10

: Style Well designed, related to the image of a star 30 40 :

Brand Well-known brand 20 60 : Function Good for ball control

and running 10 70

Where : Place Sports outlets 5 75

When : Motivation Once new product is launched 15 90

: Frequency As needed 5 95

How : Payment Method Cash/Credit 5 100

Fig (1.3) Key Discriminating Features list for the young people buying the Mercurial

Figure 1.3 shows that the Key Discriminating Features (KFDs) for young people to buy the Mercurial. The main reason of the purchase is because of the style and image of the product. Young people are very often driven by factors like brand, style and relation of product to particular famous people. The Mercurial have all the three factors which attract young consumers to buy.

*Conclusion

Nike has been successful in segmenting the consumers groups and developing an effective marketing strategy for their soccer products in recent years. This was shown in the 1998 annual report of the company’s business. Despite of the generally lowered earnings because of the Asian economic crisis and declining revenues in the United States, the Soccer product area showed a healthy increase of 74% over the prior year.

In the coming, the company would have difficulties in setting the price of its products. Research shown that there is a general decline in consumers spending resulted from the general decline in global economics. And, the strengthening of the U.S. dollar is inhibiting the Company’s ability to price products competitively in international markets. However, the cost of running the business is on an increase. The most significant increases were in the wage base, which was up 14% overall in 1998, led principally by the U.S. and Asia Pacific. And the endorsement contract-related costs, which were up 47% in the last fiscal year as a result of significant new contracts in Soccer and other categories like the NFL, WNBA, and NBA. The company will have to keep a good balance between the fixed costs associated with distribution facilities, increasing costs associated with athlete endorsement contracts, increased levels of research and development costs with its profits in order to continue the annual increase in sales.

*Bibliography

1. Nicholas Ind, “The Corporate Brand”, Macmillian (1997)

2. Malcolm McDonald & Ian Dunbar, “Market Segmentation”, Macmillian (1998) 3. Internet, http://www.Nike.com/soccer/frame1.html?hdfoot1.html-Nike_Mercurial/ (8/12/1998)

4. Internet (Nike annual report), http://www.Nikebiz.com/ (9/12/1998)


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