Nike Loses Balance After Violating Core Brand Principles

Larry LightMay 6, 20248 min

Nike has seen better times, according to The Wall Street Journal. Many recent strategic choices have not worked to Nike’s benefit. Part of Nike’s current problematic situation is that Nike violated some critical brand-business building principles. Sure, there were extenuating circumstances as a result of Covid-19. But the pandemic and the way in which customers responded to imposed lifestyle changes are all the more reasons to apply, implement, and live by the essentials of proper brand-business management.

Here are five “Don’t Do It” behaviors that brand builders must avoid.

1. Failure To Innovate And Renovate

The failure to innovate (and renovate) is a marker for trouble. Brands stay relevant and current through “news”—that is, “tell me about the interesting things you are doing for me and offering to me.” News generates frequency. Why? Because news – any way you receive it – gets a customer in the door or onto the website or tapping the app. And, today, news travels fast. Tell customers what is new and what is different.  Continuous renovation and innovation are imperatives for success. Product and service renovation and innovation are both essential to enduring profitable growth.

In an ever-changing, increasingly competitive marketing world, brands need customer-insight-driven innovation and renovation to stay relevant. Innovations breathe life into brands. However, not all innovations have to be an iPod or an iPhone. Some innovations are actually renovations.

Innovation is the development of new customer value through solutions that meet new needs, unarticulated needs, or old customer and market needs in new ways. This means offering different, more superior, or more effective products, processes, services, technologies, experiences, or ideas that address individual problems or needs. Innovation is a higher-risk activity.

The renovation process (remodeling or reimaging) improves the performance (look and feel) of existing products, services, and experiences. Renovation is a lower-risk activity that should happen continuously. The technology industry excels at this process of continuous improvement.

After Covid-19, Nike became more risk-averse. Nike, as written in The Wall Street Journal, relied on older products that were “reliable” sellers.  Nike relied on “pumping out old hits” rather than providing customers with news. Innovation and renovation declined. Insiders say that Nike forgot about is “culture of innovation and edginess.”

On the other hand, Nike spent time creating major league baseball uniforms that have generated ridicule. As pointed out in The New York Times Athletic, a memo from the MLB Players Association to players stated that Nike was fixing players’ uniforms that have been a colossal disappointment. As the memo said, “At its core, what has happened here is that Nike was innovating something that didn’t need to be innovated.”

2. Ignoring A Brand’s Provenance

Provenance is a brand’s history and heritage. Provenance gives credence to a brand’s relevant differentiation by providing the evidence of a brand’s intangible character. Provenance makes it more difficult for competitors to copy a brand’s experience. Think of brand provenance as an identity anchor.

A brand’s provenance is not about preserving the past. Brand provenance is about preserving the best of the past for the present and future. Provenance emphasizes a past of authenticity, a present of customer engagement and supports the brand’s quest for an enduring, trustworthy future. Brand owners rely on a brand’s provenance to build brand preference; preference generates value. Provenance provides continuity and consistency across all platforms, enhancing strengths of all channels.

Avoid what made your brand great at your peril. Provenance adds to customer-perceived brand value. Customer-perceived brand value describes the customer’s assessment of the quality and worth of a branded offer. Customer-perceived brand value derives from the brand’s heritage of familiarity, quality, leadership and trust.

“Losing its roots” is what The Wall Street Journal points out is one of Nike’s recent strategic failures. Critically, ignoring its provenance, did not just affect Nike’s customer sales; it affected Nike’s “internal” customers’ understanding of Nike’s reason for being.  Insiders say Nike left behind its heritage of being the superior cutting-edge footwear for serious athletes. This allowed newer brands to step into that space. Even Nike’s CEO who led the foray into less innovation now admits that his strategies allowed Nike to lose its “sharp edge” in sports.

3. Thinking That Marketers Define The Competition.

One of the biggest mistakes marketers make is thinking that the they define value and that they define the competitive set. This is wrong. Customers define value and customers define the competitive set.

Marketers may set price but they do not define value. In the same vein, marketers define the brands but customers define the brands’ competitive sets. Nike thought it owned the competitive set. But, customers’ perceptions of the competitive set changed. With Nike focused on old styles and its established franchises such as Air Jordan, Nike missed competitive set changes thus ceding its position as performance-focused footwear for serious athletes.

Employees sincerely believe that Nike Co-founder Phil Knight was correct. Mr. Knight’s principle was “first capture the market for hard core athletes with innovative performance gear and the casual consumer will follow.”

Another competitive-set mistake marketers make is thinking that size will top any small competitor. This is also wrong in so many ways. In the 1990s, Electrolux AB saw Dyson as a small competitor, with nothing like Electrolux’ global footprint. We all know how this turned out. The New York Times’ Wirecutter group continues to place Dyson as the number one vacuum. Dyson is a desired item worthy of being shown in the apartment. IBM felt the same way about Apple. To IBM, Apple was an upstart. We also know the way this story turned out.

Believing that a brand’s large footprint can overpower smaller brands is misguided brand mismanagement. A smaller brand can win if it is big in customers’ minds, big in popularity.

On with its Cloudnova brand, Hoka and New Balance have hustled into Nike’s territory. Hoka and On, especially, have used quirky yet performing footwear to break the boredom barrier on edginess while capturing the casual wearer.

4. Ignoring The Core

Keep the brand-business core strong. A brand-business’ core must be continually re-energized, protected and strengthened. The brand-business core will profitably finance a turnaround, keep a brand-business growing and provide a platform for the future.

Please do not ignore your core customers. Core customers are valuable customers. Data indicate that core customers may be 8 times more valuable than other customers. Core customers already love your brand. Core customers are less price sensitive than other customers. But, it is so easy for marketers to covet the customers they do not have over the customers they do have.

Losing even a small percentage of core customers will account for a disproportionate amount of lost income for the brand. Losing core customers will also carve into the brand’s image and reputation.

Additionally, it is less expensive to keep core customers than it is to attract new customers. Data confirm that it costs 3-4 times as much to attract a new customer as it does to keep a customer loyal. And, now that there are so many digital, online media options, research shows that new customer-attraction costs may be as high as 6 times more relative to core customers. Focusing on core customers, strengthening their core brand beliefs is an excellent way to build brand loyalty.

Of course, brands must attract new customers while creating more brand loyalty among its core customer base. But, when a brand is in trouble, the first priority is to stop the hemorrhaging of the customer base.

Nike’s plan, whether intentional or not, affected the core customer. Some of these core customers may have switched brands. By limiting innovation, diluting the exclusivity of some core customers by flooding the market with many new franchise items, cutting off relationships with retail establishments, and ceding its performance-market dominance to other brands, Nike has not shown its core customers the love they deserve. Nike also cut off the development of more affordable footwear, leaving behind Nike lovers with smaller budgets.

5. Generate Genuine Customer-Driven Insight

Nike created a global technology group. This Nike group had as one of its key remits the generation of “consumer insight and data analytics.” Apparently, insiders told The Wall Street Journal that “… executives overestimated demand for retro franchises.” Then, layoffs “trimmed layers of management” from this insight and data analytics group.

Generating insight is great.  Insight means seeing below the surface of information. It means synthesizing…rather than analyzing. But there are rules.

Gathering data is not enough. In fact, most data are behavioral. Behavioral data show what someone did and does. But, behavioral data do not show why a person behaved the way they did or do.

Analytics has its place. However, analysis travels backward. Brands must move forward. To do this a brand must use synthesis. Synthesis means, “the combining of diverse concepts into a new coherent whole.” Analysis leads to understanding what has and is happening. Synthesis leads to insight into what might happen.

Insights are special. Trends do not provide the direction in which a brand must go. It is the insight we have about the trends that help us focus on the future. Insight is looking beyond the surface, beyond appearances and seeing ahead.

Also, it is important to understand that research and insights are only as good as those interpreting the research and generating the insights. If there is too much emphasis on what people have done in the past, as in buying a lot of franchise sneakers, then the insights will reflect that past behavior.

Nike indicates that some of its strategies hit the mark while others did not. As Nike proceeds to right its ship, Nike should be very aware of key brand-building and growing principles. Of course, Nike has many issues and problems to be addressed and many plusses to augment. But, Nike must keep in mind that brands can live forever but only if properly managed.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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