Hypothesis: Nike adds value to their trainers by advertising
Added value is the difference between the price, which is charged and the total cost of material inputs for the product.
Nike was founded Phil Knight, who was an athlete and is also chief executive of Nike and Bill Bowerman who was a coach, in America. It was names after the Greek Goddess of victory in 1972. Canada became Nikes first international market. Before Nike the company was know as BRS. Which was founded in 1962. The first pair of BRS trainers was sold late in 1963
Nike is a sporting brand name. They specialise in clothes and trainers but they also produce other sporting equipment. They started out with just the footwear but have later developed into other areas.
Nike is recognised by their very simply logo a small tick (swoosh) and the slogan “just do it”. Recently Nike has signed a deal with Manchester United football club to be the official suppliers of the club kit. They also were awarded the right to make the footballs used in the Barclaycard premiership. Nike is a well-established brand. They have shops in many parts of the world called Nike Town, which are highly popular.
The Nike swoosh is an internationally recognized symbol, which people generally identify with a good quality and original products.
The cost of sales for Nike in 1997 were $5503.0, in 1998 it rose to $6065.5 and then in 1999 the cost of sales went back down to just below $5494
In 1998 the cost of sales was higher then in the following year 1999. This could be because in 1998 they was a world cup in Football and Nike were a sponsor of the world cup so people saw the adverts and bought Nike products.
Nike advertises on the T.V, in newspapers, magazines, on billboards and at major sporting events. Sometimes they sponsor major sporting events like some football matches and being the official suppliers of Manchester untied football clubs kit.
78% of the people that I asked did not like the way which Nike advertises their products. Many of them said the adverts that they have seen on T.V were boring and did not show the product very well. Another person said that the adverts don’t have any voices so you have to watch the advert to see what it is about and you cant just listen to the advert in the background, but she did also say that it is an effective campaign to make you watch the advert.
Many people only buy Nike as they have seen adverts in which a famous face such as Michael Jordan who was seen wearing the Nike Air Jordan trainer in a T.V advert. They see the famous faces wearing the trainers and then it makes them want to buy a pair just like the ones they have seen in the advert.
When Nike advertises there aim is to increase demand, which will increase their profits.
The above graph shows what happens to the demand for Nike trainers after advertising. The graphs shows the supply and demand for a product, in this case it is the Nike trainers, but most companies supply and demand curves will look roughly like this. When the demand increases for a product it will increase the supply, which will lead to more trainers being available. Nike will be able to achieve economies of scale, as they will be reducing their unit cost but still producing more trainers.
These means that Nike trainers are quite elastic as when the price of the trainers rise or fall people will still buy them at what ever price is being charged for them. As they are producing the trainers at a higher quantity but at the same price as before they will make more on each pair of trainers. The high demand for the trainer could make the selling price to the consumer rise, this could be because it a product that people cant get anywhere else so they would be willing to pay a little more to get the trainers.
When Nike advertises they are creating brand loyalty to their products. They are telling people what sort of product they market and what sort of quality it is. When they use famous faces to advertise the products they are showing people that Nike is even good enough for famous sporting athletes, so it is showing that the product are good enough for everybody else.
Innovation is the introduction of new ideas. It may affect products or the way in which they are made.
Nike invests lots in to research into what people want from a pair of trainers.
Market research involves finding out about what the customer wants. It includes the collection of data from published sources and the gathering of primary data.
Nike have trainers which they have named after famous sports people for example the air Jordan was named after the basketball player Michael Jordan
The above diagram shows Nikes product life cycle. This is the process that Nike go thought to come up with a new design and to produce each pair of trainers.
Just over 50% of the people that I asked, “what do you like about Nike?” answered the uniqueness and the originality of all the products.
Due to this uniqueness Nike
Nikes ‘Swoosh’ mark (the curly tick, which provides a unique identity for the brand name). The power of the Swoosh is complete different from that of other brands. If I were to sum up the Swoosh in one word it would have to be energetic. Motivational symbols, which are at the border of ambiguity and transparency, make identities, which consumers like to wear. They are becoming some of the most valuable properties in the fashion business
Only 29% of the people I asked were prepared to pay more for the logo.
The origin of the Swoosh
It was 1971 and Phil Knight was supplementing his modest income from Blue Ribbon Sports Inc. by teaching at Portland State University. There he met Carolyn Davidson, a graphic design student. He offered to pay her a couple of dollars per hour if she would come up with some design work for his small company.
She came up with many different designs, which Knight was not satisfied with but Knight was up against a deadline; shoeboxes that were to include the new logo were waiting to be printed, so he had to make a decision. He chose what is recognised today around the world as the “Swoosh,” telling Davidson, “I don’t love it, but it will grow on me.”
I have proved that my hypothesis is correct. Nike does add value by advertising. They also add value in other ways as well but the main way is by advertising.
Nike creates brand loyalty though advertising, as they assure people of a good quality product and a good functional one as well. I found out that many people would only buy Nike trainers, as they can be sure that they are getting what they pay for which is good quality. There were some people that would pay more just to get the logo.
Nike advertises themselves as a unique and original brand.
Even though 78% of the people that I asked did not like the way in which Nike advertises their products most of them said it was effective and it did make you want to buy the product or at least go and look at it in a shop. 75% of the people I asked first herd about Nike though an advert.
Innovation adds value to the trainers as they are always redeveloping all their trainers and bring out new designs for the trainers. They can always insure that there will something that will be suitable for every person that wears trainers.
The logo adds value as people will recognise it and they can associate it with the brand.
Bias occurs when the sample is too small, or not representative of the target market. The information given will not be accurate.
I used two types of market research 1) Field research which is the collection of information directly from individuals. I used questionnaires to do this. 2) Secondary data research, which can be collected from, published electronic and paper based sources. Fort his I used the Internet in particular I used the Nikes official web site (www.nike.com)
The research that I did was all done in the Reading area. Reading is considered to be a prosperous town. It is a fairly good and considered respective of the southeast. This could be consider bias, as I did not ask a big enough area of people. If I did ask people from different regions of the country I might have got a total different set of results from what I did get, but it would have cost me a lot of money to set up research in different regions of the country. This would be because I would either have to go to the different regions and conduct the research myself, pay someone else who lives in the area to conduct the research on my behalf or I would have to pay out to do a letterbox drop. I would also have to pay for a self-addressed envelope other wise I would never get my questionnaires back. I would have to send out a lot more questionnaire than I would need as I cant guarantee that I would get any response.
I asked an equal amount of males and females so that I would have a difference of opinion from males and females. If I didn’t ask an equal amount of both I would have been bias towards which gender I asked the most.
I also tried to ask an equal amount of people from different age groups, but I found that the younger generations of people were more helpful and more willing to answer my questionnaire. The older people didn’t want to know. I found that the few people that did answer my questionnaire from the older generation did not wear trainers or didn’t like Nike as they felt it was a brand aimed at the younger generation.
Sampling involves selecting a group of people who will be representative of the target market. I used sampling methods to select my individuals to fill in my questionnaires.
I asked people that were shopping in Reading. I asked about 0.5% of the population of Reading. Reading has a total population of about 143520. This figure was an estimation taken in 2000 for 2002. 0.5% of 143520 is about 50 people.
I also used the Nike web site to get some information about the company. This could have been bias information as it is directly from Nike themselves so they are likely to have only printed the information that they want people to know, as they don’t want people thinking that they are a bad company. They want to give people the best image that they can so that people will buy their product.