Full-Scale Marketing Plan: Nike Womens Running Shoes

Madison Darrah, Charlotte Hoover, Alyssa Marceau, Becca Ruesch

Simmons College

Table of Contents
EXECUTIVE SUMMARY
SITUATION ANALYSIS

2
2-9

DESCRIPTION OF ORGANIZATION AND PRODUCT

DESCRIPTION
INDUSTRY OVERVIEW
PORTERS FIVE FORCES ANALYSIS
ENVIRONMENTAL FACTORS
KEY SUCCESS FACTORS
COMPANY ANALYSIS
SWOT ANALYSIS
COMPETITIVE ANALYSIS
KEY ISSUES

2
2
3
4
4
5
6
8
8

MARKETING GOALS (OBJECTIVES)

MARKETING STRATEGY

10

MARKETING PROGRAM

10-14

PRODUCT STRATEGY
PRODUCT DESCRIPTION
PRICING STRATEGY
DISTRIBUTION STRATEGY
COMMUNICATIONS STRATEGY

10
11
11
13

FINANCIAL PROJECTIONS

14

MONITORING AND CONTROL

16

EXHIBITS/APPENDICES
BIBLIOGRAPHY

17-29
29

Executive Summary
Nike is one of the most recognizable brands in the world. However, with rising competition
in the Boston running market, it is time for Nike to market towards the large running market
and roll out a running sneaker durable and practical for the weather conditions facing Boston.
Because Nike aspires to bring inspiration and innovation to athletes all over the world, a
market place easily capable of being reinvented by Nike is the New England area. Introducing
a running sneaker durable enough for the long winter months in New England, visible enough
for those were run in the dark hours and strong enough to withstand different running habits,
the Nike Air Zoom Pegasus 32 Flash Womens Running Shoe.
I.

Situation Analysis
A. Description of Organization and Product
Nike Inc is an athletic corporation founded by Bill Bowerman and Phil Knight in 1964

that is headquartered in Beaverton, Oregon. Nike Inc is a world-renown brand that is interested
in the design, development, manufacturing and worldwide marketing and sales of footwear,
apparel, equipment, accessories and services. Nikes main focus is on their shoe wear, ranging
from every-day sneakers to high performance running sneakers. The newest high performance
running sneaker is the Nike Zoom Pegasus 32s, designed specifically for the runner who
doesnt let winter get in the way of exercising.
Industry Overview
Nike is in the Clothing and Apparel Manufacturing industry. This includes companies
such as Adidas, New Balance, and Under Armour. More specifically, the Zoom Pegasus 32
sneaker falls in the footwear manufacturing in the United States industry. As of May 2015, the
footwear manufacturing industry in the US grew by 2.9%, reaching a market value of $74,

196.2 million. Based on current trends, this industry is projected to reach a value of $87,469.
1 million by 2019 (MarketLine, 2015). This mature industry has seen little volatility over the

past few years, most likely because the products are a staple for all consumers, and has a
limited amount of luxury goods. Due to an aging population and falling birthrates, the footwear
manufacturing industry in North America is growing at a slower rate than those in emerging
markets, thus resulting in increased competition. A variety of materials are sourced around the
world, as this industry is not known for any local sourcing or green manufacturing practices.
Porters Five Forces Analysis
The threat of entry from potential new entrants into the clothing and apparel
manufacturing industry is high due, primarily, to low fixed costs. A general lack of brand
recognition across this industry, aside from major retailers, further enables new entrants
(MarketLine, 2015). Large retail groups compete against one another for consumer attention,
often affecting prices. Due to the recent trend of fast fashion retailers have increased
competition for fast merchandise turnover (MarketLine, 2015). In developed countries,
consumers are increasingly substituting athletic footwear for more traditional styles; however,
this does not limit the necessity of basic footwear for all consumers. Substitution is most
noticeable in the use of online retailers over traditional retail stores (MarketLine, 2015). Due to
the necessity of footwear, and the high volume purchased per year, buyer power is moderate.
In the United States, the average number of shoes per consumer is 7, indicative of its necessity.
Footwear is often a more expensive purchase, limiting their power in times of economic stress
(MarketLine, 2015). Supplier power in this industry is moderate due to two factors. First, due
to the extremely high level of production in Southeast Asian countries, Western suppliers have
turned to the production of highly specialized footwear in order to compete. Second, supplier
power is weakened by the economic advantages of Western retailers, suppliers and
wholesalers. (MarketLine, 2015). (Refer to Exhibit A)

Environmental Factors
The five environmental factors that can create opportunities or threaten an organization
are governmental policies, economic forces, social and cultural forces, demographic factors,
and technological changes. Governmental policies could impact Nike, as the majority of their
products are manufactured over seas in a few Asian countries, significantly lowering labor
costs. If the governments of these countries changed labor laws, increased wages and began
regulating hours worked, Nike would have to adjust their practices and budget to match these
changes. Economic forces could influence overall sales given changes in economic health;
however, because many of Nikes products are a staple for not just average consumers but for
companies and sports teams, and their market share is so substantial, revenue will likely not
change substantially given volatilities in the economy. Social and cultural forces apply to Nike
as a major global retailer, in that their products and advertisements reach consumers on a large
scale. Due to this, Nike has to adapt to social and cultural norms in order to appease a much
larger audience. With such a large-scale audience, it is important for the company to watch
changes in this category, as the margin for error is relatively large. Demographic factors apply
to the design and manufacturing of Nikes products, as they must keep up with relevant trends.
Technological issues could influence manufacturing if production centers face a massive tech
failure. This would substantially affect revenue and growth for the company; however, this is
highly unlikely given the resources at the companys disposal to keep up with technological
trends that make production more efficient.
Key Success Factors
To succeed in the footwear industry in the United States, one must conform to five key
success factors. First, having low-cost manufacturers at ones disposal is key in producing the
necessary amount of product while keeping costs low. Following this, in order to stay

competitive in the future, companies are switching to a near-sourcing approach for their raw
materials, as countries in Southeast Asia are increasing their previously low labor costs, forcing
companies they serve to change some of their practices. Having differentiated or specialized
product lines helps companies stay competitive amongst consumers who trend towards fast
fashion and are replacing traditional footwear with more modern, athletic styles. To stay
competitive amongst already existing retailers, companies must have access to a large retailer,
such as a department or specialty sports store in order to reach a large audience. Finally, in
order to keep up with an ever-growing dependence on e-commerce operations, an online
presence is essential in reaching a global audience.
Company Analysis
The Nike Zoom Pegasus 32 is specifically designed to make runners go faster. Spring
back in the heel helps one push off a tough surface, moving them forward. Indeed, this shoe is
designed for tough New England conditions, with its reflective and water-resistant material.
These strengths will push the product forward in the market. Weaknesses lie in the similarity of
some features, especially reflective material; however, the overall design and aesthetic of the
shoe is original in the market. The list price for the Nike Zoom Pegasus 32 is $125. This price,
a strength for Nike, positions it directly between the basic Nike Free line of sneakers, but
below higher-end running shoes, such as Asics, priced between $120 and $200. A weakness in
pricing is that it is not significantly lower than some of Asics more basic lines; however, the
goal is that the product features, brand, and direct distribution channel will entice customers.
Placement of the product will be facilitated through a direct-to-consumer (DTC) channel and
an online channel. This personal mode of distribution will help to increase the in-store
experience while placing the product at the forefront of the consumers mind, and make them
see the product as a need, not a want. Nikes alreadyestablished online channel is a key
strength in this plan, with the DTC channel presenting as a variable weakness, as it is a new
strategy. The goal is that this new channel will enhance customer experience and retention.

Through print and billboard advertisements, as well as social media and interactive marketing
tactics, the Nike Zoom 32 Pegasus will reach customers on a wide-scale basis. The sales force
at store locations will work to create a more personal experience through a direct-to-customer
channel. These strengths will work to promote the product amongst women runners in New
England. A weakness in this system is in the pre-existing lack of recognition amongst the
target audience, making it more difficult for promotional tools to build a base. The launch of
this shoe is designed to combat one of Nikes largest points of weakness: their lack of
recognition amongst female runners in New England. Taking advantage of this large market
will only enhance their already established brand. Strengths within marketing communications
lie in print and billboard advertisements and in-store tactics that work to create an interactive
experience between the sales person and customer, awareness and retention. A weakness in this
could lie in a lack of television advertisements; however, the cost saved in focusing primarily
on billboards and print will be beneficial in the long run. Price weaknesses occur because the
footwear market is 80% of Nikes profit, meaning they have to profit 100% of the time, leaving
very little room for error. Strengths are seen in the positioning of price as it is at a strong midpoint between higher end shoes, and the basic Free line.
SWOT Analysis
Strengths
Very well established and credible brand of running sneakers. All women, even those who

arent runners, are familiar with the brand and know what types of products they have.
Their already existing marketing campaigns are incredibly strong and continue to enhance

brand consistently and familiarity.

Provide lightweight running shoes with foam materials, which eases the running process for

many of its consumers - particularly women.

Sponsors top athletes and through this, gain valuable coverage and immense product

placement of the brand name and symbol.

One of Nikes main focus is on research and development

Weaknesses

Shoe market is definitely their highest and most successful. This means that this part of the

company has to be successful at almost all times, given that is is such a large part of their
profit.

Company has been known for having very poor labor practices.

Nike has a very strong brand, but this means the prices of the products tend to be quite high.
The cost of their running apparel is higher than almost all of their competitors. If the
economy were to fall into another recession, consumers who were still spending money will
likely switch over to a brand with cheaper products.
Nike is currently trying to focus more on running and fitness activities for their sneakers

versus the sole purpose of fashion. A weakness is that their running sneakers are not reflecting
that.
Opportunities
When consumers need to replace running shoes because they are over-worn or no longer

work, they are looking for the best quality shoe that will help them perform better.

Their strong research and development allows for the potential of new or improved products if not both. These skills can provide huge growth opportunities for a company or brand especially a well-established brand, such as Nike.

Emerging markets is still a very big growth opportunity for Nike Running. The brand does
already have presence in some emerging markets, but not necessarily with running specifically.
Threats

Competition is arguably Nikes biggest threat, especially when it comes to the running market
in Boston.

The economy is always a very realistic threat to companies, even big companies like Nike.

Unethical and questionable business practices are always a threat when trying to break into an
emerging market. The market is very competitive and Nike wants as much of the share as they
can get, so they must be cautious of making sure they maintain ethical behavior throughout the
whole process.
Competitive Analysis
Set apart already, the Nike Air Zoom Pegasus 32 Flash Womens Running Shoe is
designed to respond to the motion of a foot while also being lightweight. In addition, the
sneakers are water-repellant and reflective. The water repellent support is described on
Nikes website as three-layer, abrasion-resistant mesh repels water while keeping your foot
cool (Pegasus Nike Air Zoom Flash 32, n.d). This technology is meant for the cold winters of
New England. In direct competition is the Adidas ultra boosts and New Balances Vazee
Rush Beacon. Adidas ultra boosts are designed for ultimate comfort while on a run. These
particular running shoes are engineered to naturally expand with your foot, which could reduce
irradiation while running. Also in competition, New Balances Vazee Rush Beacon is
designed for after-hour runs, with their highly reflective material surrounding the shoe.
Nike is differentiated by its enhanced visibility shoe that is designed to have enhanced
visibility during the darker hours of the day. And also its water repellant nature lends itself to
winter runners. Adidias ultra boost technology has energy-returning properties that keep
every step charged with an endless supply of light, fast energy (Adidas Ultra Boost Shoes
White | adidas US., n.d.).. New Balance markets itself on their sneakers feature that allows for
360 degress of reflectivity but neglects to include breathable warmth, which is exactly what
Nikes running sneaker includes. The combination of being water repellant, reflective and
responsive to a foot is what will set Nike apart from its competitors.
(Refer to Exhibit B for a competitive analysis chart.)
Key Issues

One of the main issues Nike Running faces is making sure that the global supply chain
not only connects with, but also impacts our consumers to buy, or continuing buying, our Nike
Running products. It is imperative that we make sure our manufacturers and suppliers are being
treated fairly and able to live in suitable conditions. Nike Running products also come with a
customization promise. However, this creates a stressful and demanding environment for the
producers and suppliers. Every customer is different and has different needs, so it is important
to make sure that all workers are not only properly paid and treated well, but also properly
trained.
Nike Running also must overcome the issue of breaking into the Boston running scene. As
mentioned in the threats, New Balance currently has most of the control over this market and
given the long established partnership with the Boston Marathon. The marketing efforts need
to keep current customers satisfied, bring in new customers from the competition, as well as try
to gain control over a good portion of the Boston running market.
II.

Marketing Goals (objectives)

To increase the brand awareness among women and the overall profit of the Nike running
market in New England

To be recognized and known as the leading running footwear supplier in the city of Boston

Break even on all investments by the end of 12 months

Increase market share by at least 4% in the New England area, specifically focusing on women
in the greater Boston area.

Sell 576,000 pairs of Nike Air Zoom Pegasus 32 running shoes in Boston within the next year
Overall, our main goals are to increase the awareness of the Nike Running footwear, while
also increasing the profit by at least 3 percentage points. New Balance is currently our biggest
competitor, especially when it comes to the running market in Boston. We want to take over a
good portion of their market share and make certain that our brand logo and our products are
positioned at the top of the consumers mind when they are in need of new running footwear.

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We hope our footwear will inspire and motivate athletes all over the world to perform at their
highest quality and reach their ultimate athletic achievements.

III.

Marketing Strategy

The Nike Air Pegasus Zoom Flash 32 womens running shoe is perceived as high quality
and running specific and focuses on a target market of active middle to high class women age
18-26 in New England that lead an active lifestyle and need quality, stable and comfortable
sneakers. Nike running shoes are known for their unique designs and ability to be customized.
Nike uses their unique visual appeal in combination with the current increase in quality,
comfort and stability to construct a new line of running shoes that will compete and
differentiate from the competitors in the current womens running shoe industry. Nike
differentiates from this industry through their unique visual appeal and ability to customize and
personalize. Nikes high brand recognition and popularity also helps to differentiate their new
running conducive product in this competitive industry. The Nike Air Zoom Pegasus Flash
32 Women's Running Shoe delivers highly responsive cushioning and lightweight support to
help you find your fastest run. The weather resistant and dynamic design of this shoe
differentiates Nike from the rest of the womens running shoe industry in Boston due to its
brand recognition and key features.
IV.

Marketing Program

A. Product Strategy
Product Description
Nike running shoes, specifically the Air Zoom Pegasus 32, provide excellent springback cushioning which allow the runner a quicker start and allow for an overall faster run. The
feet are given the ability to move freely within in the shoe, which ultimately helps benefit the
athlete and strengthen muscle. The Nike footwear products not only offer the ability for the foot
to move freely and naturally, but also offer a cushioned sole to offer support and flexibility to

11

the runner. One of the many prominent features is the partial mesh inner sleeve around foot,
which helps the runner feel more comfortable, while still offering good flexibility and support.
A reflective, water-repellent upper keeps you visible, dry and comfortable in dark, dreary
conditions, with the ability to customize and personalize color and any text and the three-layer,
abrasion-resistant mesh upper repels water while keeping your feet cool. Customization is
another great feature of Nike footwear. Consumers always have the ability to go online and
create their own shoe using all of their desired colors, designs, styles and can even include their
initials somewhere on the shoe (Move, 2015). A feature and benefit chart can be found in
Exhibit C.
Pricing Strategy
Nike uses a premium pricing strategy for all of their products. This applies to the Zoom
Pegasus 32 shoe, with a retail price of $125. Based on the survey conducted, the target market
of athletic women aged 18-26; this is a price that the majority of consumers are willing to pay.
This price is not much higher about $20 - than the prices of other Nike sneakers, such as
those in the Free line, but is lower than prices of comparable running shoes. This balanced
price leverages the shoe by giving it an edge over other Nike products, but places the price
below comparable substitute products. The goal is to allow this price to entice consumers, by
placing it between these two extremes. (Refer to Exhibit D)
Distribution Strategy
One of the distribution tactics that Nike Running will focus us one is selling products to
wholesalers in the United States, but specifically within the Boston market. Nike will distribute
these running products across the country, but our main focus will be centered on distribution
and sales in the Boston area. Please see exhibit E for a channel diagram.
Nike Running will also use a direct-to-consumer model (DTC). This will include
factory and retail stores, as well as online sales made through www.nike.com (Soni, 2014). The
Nike Brand experience stores, like the one on Newbury Street in Boston, with the full retail ad

12

brand experiences. Each individual store has displays of the different designs, style of footwear
and apparel offered by the brand. One of Nike Runnings distribution goals is to increase the
amount of brand experience stores in the Boston area. Nikes online store is another huge
channel for the brand. Online shopping seems to be getting more popular every day and is a
great channel for those consumers who do not enjoy the in-store experience. The online store
features even more unique customization settings that consumers cannot get in the brand
experience stores. We will also be sure to have diagrams and highlight important features of
the running shoe on the main page of the running section of www.nike.com.
Our distribution objectives for the DTC channel are as follows:

Increase the amount of Boston brand experience store locations.

o Nike stores will not just be a retail store; they will be a life experience

Keep the brand at the top of the consumers mind, as well as allow them more access to
purchase products.

Enhance the overall brand experience for the consumer and convince them that our
running shoe is a need, not just a want.

Strategies for achieving our DTC channel objectives:

When creating the budget, room for new employees and store locations will be heavily
implemented.

Employees hired for in-store employment will be extremely well trained and be the
most knowledgeable about all Nike products and their function.

Provide examples of the shoe and provide treadmills and small running tracks where
the shoes can be truly tested out in the store.

Our distribution objectives for the online store channel are as follows:

Increase the customization elements online and allow consumers complete control over
what colors, patterns, styles and designs their footwear will consist of.

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Make sure that consumers are still getting the Nike brand experience from a sleek,
high-tech and well functioning website.
o This will also help keep Nike as a top brand in the consumers mind.

Keep stock as ready and up to date as possible, so that we are completely able to deliver
on our customization and special order promise.

Strategies for achieving our online store channel objectives:

Work closely with designers to develop more color patterns, shapes, styles and logos to
further increase the already high customization feature.

Ensure that all website designers and engineers are highly experienced, trained and
prepared to create a sleek, smooth, high-tech and overall impressive website.

Keep numerous inventory documents, spreadsheets and charts for all products and have factory
workers be aware as soon as we start running low on a product.
Marketing Communications Strategy
Communications Objectives:

To increase brand awareness and sales in the Boston area through good promotional
strategies, such as advertisements, public relations incentives and social media.

Create an element of interaction between the seller and consumer.

o This helps develop a personal relationship with the consumer.

Develop good and effective advertisements that will help us increase sales, as well as
break even on our overall marketing investments.

Proposed Budget: See Exhibit F.

Recommended Media: (Refer to Exhibit G for Press Release)

One of our media tactics will be to release print advertisements in top magazines and some
newspapers read by our target audience to increase press coverage and impressions, focusing
specifically on the Boston area. Local publications include The Boston Globe and Boston

14

Magazine. National publications include Sports Illustrated, Womens Health Magazine and
Shape Magazine.

We will implement traditional (not digital) billboard advertisements in the local Boston area,
on the side the T, inside the T stations, and on the sides of public buses. Billboards will also be
used on popular roads highways such the Massachusetts Turnpike, I-95 and Route 1. The
billboard advertisements will be on display January 2, 2016 through March 1, 2016.

The Internet and social media will be one of our primary outlets. The main social media
channels to be used will be Twitter, Facebook and Instagram. We will also send out a direct
email blast to subscribers, offering exclusive promotions and deals only available through the
email link.
o The email blasts will feature a large, colorful picture of multiple styles of Nike running shoes
and highlight the customization aspect. The size of the email blast will either be a large
rectangle shape (336 x 280 pixels) or a wide skyscraper shape (220 x 600 pixels). The pictures
of the shoes will fit comfortably within the space, while still leaving room for text explaining
the customization and special functions of the shoe.
o Facebook advertisements should primarily be consisted of a square (125 x 125 pixels) and
they will be located in the sidebar of the main Facebook home page. Ads will be colorful and
eye-catching, so that when people are scrolling through their news feed they notice the ad on
the side. These ads will also feature an image of the Nike Air Zoom Pegasus 32. These ads
will appear during the morning hours Monday Friday around 10 a.m., then again around
lunch time when more people are using social media, then once again anytime between 5 p.m.
and 8 p.m. when are home and out of work. On Saturdays and Sundays, they will pop-up
around 1 p.m. and then again around 6 p.m.
o Twitter will have promotional tweets, highlighting the running shoes and their unique features,
going out Monday Friday between 12 p.m. and 1 p.m. On weekends, promotional tweets

15

will be sent out at 10 a.m. and then again at 3 p.m. These tweets will also contain a direct link
to the running portion of the Nike website.
V.

Financial Projections

Sales for Nike will grow by 2.4% of the market share in New England in 2016; selling 576,000
pairs, generating $72 million in revenue.
The analysis of Nikes income statement includes insights on how effectively Nikes
expenses are being managed. The top expense referred on the common size income statement
in Exhibit is the selling and administrative expense. The expenses were 30.8% in 2013, 31.53%
in 2014, and 32.33% in 2015 (Filing Data Nike, 2015). This distribution makes sense for
Nike Inc because Nike earns its profits from making and supplying athletic wear and footwear.
This means that Nike has to purchase supplies to manufacture their product and it also has to
pay wages (operating overhead expense) to employees selling the product. The company is
profitable because the expense percentage is small, and its gross profit percentage is high which means revenues exceed expenses. In 2015, Nike Incs gross profit was nearly 50%
meaning for every dollar Nike earns, $0.50 is profit (Filing Data Nike, 2015). (Refer to
Exhibit H).
In order to calculate the sales forecast it was important to determine the amount of total
runners there are in the United States. Through calculations, it was found that 51.9% of all
runners in the United States are female (2014 State of the Sport, 2014). By multiplying that by
the number of running shoes sold in 2013, the number of pairs of running shoes purchased by
women can be calculated. This number is 24 million. It is projected that this product can
increase the market share in New England for womens running sneakers by 2.4%, by dividing
the number of women runners in New England by the number of running shoes purchased
(2014 State of the Sport, 2014). In order to project sales, the market share is multiplied by the
24 million pairs of sneakers bought by women in New England. That total comes out to be
576,000 units selling at $125 a pair for projected revenue at $72 million. (Refer to Exhibit I

16

for a Nike to Industry profitability comparison). To best calculate the break-even point, an
analysis of the fixed costs is necessary. To determine fixed costs, the efficiency ratio was used
(refer to Exhibit J). By multiplying Nikes return on its assets in 2015 by the revenue Nike
generated in 2015. Using Nikes global financial statements is valid because Nikes numbers
are proportionate enough to New England. Variable costs were calculated by taking the
marketing budget and dividing it by how many units that are projected to sell. With this, it is
determined that the anything sold above 73,000 units or $9.1 million in revenue, will be profit.
(Refer to Exhibit K for financial projections & refer to Exhibit L for break-even analysis)
VI.

Monitoring and Control

Monitoring the progress of the Pegasus Zoom 32s is crucial. The best way to do this is to

track sales in New England quarterly, be conscious of social media traffic and monitor the
success of the Field Day proposed. In addition, monthly visits to the new and existing Nike
stores in place to be sure the employees have excellent understanding of the product and
theyre relaying the information to the consumer. The contingency plan set is to market
towards a different region in the country. For example, the mid west where the winters remain
harsh and the product would be useful. In addition, the contingency plan is to use different
media outlets to spread the word farther.

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VII.

Appendices/Exhibits
Exhibit A: Porters Five Forces

18

19

Nike Inc

New Balance

Adidas

The Nike Air Zoom Pegasus

32 Flash Womens Running
Shoe is designed to respond to
the motion of your foot while
also being lightweight. In
addition, they are waterrepellant and reflective making
these the perfect running
sneakers for the winter
months.
Women between the ages 18
and 25

The Vazee Rush NB

Beacon is deigned for afterhour runs, with highly
reflective material
surrounding the shoe. Also
comfortable, the Vazees
respond to the motion of
your foot.

The Adidas ultra boost shoes

are designed for ultimate
comfort while on a run.
These particular running
shoes are engineered to
naturally expand with your
foot, which could reduce
irradiation while running.

Women between the ages

25 and 35

Positioning
Strategy

Brand Positioning Strategy:

Using the Nike Brand to better
market the product

Product Benefits

Responsive Cushioning
Water-Repellent Support
Enhanced Visibility

Product Positioning
Strategy: This product
differentiates from others
because of its reflective
properties
360 Degrees of reflectivity

While Adidass main target

market is professional
athletes, they also market to
non-athletes.
Brand Positioning Strategy:
Using the Adidas Brand to
better market the product

Exhibit B:
Competitive
Analysis

Product
Description

Target Market

$125 Premium Pricing

Global Growth
DTC
Leader

$99 Target Pricing

Boston Marathon

boost technology
energy returning properties
keep every step charged with
an endless supply of light,
fast energy
1. Manufacturer to
Consumer
2. Manufacturer to
Wholesaler to
Consumer
3. Manufacturer to
Agent to Consumer
4. Manufacturer to
Licensee to
Consumer
$180 Prestige Pricing
Boston Marathon

Challenger

Challenger

Distribution

1. Manufacturer to
Consumer
2. Manufacturer to
Retailer to Consumer
3. Manufacturer to
Licensee to Consumer

Pricing
Promotion
Competitive
Classification
Rating Against
Industry Key
Success Factors

1. Manufacturer to
Consumer
2. Manufacturer to
Retailer to
Consumer

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Exhibit C: Feature and Benefit Chart of Nike Air Pegasus Zoom 3

Feature
Extremely responsive cushioning and
lightweight support.
Heel of the sneaker provides a spring
back type of cushioning.
Half mesh inner sleeve around the foot.
Breathable mesh with proper ventilation.
Appealing design, completely customized
to the individual.

Benefit
Allows feet to move freely, providing the
runner with more speed.
Helps feet push off the ground more freely,
allowing the body more overall speed.
Assists the runner in feeling more
comfortable during the run and offers more
support and cushioning for the foot.
Allows feet to breathe and feel comfortable
in the shoe.
Consumers feel like this shoe was actually
made for them, which helps boost
confidence and makes them look and feel
good.

Exhibit D: Survey Response to Determine Pricing Strategy

21

Exhibit E: Nike Channel Diagram

22

Exhibit F: Nike Proposed Marketing and Media Budget

Media Outlet

Total Cost

CPM

Print Advertisements

$495,000

$15.00

Email Blasts

$6,552,400

$9.20

Social Media & Digital Banners

$20,270,848

$11.10

Outdoor Billboards

$4,120,506

$6.40

Subtotal = $31,435,754
Royalties and Licensing

$35,000

Cost of Production

$506,400

Cost Per Impression

$0.01481

Cost Per Thousand

$14.81

Contingency

$1,266,275

GRAND TOTAL (Not including Production, CPI or CPT) = $32,737,029

Exhibit G: Nike Press Release

23

Media Contact:
FOR IMMEDIATE RELEASE

Becca Ruesch
[email protected]
(617) 712-4994

Nike Running Launches First Field Day at Boston Athletic Club

(BOSTON) Earlier this week, Nike Running in Boston announced their first ever field day to take
place on January 16, 2016 at the Boston Athletic Club. The field day will consist of various running
contests and the winner of each activity will receive a 15% off coupon for the Nike Air Zoom Pegasus
32 running sneakers.
The events held during this day will consist of a short relay race, a 50-yard dash, a jump rope contest
and a plank contest. There will be two sessions throughout the day: a morning session running from 10
a.m. to 12 p.m. and an afternoon session running from 2 p.m. to 4 p.m. Two rounds of contests will be
conducted during each session, allowing for a total of 16 winners.
The Nike Air Zoom Pegasus 32 is an elite, high-quality running sneaker specifically designed to allow
people a faster runner. The heel of the shoe provides a spring-back cushioning, allowing the runner
more speed when they push off the ground. Winners of the field day competitions can redeem their
coupons for this elite sneaker at any Nike retail store in the Boston area.
About Nike, Inc.
Nike, Inc. is a multinational American company whose primary focuses is creating elite, high-quality
quality athletic apparel and footwear for the everyday athlete. The companys headquarters are located
in Beaverton, Oregon and is one of the worlds leading and largest suppliers of athletic apparel,
footwear and sports equipment. Nike quickly became one of the worlds most recognizable brands and
is known for the swoosh logo and the Just Do It slogan.

24

Exhibit H: Nike Financial Statements

NIKE+Inc.
Income+Statement
For+Year+Ending+May+31,+201x
Dollars+in+Millions

Revenues
Cost(of(sales
Gross(profit
Expenses
Demand(creation(expense
Operating(overhead(expense
Total(selling(and(administrative(expense
Operating(Income
Other(Income(and(Expense
Interest(expense((income),(net(
Other((income)(expense,(net
Total(Other(Income(and(Expense
Income(before(income(taxes
Income(tax(expense
Net(Income(

2013
$(25,313
14,279
11,034

2014
$(27,799
15,353
12,446

2015
$(30,601
16,534
14,067

2,745
5,051
7,796
3,238

3,031
5,735
8,766
3,680

3,213
6,679
9,892
4,175

(3)
(15)
(18)
3,256
805
$(2,451

33
103
136
3,544
851
$(2,693

28
(58)
(30)
4,205
932
$(3,273

Amended from Sec.gov

Revenues
Cost/of/sales
Gross/profit
Expenses
Demand/creation/expense
Operating/overhead/expense
Total/selling/and/administrative/expense
Operating/Income
Other/Income/and/Expense
Interest/expense/(income),/net/
Other/(income)/expense,/net
Total/Other/Income/and/Expense
Income/before/income/taxes
Income/tax/expense
Net/Income/

NIKE'Inc.
Income'Statement
For'Year'Ending'May'31,'201x
Dollars'in'Millions
$
%
$
2013
$/25,313
100.00%
14,279
56.41%
11,034
43.59%

%
2014
$/27,799
15,353
12,446

$
100.00%
55.23%
44.77%

%
2015
$/30,601
16,534
14,067

%
%
2013%2014 2014%2015
100.00%
9.82%
10.08%
54.03%
7.52%
7.69%
45.97%
12.80%
13.02%

2,745
5,051
7,796
3,238

10.84%
19.95%
30.80%
12.79%

3,031
5,735
8,766
3,680

10.90%
20.63%
31.53%
13.24%

3,213
6,679
9,892
4,175

10.50%
21.83%
32.33%
13.64%

10.42%
13.54%
12.44%
13.65%

6.00%
16.46%
12.85%
13.45%

(3)
(15)
(18)
3,256
805
$/2,451

%0.01%
%0.06%
%0.07%
12.86%
3.18%
9.68%

33
103
136
3,544
851
$/2,693

0.12%
0.37%
0.49%
12.75%
3.06%
9.69%

28
(58)
(30)
4,205
932
$/3,273

0.09%
%0.19%
%0.10%
13.74%
3.05%
10.70%

%1200.00%
%786.67%
%855.56%
8.85%
5.71%
9.87%

%15.15%
%156.31%
%122.06%
18.65%
9.52%
21.54%

Amended from Sec.gov

25

Exhibit I: Nike Profitability to Industry Ratio Analysis

Protability'
50.00%%
45.00%%
40.00%%
35.00%%

Percent'

30.00%%
25.00%%
20.00%%
15.00%%
10.00%%
5.00%%
0.00%%

2013%

2014%

2015%

Gross%Margin%

43.59%%

44.77%%

45.97%%

Opera8ng%Expenses%to%Sales%

30.80%%

31.53%%

32.33%%

Prot%Margin%

9.68%%

9.69%%

10.70%%

26

Exhibit I: Nike Profitability to Industry Ratio Analysis

The profitability ratio analysis displays data on gross profit margin, operating expenses to sale ratio,

and profit margin. In reference to the profitability graph, Nikes gross profit margin appears to be increasing
from 2013-2014 and also from 2014-2015. The values are 43.59% in 2013, 44.77% in 2014, and 45.97% in
2015 (Filing Data Nike, 2015). This shows that Nikes gross margins are increasing and means that N ike
is improving. Operating expense to sales ratio is also increasing from 2013-2014 and also from 2014-2015.
The values for Nikes operating expense to sales ratio are 30.8% in 2013, 31.53% in 2014, and 32.33% in
2015(Filing Data Nike, 2015). This shows that the company is worsening, even though the percentages
are increasing, because if the operating expense ratio is increasing over time, it means the company is
operating less efficiently since operating expense to sales ratio indicates how much each dollar in sales
revenue cost the company to achieve. Looking at the profitability graph, it shows that Nikes profit margins
remain fairly consistent but taking a closer looks at the values, it shows that Nikes profit margins are
increasing. The values for Nikes profit m argin are 9.68% in 2013, 9.69% in 2014, and 10.7% in 2015 (Filing

Data Nike, 2015). Comparing Nikes profitability to the industry average, referencing the ratio table, the
industry averages for gross margin are 37.6% in 2013, 35.1% in 2014, and 34.7% in 2015 (Filing Data

Nike, 2015). In 2015 Nikes gross profit margin was 45.97% while the industry average was 34.7%, this
percentage is lower than the previous years for the industry, concluding a worsening gross margin. This is
in contrast with Nike who experienced increasing gross margins. Nikes gross margin is overall higher than
the industry values and therefore Nike is doing better than the industry. The industry averages for
operating expenses to sale ratio are 33.5% in 2013, 30.7% in 2014, and 32% in 2015 (Filing Data Nike,

2015). In 2015, Nikes operating expenses to sale ratio was 32.33%, a worsening value from previous years,
while the industry in 2015 was about the same at 32%. This shows that the company is average
comparative to the industry average. The industry averages for profit margin are 2.9% in 2013, 3.6% in
2014, and 2.1% in 2015(Filing Data Nike, 2015). In 2015, the profit margin for Nike was 10.7% which is
much higher than the industry average. Nike experienced increasing profit margins that are overall higher
in value and better than the industry. Concluding, Nike is improving over time in gross profit margins,
worsening over time in operating expenses to sales ratio and experiencing improving profit margins.

27

Exhibit J: Nike Efficiency Ratio Graph

Eciency'
30.00%%

25.00%%

Percent'

20.00%%

15.00%%

10.00%%

5.00%%

0.00%%

2013%

2014%

2015%

Return%on%Equity%

22.76%%

24.50%%

27.82%%

Return%on%Assets%

14.83%%

14.89%%

16.29%%

28

Exhibit K: Financial Projections Calculations

2013
21.8 mil Female Runners (2014 State of the Sport, 2014)
42.0 mil Total Runners (2014 State of the Sport, 2014)
51.9% of all runners in the United States are Female
46.25 mil running shoe units purchased (2014 State of the Sport, 2014)

46.25 x .519 = 24 mil pairs of running shoes purchased by women

2,144,000 runners in New England (2014 State of the Sport, 2014)

2,144,000 x .519 = 1,112,736 runners in New England who are women

1,112,736 / 46.25 = 2.4% market share

24 mil x .024 = 576,000 pairs of sneakers sold for running to women

576,000 units x $125= $72 mil

Total Revenue in North America = 11,158 mil (Nike's North American revenue from 2009
to 2015, by segment, 2014)
Total Revenue from footwear = 6,751/11,158 = 60.5%
New England has 5% market share in the sneaker market (Soni, 2014)
6,751 x .05 = 337.55 mil New Englands total sneaker revenue
337.55 x .519 = $175.19 million in revenue generated in New England by women
purchasing footwear from Nike

$72 mil / $175.19 mil = 41% of revenue generated by footwear sales in New England
by women will be the Nike Air Zoom Pegasus 32 Flash Womens Running Shoe

29

Exhibit L: Break-Even Analysis Calculations

fixed costs = ROA in 2015 x revenue in 2015

= 16.29% x $30,601 mil

=$4,985 mil

variable costs = budget

=$32,737,029
unit variable cost = budget / units sold


=$32,737,029 / 576,000


= $56.84

BEP units = fixed cost/unit price-unit variable cost
= 4,985/(125-56.84)
=73,000 units

73,000 units x $125 = $9,125 thousand

Break Even Analysis: anything sold above 73,000 units will be profit, generating
$9,125 thousand in revenue

30

References
2014 State of the Sport - Part II: Running Industry Report. (2014, June 15). Retrieved
December 2, 2015, from http://www.runningusa.org/2014-running-industryreport?returnTo=annual-reports
Adidas Ultra Boost Shoes White | adidas US. (n.d.). Retrieved December 1, 2015, from
http://www.adidas.com/us/ultra-boost-shoes/AF5142.html
Filing Data - Nike. (2015, July 23). Retrieved December 10, 2015, from
http://www.sec.gov/cgi-bin/viewer
MacLeod, R. (2015, March 18). NIKE Pricing Strategy: Cost-Plus vs. Consumer Value
Equation. Retrieved December 2, 2015, from
https://marketingdiscussions.wordpress.com/2015/03/18/nike-pricing-strategy-costplus-vs-consumer-value-equation/
MarketLine Industry Profile: Footwear in the United States. (2015, May 1). Retrieved
December 2, 2015, from
http://globalbb.onesource.com/Web/Reports/ReportMainIndustry.aspx?SicCodeID=28
&Report=ALLMARKETRESEARCHREPORTS&Process=IP&Type=GetReport&File
Format=PDF&ReportID=60330&FileName=0072-06192014.pdf&VendorName=Datamonitor
Nike's North American revenue from 2009 to 2015, by segment (in million U.S. dollars).
(2014). Retrieved December 2, 2015, from
http://www.statista.com/statistics/241706/nikes-us-sales-by-product-category-since2007/
Soni, P. (2014, December 29). Market Share Gain Spurs NIKEs North American Footwear
Revenues. Retrieved December 2, 2015, from http://marketrealist.com/2014/12/marketshare-gain-spurs-nikes-north-american-footwear-revenues/

31