Internet marketing startegy for Nike

Internet Marketing Strategy:Nike Corporation

Andrew Olsen

University of Maryland University College

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Executive Summary

The purpose of this paper is to develop an Internet marketing strategy for Nike

and its sneakers. I will give a brief history of Nike and then elaborate on its dominant

market share. This section will also discuss Nike’s footwear and what makes Nike, Nike.

Nike’s target market is far-reaching, yet very specific. The average age of a Nike

consumer is 25, but they have been concentrating more on the teen market because of the

growth potential. This paper will provide proof to why this is and elaborate on its other

demographics, such as its adult and female market.

This paper will touch on Nike's business model and its various pricing strategies,

such as premium pricing, target-costing/pricing and dual pricing and why it uses these

strategies. Then I will discuss the only payment mechanism at Nike’s online stores.

Nike has a very extensive and complex value chain system. It has to monitor the

distribution of its footwear from its production centers in Asia to their main distribution

centers in the US and Europe. From there they have to ship their products to all of their

retailers. In this paper I will explain how Nike does this and how it handles the logistics

of a complicated distribution system.

Nike is no stranger to promoting its products. It shells out about $1 billion a year

on creating demand for its products through marketing. Nike has never been one to use

traditional online promotions and I will explain why that is and why Nike has used

sophisticated, unique and interactive ways to promote its footwear online.

Finally, I elaborate on Nike’s potential sales over the next three years, which

appear to be very good, and determine the viability of Nike’s market strategy for

promoting and advertising Nike’s footwear on its online stores.

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Company and Product Overview

Nike has a storied history that goes back to a long-lived business partnership

between Bill Bowerman and Phil Knight that began all the way back in 1962 when the

two opened Blue Ribbon Sports (BRS). In 1972 BRS changed its name to Nike, which is

named for the Greek winged goddess of victory. (Further history: see Exhibit 1 & 2) The

Nike Corporation went public in 1981, and in its first year as a public company, it led the

industry and was sold in more than forty countries worldwide. It has evolved from a

traditional brick and mortar company to a click and mortar company, as a number of

other companies have also done. Nike employs 22,000 people worldwide, and including

the manufacturers, shippers, retailers and service providers, nearly 1 million people help

bring Nike to “athletes” everywhere (www.NikeBiz.com).

Nike is primarily engaged in the design, development and worldwide marketing

of footwear, apparel, equipment and accessory products. They sell athletic footwear and

apparel worldwide. Nike sells its products to approximately 18,000 retail accounts in the

United States and through a mix of independent distributors, licensees and subsidiaries in

approximately 140 countries worldwide (Nike, Inc. profile). Each month, Nike will

assess the factory's performance and licenses may be withdrawn if something goes wrong

or gets a poor assessment. Nike will also assist its subcontractors in finding better

production sites.

In addition, Nike operates Niketown shoe and sportswear stores and has opened

two Nikegoddess stores, which caters to women. Nike does not have a single sneaker

factory in the U.S. because independent contractors manufacture virtually all of its

products. All footwear products are produced outside the U.S., while apparel products

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are produced both in and out of the United States. At the moment, Indonesia is Nike's

biggest production center, with about 17 footwear factories that employ 90,000 workers

and produce about 7 million pairs of shoes each month (www.NikeBiz.com).

The athletic shoe industry is one of the largest markets in the U.S. today and

Nike’s largest concentration is on the sneaker market itself. They also sell all kinds of

athletic apparel and equipment, from warm-up pants to soccer balls and football pads.

The three major corporations that dominate the industry are Nike, Reebok, and Adidas.

Nike controls roughly 40% of the entire market, while Reebok maintains about 12%, and

Adidas owns about 10% (Herzog, 2003). Its market share is more than Reebok and

Adidas’s market share combined. (Exhibit 4) There are many other competitors such as

New Balance, Puma, Champion, and Fila, but these companies do not run the market like

the big three. They just own much smaller segments. (Exhibit 5)

Nike is the world’s most popular brand, hence making it the world's top shoe

company. The $10 billion company still has just over 39% of the U.S. athletic footwear

market and sold six of the top 10 styles in 2002 (McCarthy, 2003). (Exhibit 6) The

Company's athletic footwear products are designed primarily for specific athletic use,

although a large percentage of the products are worn for casual or leisure purposes. Nike

designs and sells shoes for a variety of sports, including baseball, cheerleading, golf,

volleyball, wrestling, and so forth. (Exhibit 3 & *) They also sell Cole Haan dress and

casual shoes and a line of athletic apparel and equipment.

Almost every American has at least one or two pairs of Nike shoes, which is due

directly to the quality and popularity of the sneakers they sell. It is those sneakers that

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have been its foundation and they have been Nike’s money makers. Nike may have

diversified its product line, but it will always be associated the shoe industry.

Nike has been able to remain a dominant market player for a majority of their

existence because of their innovative technology and diverse and ever changing product

line. They also have a reputation for fancy footwork, especially in the arena of

marketing. Nike is not only the biggest producer of sports shoes, but also spends the

largest amount of money on advertising and promotion. It was Michael Jordan, a five-

time MVP, whose endorsement of Nike and their marketing of the superstar that helped

turn the company into the industry's dominant maker of athletic shoes and apparel. Now,

Nike is hoping that the endorsements of LeBron James, Kobe Bryant (Exhibit 9), and

other international stars like Ronaldo and the Brazilian Nationals will continue its

dominance as a maker of athletic shoes and apparel. Nike's presence in soccer, which is

the world's biggest sport, became stronger after entering into new partnerships with top

European club teams such as FC Barcelona and Inter-Milan. During the 1998 World

Cup, six teams: Brazil, Holland, Italy, Nigeria, South Korea, and the United States,

competed in uniforms designed by Nike. Furthermore, in 1999 Nike negotiated a new

contract with the Dutch soccer association, KNVB, and the Dutch team will be playing

with the Nike swoosh on their uniforms until 2006.

Nike shoes have become the gold standard of sports. The Nike swoosh has been

omni present on sports products and in many sports venues and will continue to be for

years to come. Its Swoosh trademark is as recognizable as the Stars and Stripes and may

be better known than the McDonalds’ Golden Arches or even Jell-O (Reilly, 1997).

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Sneakers are not a necessity, but they are not a luxury either. Almost everyone has

at least two pairs of sneakers, but the only possible difference would be the brand of the

sneakers and one pair is usually Nike. Nike has been able to sustain a competitive

advantage since their beginning. They have established their name through

advertisements, endorsements, quality, and innovation.

What Nike has done is create a link between a solid product and a solid company.

Consumers trust the products that Nike Inc. sell. This has been the key to Nike’s success

and is one of the main reasons why they are able to charge what can be viewed as very

exorbitant prices that they do for their sneakers. However, this is the way Nike sneakers

make their revenue. The fact is consumers are not just buying the shoe they are also

investing in the label.

Target Market

Nike has done a remarkable job of positioning itself. They have had to reinvent

themselves many times in order to reach its target market. Nike has gone through a

running craze when consumers wanted the best running shoe. There was the coming of

Michael Jordan where basketball shoes ruled the footwear market. Then athletic urban

wear became king when consumers started buy Nike just for a fashion purpose. Nike has

been able to create an emotional link with their customers, and more specifically their

target market.

It is extremely important to clearly define your target market and to think about

how the product fits into their life (de Asis, 2002). Nike has been able to do this. Nike

considers its customers as any and every athlete and more specifically, they target those

who endeavor to do their best in sports. For that reason, Nike markets to those who desire

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to become “champions” in whatever they do. Nike currently sells about 300 models of

athletic shoes in 900 styles for 25 different sports (www.Nike.com). (Exhibit 2) Running

shoes take the greatest share of consumer spending composing of 29% of the total market

(Werth, 2002), while basketball shoes account for 18.3% of total consumer spending for

sport shoes (Lenetz, 2002). (Exhibit 8) In addition, in a bold move to continue its market

dominance, Nike is spending more marketing dollars on soccer than basketball in a

concerted bid to become the No. 1 soccer brand by 2006 (Nike Heats…, 2002). However,

Nike also sells more casual shoes to those who do not consider themselves as “die hard”

athletes. In its goal to diversify its footwear line, this has given Nike a very broad

customer base. (Exhibit 8)

Even with its broad customer base, Nike is not really considered a Gen-X or baby

boomer brand. The average age of a Nike consumer is 25 and their main target market

for their shoes are males and females between 15 and 35 years old. More specifically,

Nike concentrates on the fashion-conscious 18- to 24-year-olds with cash to burn

(Markiewicz, 2002). Nike has been concentrating more so on the affluent teen

demographic. The growth opportunities in the teen market are enormous. Young adults

12-24 represent the fastest growing market segment since the baby boom and are

estimated to exceed 40 million by next year (Fusient Media, 2001). In addition, there are

currently 56 million boys and girls between the ages of 10 and 24 in the U.S and it is

growing 19.5% faster than the overall U.S. population and accounts for more than $250

billion of annual disposable income (Silverstar Holdings…, 2001). There are also more

than six million teens involved in sports. Nike understands that there is an extraordinary

opportunity exists in this valuable market.

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The teen market is as fickle and bewildering, but teenagers have money and are

willing to spend it, whether it is theirs or their parent’s. Teens are spending an average of

$135 per month on apparel and related products, an increase of 23% over last spring's

$110 total and are looking for more brand names, such as Nike (Teens…, 2002). (Exhibit

10) Over a 30-day period teens shop at a supermarket 5.3 times, at a convenience store

4.7 times and in a mall setting 4.3 times and 36% of teens also claim to have at one time

or another purchased something online (teen shopping…, 2002). This is why the

emphasis remains on the young. They represent the future life-blood of the market.

Even though Nike is concentrating on their younger demographic, they have not

forgotten the more steady adult market. Nike likes to stress their shoes' general trendy

styling and superior performance in a given sport, which is more important to adult

shoppers. Nike is a strong example of a company that markets to both adults and

children with equal impact, and without dilution of the brand image. (Baby Steps: 2003).

The adult market, specifically baby boomers, are only getting bigger in numbers and are

probably the wealthiest component of our society that currently account for nearly 30%

of the $15.7 billion in annual sneaker sales, second only to the teen market (Yen, 2003).

Nike has also made a dramatic push in recent years at the long forgotten female

market. A lot of this is directly due to the fact that spending for women's sports apparel

and related products has grown at a greater clip than spending for men's. Women also

make about 60% of all sports apparel purchases and the women's category accounts for

about 45% of total spending (D'Innocenzio, 2002).

In response to these trends, Nike has signed prominent female athletes, such as

Sheryl Swoopes and Gabrielle Reece in hopes of attracting more female shoppers. Nike

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has also developed more versatile sneakers because women definitely want a product that

looks good, but also has key performance benefits (Buss, 2002). It is looking to meet all

the athletic needs the female shopper.

Nike has also gone a step further than any other athletic footwear company to

attract more female shoppers by opening any all-female store, Nikegoddess. The hope

here is to make the retail experience more meaningful to their female demographic while

providing a concentrated consumer input and feedback loop. It provides a very intimate

setting with a unique look and feel in terms of the environment of the store that is

designed to address the needs of the female shopper. Nike will use Nikegoddess as a way

of determining how to approach the women's business (D'Innocenzio, 2002).

Nike has realized that their brand does not have to exactly represent their target

market's description or lifestyle. However, Nike also realized that it must at least be

compatible with the company’s target market and it must match their consumer's profile

and expectations. Nike has built its brand around star athletes, such as Tiger Woods,

Ronaldo, Martina Hingis, and Kobe Bryant, to name a few. However, Nike does not just

sell shoes, but an image. It is selling the mythology of sport, and the surrounding

philosophy of youth, health, fitness, and the sort of in-your-face rebellion that appeals to

the adolescent in all of us. Nike works because their product, icon, and target market are

all seamlessly integrated into one ideology. All this has allowed Nike to make their

brand more relevant and familiar to their target market. Nike may have a specific target

market, but the way Nike has been marketed allows everyone to think of the Nike brand

as "my kind of product."

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Pricing

Nike's business model is based on the total revenue equation, TR=P*Q, which

means that in order for them to make a profit they must maintain high margins while

expanding sales. This business model is normally consistent with demand curve pricing,

which means that if you raise prices, demand will decrease and vise versa. However, in

the case of prestige goods, the demand curve sometimes slopes upward. Some

consumers believe that they getting a better shoe at a higher price, but that all depends on

the perceived value of the brand, which will be discussed next.

Nike practices a premium pricing policy. (Exhibit 11) Prices range on the high

end from $200 for a pair of Gary Payton Basketball sneakers to $175 for either a pair of

Tiger Woods golf shoes or the new Air Jordans. A pair of women’s running shoes will

run you as much as much as $150, $140 for a pair of lifestyle shoes, or $130 for a pair of

soccer sneakers. On the low range prices range from $30 for a pair of men’s sandals or

$50-$65 for a pair of casual sneakers and $20 for a pair of women’s sandals and $30-$45

for a pair of casual/leisure sneakers. You are not only paying for the “best product,” you

are also paying for the Nike brand. (Exhibit 12)

Nike is able to charge a premium for its sneakers because of the strength of their

brand. Its brand recognition is very high and it has a strong international base. Because

Nike is an established premium brand, the pricing strategy should clearly demonstrate the

high quality and style of the brand, if the product is to meet the consumers' needs for

image and social status. This pricing strategy is based on the consumer's perceptions of

value and a strong brand such as Nike usually equals a higher perception of value. A

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strong brand allows you to maintain a certain amount of pricing premium and consumer

interest, which is beneficial to the sales and margin growth the product should generate.

Nike may have a premium pricing policy and it may be able to do so because it is

a premium and established brand, but it is very important to remember that the consumer

decides whether a product’s price is right. That is why, pricing decisions are buyer

oriented like the other marketing mix decisions. The willingness to pay is the maximum

price a customer will pay for a specific product at a certain performance level and the

higher the perceived value of a product, such as sneaker, the more the customer is willing

to pay for it (Butscher & Laker, 2000). However, effective buyer-oriented pricing

involves understanding how much value consumers give to the product and setting a

price that fits this value. If consumers perceive that the price is greater than the product’s

value, they do not buy the product. In addition, if consumers perceive that the price is

below the product’s value, they buy but then the seller loses from its profit opportunities.

This is where target-costing/pricing approach becomes very important. (Exhibit 13a&b)

Target-costing/pricing approach can help maximize return on products with short life

cycles while determining the value consumers give to the product.

Nike also incorporates a dual-pricing strategy, which means that after a new

sneaker ($90+) is introduced, Nike will sell off the rest of the “old product” at a lower

price corresponding to its relative market values. Nike displays its latest shoe models

first at premium retailers like Footlocker or Niketown and sells its older shoe models at

discounters and outlets (Billington, Lee, & Tang, 1998). Nike’s target-costing approach

plays an important role here also because as mentioned earlier, it can help maximize

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return on products with short life cycles while determining the value consumers give to

the product.

Finally, Nike does not offer a price-matching program because as the

manufacturer, they can only suggest a retail-selling price. If Nike were to do so, they

would be "price-fixing," which is against business law. A retailer can determine if they

want to lower the price for competitiveness and keep in with the selling costs of the

current market (www.NikeTown.com).

Nike footwear can be bought online from any retailer that has a website. There

are a variety of ways a person could pay for their Nike’s online, like online check, debit

card, or credit card. At Nike the only payment mechanism that is used is a credit card

because it is the safest and most secure way to guarantee payment for the product. It is

also a way of protecting the consumer. Nike footwear is available at a number of local

retailers so if you do not have a credit card they can be purchased at your local retailer.

Purchasing footwear through NikeTown.com or NikeGoddess.com is not necessary it is

just another added service Nike provides for purchasing their footwear.

Distribution

Nike has a very extensive and complex value chain system. Tens of thousands of

sneakers get piled onto cargo ships from Asia and sent to distribution centers in the US.

Nike is a manufacturer without factories, meaning that they separate the physical

production of goods from the design and marketing stages of the production process

(Gereffi, 2001). Since all Nike footwear products are produced outside the U.S., Nike

has to monitor the distribution of its footwear from its production centers in Indonesia,

China, and so forth to their two main distribution centers in the U.S. in Memphis,

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Tennessee and Wilsonville, Oregon. Nike also owns or leases several other U.S.

distribution centers. (Exhibit 15)

When Nike footwear is shipped from Asia to the Wilsonville, Oregon distribution

center is one of the first stops it makes before being sent off to their various retailers. It

ships out 26.6 million pairs of footwear each year (www.NikeBiz.com). The Memphis,

Tennessee distribution center (Exhibit 16) serves as the other main distribution centers in

the U.S. for Nike footwear. It is a major force in the U.S. making sure Nike’s footwear

gets to their retailers.

Nike operates 19 distribution centers in Europe, Asia, Australia, Latin America

and Canada. They have had more distribution centers in the past, but because of EU

policies Nike closed around 20 distribution centers throughout Europe and replaced it

with a main center in Belgium for all of Europe. (Exhibit 15)

Nike markets its products in approximately 140 foreign countries through a

number of independent distributors, licensees, subsidiaries and branch offices. It also

operates 162 retail outlets outside the U.S., which are comprised of NikeTowns, factory

stores, employee stores and Cole Haan stores.

In the U.S. Nike sells its products to approximately 18,000 retail accounts, which

include main retailers such as Champ's, Eurostar, Finish Line, Footaction, Footlocker,

Hibbett's to name a few. Recently, Hibbett cut a deal with Nike that lets the company

import goods directly from the Far East instead of going through Nike's distribution

center, which cut their freight costs quite a bit (Reeves, 2002). Many of Nike’s retailers

also include various department stores and smaller local “athletic stores.” Finally, there

are a number of Nike retailers. Nike runs 13 NikeTowns in major cities, over 70 Nike

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Factory Stores featuring healthy discounts on recent inventory and a few Nikegoddess

stores. This is not to mention the Nike’s online retailer, www.Nike.com or

www.NikeTown.com. Nike has 17 regional sales offices throughout the U.S., which are

responsible to taking orders from retailers and maintain inventory. (Exhibit 17)

Nike has recognized the importance in monitoring value chains and its

distribution is as about as tight as you can make a consumer goods-oriented business. It

is actively working with their many logistics vendors. They are incorporating the latest

warehouse management software with Nike’s system in order to manage their shipping,

inventory, distribution, etc… Toll’s integrated logistics solution has consolidated three

Nike distribution centers into one in Altona, Victoria (Rennie, 2002). Last year Menlo

customized and staffed Nike’s distribution center in Memphis (Menlo in…, 2002). In

addition, Emery Forwarding, which is part of the Menlo Worldwide group, provides Nike

with its integrated "QuickSource" logistics program that combines inbound/outbound

transportation, storage, inventory management and order fulfillment 24 hours a day,

seven days a week.

Mallory Distribution Centers (MDC) is the logistics and warehousing arm of The

Mallory Group and provides warehouse logistics services, including inspection and

packaging for Nike (www.mallorygroup.com). FKI Logistex is the world’s second-

largest materials handling systems company and provides Nike with an automated

logistic system for handling parcels and packages, particularly in the overnight courier

market (www.fkilogistex.com). Another of Nike’s vendors, Island Pacific, provides them

with fully integrated suite of software to manage the entire range of their merchandising

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activities assuring that merchandise desired by customers is in retailers' stores priced

competitively (Island Pacific…, 2003).

Finally, the UPS Logistics Group has tailored shipping information for Nike’s

online retail store www.NikeTown.com. If you place an order for sneakers online from

Nike, a UPS Logistics Group company has had its hands all over your order. UPS stores,

packs, and ships all goods ordered through the Nike Web site. It stocks shoes and warm-

ups in their warehouse and fulfills orders hourly, loading goods into trucks headed to the

hub (Eskew, 2000).

Nike prides itself on its ability it effectively and efficiently manage its value chain

system. By effectively and efficiently managing its value chain, Nike’s goal is to reduce

its cycle time, reduce its inventory costs and lower its overall spending on transportation,

and so forth. Nike believes that they have been able to achieve this goal with their

various logistics vendors. With its core logistics vendors, Nike has been able to better

server all of its consumers by being able to cut costs and improve shipment time and

inventory turnover. Satisfied customers and an effective and efficient distribution system

is a key aspect of Nike’s marketing strategy.

Promotion

Nike shells out about $1 billion a year, or a tenth of its annual revenues, on

creating demand for its products through marketing (Herzog, 2003). It uses a product

oriented advertising campaign meaning Nike is trying to convince the consumer to

purchase their product. Nike has been able to develop successful advertising campaigns

and effectively market their footwear through the hard work of their many ad agencies.

Throughout the years Nike has had many different advertising campaigns, some

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more successful than others, but were always created to reflect public opinion. Some of

the major strategies used to achieve this goal are the use of television,

magazine/newspaper, and online promotion. (Exhibit 20 & 21) Nike has been

successfully using traditional promotion tools since its inception. However, Nike was

slow to respond to the e-commerce market and online promotion methods and it did not

fully embrace them until well into the new millennium. Nike finally realized that the

Internet can leverage and enhance the other vehicles such as media advertising,

promotions, sponsorships and publicity (Narisetti, 1998).

Nike has never been one to use traditional online promotions. It has not invested

much in banner ads or search engines because anyone that knows Nike knows that they

also have a website. They do not need to use a search engine to find NikeTown.com or

Nike.com. In addition, almost all of their TV ads have their website address on it.

Furthermore, Nike products are sold by hundreds of retailers and any number of them can

have a website so it is the responsibility of that retailer to promote their site. If you type

in Nike in a search engine any number of retailers that sell Nike’s will pop up along with

Nike.com and the NikeTown site. Even if you type in Nike sneakers the Nike websites

do not even make it into the top 100 search returns. Nike does however, promote their

website and use banners on top online malls, such as 24HourMall.com.

Because of clutter caused by pop-ups, banner ads and many other online

annoyances, Nike has pushed the envelope to develop unusually sophisticated and

engaging Web offerings (Elkin, 2003). When Nike first wanted to generate traffic

towards its website in 2000, it used the combination of rich media Web advertising, a

cliffhanger TV spot, and an engaging e-commerce-enabled site (Jackson, 2001). Part one

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of the advertisement was a normal TV commercial. However, in order to see the

conclusion of the commercial, the individual would have to sign on to the Nike website.

It was the first time traditional advertising was used to send its viewers directly to the

Internet. This not only increased Nike’s already high brand awareness, but also increased

website traffic and sales. The fact is the future of online advertising is more about

applications than ads because those applications involve the user in new, unique, and

most importantly interactive experience (Carton, 2003). An application such as rich

media allows you to create so much more of an emotional experience for people

compared with a banner ad (Rewick, 2000). By inviting a consumer to participate in

something interactive will reward them for their participation, often in the form of

more/specific information that matches their needs or some degree of entertainment

(Jaffe, 2003).

In keeping with the style and philosophy of their TV ads: sports as self-

realization, Nike’s online ads and promotions place a lot of emphasis on athletic

potential. They utilize limited video-like images as icons/links to additional pages to

showcase their products. Nike called upon several companies for its online branding and

advertising solutions. Viewpoint worked directly with Nike to provide a complete rich

media solution for an interactive product presentation at the Nike Shox website.

Customers were able to look at all of the shoes in the Shox line from any point of view

and could also take the shoe apart and examine its separate components (Nike Shox).

Traffic to Nike’s online store dramatically increased along with sales. The Nike Shox

site received an estimated 540,000 hits and NikeTown.com sold out all three Shox line

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products within 24 hours of their release. They continued to be top sellers daily in the

NikeTown with almost 4,000 units sold in the first 4 weeks after launch (Nike Shox).

Nike is also actively using Macromedia Flash and Director and Shockwave on its

various websites, like NikeBasketball.com. Macromedia, the maker of the popular Flash

tool for Web animations, actively works with YaYa, Radius Inc., and Zendo Studios to

provide Nike with additional interactive applications on its various websites. Flash is one

of the most widely used development applications for Web sites, advertisements and

games. YaYa worked with Nike to design a Vince Carter slam-dunk game. The game,

which launches from an email sent by Nike to a targeted audience, begins by letting

players choose their own shoe color of Nike Shox basketball sneakers (Vitzloff, 2001).

Players can then email their high scores to their friends, which they can try to beat. This

is email advertisement with an interactive twist.

Zendo Studios created the Nike Freestyle Remixer, which is an innovative online

entertainment piece featured on NikeBasketball.com. This is an interactive online

extension of Nike’s Freestyle TV ad that features pro basketball players and streetballers

showing off their hottest ball-handling skills (Chu, 2001). Nike and Zendo have given

users the ability to create their own re-mix of the video and send it to their friends via

email. The Freestyle Remixer is one of the most-visited features of NikeBasketball.com

and it has allowed users to simultaneously create and consume a video experience

(“Zendo Studios: 2001). Nike has just used this as another interactive email

advertisement.

Another important interactive feature that Nike has added to its website is

NikeiD.com. NikeiD lets customers design their own shoes. They can select from 1,000

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or more possible design combinations, which are basic style, colors, size and a brief

phrase of your own creation that appears on the back of the shoes. Customers can then

view their personal designs from a variety of angles, as discussed earlier. Nike spent six

months working with suppliers in Asia to rejigger its manufacturing for custom-made

sneakers (Keenan, 2002). NikeiD has been able to draw steady traffic and 20% of

sneaker sales at the site are customized (Swartz, 2002). This is just another hands-on

interactive tool that wraps Nike products in an engaging, relevant brand experience, while

also being able to recreate Niketown's intensity and popularity (Fleming & Shiple, 2001).

Finally, NikeTown.com provides customers the opportunity to locate a store near

them that sells Nike products, if you do not or cannot shop online. The store locator is

powered by Vicinity and it provides customers with locations, directions, distance, and

contact information to Nike retailers' up to 500 miles of your location. Vicinity has more

than 280 clients with an aggregate of more than three million real world store locations

(Christopher, 2000).

Basically, Nike realizes that different consumers are going to connect with them

in different ways and they want the consumer to have a brand experience that's relevant

to them (Elkin, 2003). It has been through these interactive and engaging promotions that

have helped generate all the traffic and sales on Nike’s websites. Nike was even named

Advertiser of the Year at this year’s One Show Interactive (Creative; 2003). (Exhibit 24)

Nike has a number of ad agencies, such as Wieden & Kennedy, R/GA and

DoubleYou, which have created a number of e-commerce sites for Nike. The uniform

mind-set among them has been to resonate with the consumer in as many ways as

possible and that has been to through deep interaction with the Nike brand (Taylor,

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2003). Nike is continuing to look for ways to do more with online advertising as a brand

communication medium, such as leveraging their TV creative and giving it impact online

(Hayes, 2003). They also continue to do a lot more with services and tools that enhance

the Nike brand from a value-added service point (Hayes, 2003), which should continue to

increase traffic to the Nike sites, while quite possibly increasing sales.

Pro Forma Financials

The sneaker market is an elastic one and is dependent on the economy and the

health of the retail market. As the economy and/or the retail market goes so does the

sneaker market. Since consumer confidence and spending is increasing and the economy

continues to improve, Nike has great growth potential and should continue its dominance

well into the future.

Most recently Nike’s sales grew 8% to it over $10 billion mark for the first time.

In addition, last year sales grew by almost 7% to just under $9.9 billion. (Exhibit 25)

What has made this growth so impressive is that it has come on the heels of the

Footlocker Nike feud. This has been a battle that has gone on for over a year and it

started when Footlocker cut the number of Nike sneakers priced above $100. In

response, Nike cut its sneaker shipments to Footlocker by roughly 40%. Footlocker has

been their most profitable strategic alliance, until now. It has and will continue to effect

US sales the longer the dispute goes on. However, even though Nike’s US footwear sales

have fallen around 1% from last year and by almost 5% since 2001, Nike’s sales have

increased significantly because of a greater reliance on non-U.S. markets. (Exhibit 25)

Nike is still dependent on the US footwear market and cannot allow this dispute

with Footlocker to continue. However, there is still greater growth potential

21

internationally and Nike has learned to develop that market since their dispute with

Footlocker. If and when this dispute resolves itself, nothing should hinder Nike’s sales

potential.

Nike spends on average over $1 billion on advertising and promoting their

products and three-quarters of that is spent just on their footwear. Advertising production

costs are expensed the first time the advertisement is run. TV and print placement costs

are expensed in the month the advertising appears. The majority of Nike's promotional

expenses result from payments under endorsement contracts. Accounting for

endorsement payments is based upon specific contract provisions. Generally,

endorsement payments are expensed uniformly over the term of the contract after giving

recognition to periodic performance compliance provisions of the contracts.

Total advertising and promotion expenses have continued to increase each and

every year. They will continue to increase, especially with the recent signing of Lebron

James to a $90 million endorsement contract and Kobe Bryant to a $40 million one. Nike

has seven of the top ten most expensive endorsement contracts. (Exhibit 9) Nike’s

advertising and promotion expenses have increased almost $50 million since 1999.

(Exhibit 26)

Nike has made a name for itself through its advertising and promotion. It does

not hold back when advertising and promoting their products. When expenses need to be

cut the advertising and promotion budget is usually left untouched. As was already

mention, Nike uses a variety of traditional and Internet advertising and promotion

techniques. They are looking to increase the brand identity and consumers value

perception. The stronger the brand, the higher the perception of value, which leads to an

22

increase in sales. With Nike’s goal to continue to dominate the global athletic product

market, they will continue to increase their advertising and promotion budget. It is

expected that by 2006 Nike will be spending over $125 million more then they do now to

advertise and promote their products. (Exhibit 26)

23

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33

Appendices:

Exhibit 1:

Nike Timeline:

Year

1938 Phil Knight: Born, Portland, USA

1959 Graduates from the University of Oregon where hemet coach Bill Bowerman

1962 Graduates from Stanford University where his MBApaper was on trainer manufacturing

1964 Sets up Blue Ribbon Sports with Bowerman to importtrainers from Japan

1971 Nike, named after the Greek goddess of wingedvictory, is founded. The swoosh is designed byPortland University design student Carolyn Davidson,who is later paid in shares

1972 Bowerman invents the waffle trainer sole

1974 Jimmy Connors wins Wimbledon wearing waffleNikes

1980 Nike lists on the New York stock exchange

1984 Carl Lewis and Nike dominate the LA Olympics

1985 Knight signs unknown basketball rookie MichaelJordan

1987 Nike launches Air Max

1988 Nike ad man Dan Wieden says "you guys just do it" ata meeting. A company slogan is born. “Just Do It”

1997 Nike's rookie golfer Tiger Woods wins the Masters bya record 12 strokes

1998 Signs $17m (£11m) annual deal with Brazilianfootball team.

2000 Nike signs £300m deal with Manchester United givingit rights to all of United's merchandise

2003 Nike announces third quarter results with sales up 6%to $2.4bn (£1.4bn) and profits of $125m. Annual salesare forecast to be $10.6bn

Source: (Hatfield, 2003)

Exhibit 2:

Nike History:

34

Source: (NIKE HISTORY, Dec2002/Jan2003).

Exhibit 3:

Nike Sneakers:

Cross-Trainers $85.00 Nike Shox’s $95.00

35

Air Resolve – Tennis $75.00

Air Jordan’s $175.00 Air Payton’s $200.00

Tiger Wood’s Golf Shoe $175.00

Air Max Griffey – Cross-Training $140.00 Nike Shox TL – Running $150.00

36

Air Zoom Total 90 II F.G. – Soccer $150.00

Air Rift Leather B (unisex) – Lifestyle $100.00 Air Vos – Walking $75.00

Air Zoom Talac – Outdoor $140.00

Exhibit 4:

Nike CompetitorsDIRECT COMPETITOR COMPARISON

NKE FLH RBK ADDDY.PK Industry

Market Cap: 14.12 B 106.16 M 1.99 B 206.25 M

Employees: 22,700 2,099 7,400 2.40 K

Revenue Growth (ttm): 4.30% 4.50% 3.50%

37

Revenue (ttm): 9.89 B 3.13 B 471.55 M

Gross Margin (ttm): 40.98% 38.95% 37.44% 35.28%EBITDA (ttm): 1.17 B 66.69 M 248.63 M 38.04 MOperating Margins (ttm): 10.50% 2.81% 6.30% 3.66%Net Income (ttm): 740.10 M -63.65 M 135.29 M 10.60 M

EPS (ttm): 2.77 -1.42 2.09 0 0.606PE (ttm): 19.16 16.11 14.813PEG (ttm): 1.23 1.02 0.930PS (ttm): 1.31 0.11 0.63 0.452

FLH = Fila Holdings SpARBK = Reebok International LtdADDDY.PK = Adidas-Salomon AGIndustry = Apparel, Shoes & Accessories IndustryNike, Inc. Competitors. Yahoo! Finance: http://beta.finance.yahoo.com/q/co?s=NKE

Exhibit 5:

Nike Athletic/Casual Footwear CompetitorsAdidas Salomon, Inc. Fila

Kenneth Cole Productions, Inc. K-Swiss, Inc.New Balance Reebok International Ltd.Saucony, Inc. Skechers U S A Inc.

Steven Madden Ltd. The Timberland CompanyVans Inc.

Exhibit 6:

Market share2002 market share of U.S. athlete shoe

market based on wholesale value of retailshipments

Brand Market ShareNike 39.1%

Reebok 12.0%New Balance 11.6%

Adidas 9.6%(McCarthy, 2003)

Exhibit 7:

Sneaker sales: 1998 – 2003

38

1998 -3.3%

1999 -1.4%

2000 2.7%

2001 2.7%

2002 2.5%

2003 (estimate) 4.4%

(McCarthy, 2003)

Exhibit 8:

Athletic footwear U.S. retail dollar sales byclassification:

Shoe Type Sales PercentageRunning 27.9%

Basketball 15.6%Cross training 10.9%

Walking 9.1%Low performance 6.3%

Hiking 6.3%Tennis 4.8%

Skateboard 2.7%Sport sandals 2.6%

Other 14.3%Source: (McCarthy, 2003)

Exhibit 9:

Top 10 endorsement contractsAthlete Contract Company

Tiger Woods $100 million NikeLeBron James $90 million NikeAllen Iverson $50 million Reebok

Michael Jordan $47 million Nike, OthersKobe Bryant $40 million Nike

Venus Williams $40 million ReebokMartina Hingis $30 million NikeLleyton Hewitt $30 million NikeTracy McGrady $12 million Adidas

David Duval $8 million Nike

39

Source: (Top Shoe Endorsement Deals for Athletes, 2003)

Exhibit 10:

The Coolest Brands According to consumers 13 - 18 years old

BRAND TOTAL MALES FEMALESNIKE 23% 28% 18%SONY 13% 22% 5%

ADIDAS 13% 12% 13%A&F 10% 8% 12%

OLD NAVY 9% 6% 12%Source: (Teen Shopping…, 2002)

Exhibit 11:

Source: (http://www.theproduct.com/6m147/solutions/nike.pdf)

Exhibit 12:

Nike Marketing Channel

Manufacturer Wholesaler RetailerLabor $2.75 Nike's payment to $20.00 Retailer CGS $36.48

40

factory (CGS) (from Nike'sSP)

Materials $9.00 Sales, general &administrativecosts

$5.00 Other expenses& profit

$12.50

Factory Overhead $3.00 Advertising,promotions &endorsements

$4.00 Rent $9.00

Other Operatingexpenses and net income

$5.25 R&D $2.00 Other cost $7.00

TOTAL $20.00 Taxes $1.82 Personnel $9.50

Interest Expense $.33 Average RetailSP

$74.48

Net Income $3.33TOTAL SP $36.48

None of these figures are representative of Nike’s actual pricing structure. Its purpose is to give a genericexample of Nike’s marketing channel and how it would determine a price for their sneakers. Nike has toincorporate product-mix, pricing strategies because there are more than one Nike product. In product-linepricing, Nike must decide on the price steps, such as cost differences between the products, customerevaluations of their different features, and competitors’ prices, to set between the various products in theline. From there, Nike must establish perceived quality differences that support the price differences.Those “premium sneakers” such as the Air Jordans, Air Paytons, or any shoe that is endorsed by a sportscelebrity would have a higher cost because the name attached to the Nike sneaker. However, Nikeconsiders all of its footwear as a “premium shoe” whether it is endorse by a sports celebrity or not. Nikegoal is to provide a competitive edge to anyone who wears their shoes and by doing so they have enhancedperformance by reducing weight, developing new sizing and fit concepts, rethinking the traditional mix ofoutsole, midsole and upper, new materials and closure systems, sustainability in production(www.NikeBiz.com). This means that you are also paying for the technological innovation that goes intothe development and manufacturing of their shoes. Basically, you are paying for the Nike brand, anyendorsements, and the technology involved in the shoe. You must also take into consideration the targetmargin and the dealer’s margin. A pair of Nike running shoes for example may cost only $15 to $20 toproduce, however, they retail for four times the factory cost in the U.S. (Larson, 1996). All of these factorsmust be taken into consideration when Nike prices their shoes.

41

Exhibit 13a:

Source: (Butscher & Laker, 2000).

Exhibit 13b:

This shows the example of a new basketball sneaker from JUMP that had several advanced features and amodified cushioning technology. The cost of the sneaker was $40, dealer price $80 (target margin of100%), and a market price of $120 (dealer's margin of 50%). Sales projections were thin so JUMP decidedto reevaluate the new shoe using the target-costing approach and it was discovered that the target segmentspreferred a less elaborate shoe. The maximum acceptable price for such a shoe was determined to be $99.

42

Deducting the 50% dealer margin-subtracting 33% from the $99-led to a price to the dealer of $66($66+50%=$99). Deducting the 100% target margin from that price-subtracting 50% from the $66-resultedin a target cost for the sneaker of $33 ($33+100%=$66), $7 lower than the current cost. JUMP was able toslash the cost to $33 by slightly redesigning the sneaker to lower the production cost and by optimizingtransportation from the Asian production plant to the distribution centers globally. It launched the sneakernine months after the original target date (Butscher & Laker, 2000).

Exhibit 14:

2002 Average Retail Price per Pair - 1997 Average Retail Price per Pair5-Year Percentage Change

Shoe Type 2002 1997 PriceChange

1.) Hunting $64.79 $58.46 10.8% Hunting boots carried the highest price tag of allsports footwear in 2002, mainly because of theirexpensive components, which often includeThinsulate Insulation and a Gore-Tex bootie. Theseboots are designed to keep feet warm and dry in allweather conditions.

2.) Golf $62.12 $60.11 3.3% It's not just the pricey clubs that makes golf anexpensive sport. The components incorporated intomost golf shoes can also drive up price points. Inaddition to featuring typically soft-grain leather and asoft, cushioned footbed, most golf shoes also employsophisticated outsole technology that includes spikesystems.

3.) Basketball $56.12 $55.57 1.0% Today's court-conscious consumer considersperformance as well as street fashion when it comes tobasketball shoes. Industry watchers tie the category'srecent success to the popularity of more mid-pricedshoes from brands such as Nike, Adidas and NewBalance that now incorporate better technology andmore fashionable styling.

4.) Cycling $53.67 N/A N/A Cycling shoes are a study in striking a balancebetween weight and stiffness. The goal is to ensureless rotational weight on the feet to help the rideraccelerate faster, while providing hard soles forpedaling efficiency. Other typical design featuresinclude ultralow stack height and uppers using mixesof synthetic leather and mesh to provide breathability.

5.) Volleyball $53.28 $50.88 4.7% Built for maximum shock absorption and stability,volleyball shoes often contain a combination leatherand mesh upper, with a compression-molded EVAmidsole containing foam in the heel.

6.) Jogging/Running $50.99 $48.71 4.7% Running has been a growing athletic shoe categoryduring the past few years, due mainly to the category'sconstant technological innovations and the popularityof the running silhouette as casual footwear. Forspring 2003, running shoe vendors addressed theneeds of both serious and casual runners by launchingproduct that focuses on various aspects of motioncontrol.

43

7.) Trail-Running $49.68 N/A N/A Performance-enhancing components such aswaterproofing systems, Kevlar lacing and meshdetailing have become key purchase points for thetrail-running consumer. But while technology ispivotal, developers need to be careful not to let itoverwhelm the shoe.

8.) Track $47.28 $39.40 20.0% Most outdoor track-shoe styles contain removablespike plates, which are designed to give the racergreater power and efficiency. For athletes in multipleevents, track shoes often contain extra heel cushioningand a rubber outsole for flexibility and protection.

9.) Hiking Shoes/Boots $46.42 $45.59 1.8 % Hiking shoes vary greatly in price depending on theterrain and distance they're designed to cover and theamount of waterproof protection offered. Many longerhiking trips require higher-topped, stiffer boots, oftenwaterproofed and containing a hard plastic or steelshank designed to keep the boot and ankle fromtwisting during hiking.

10.) Cross-Training $46.10 $49.96 -7.7% Cross-training shoes were actually the only sport shoecategory in the top 10 to see a decrease in averageprice. The category's popularity has deteriorated dueto rising demand for more specialized athleticcategories such as running and basketball. What'smore, vendors have been slow to introduce innovativeproduct specific to the multisport concept.

Source: (Sports Nut: Top Ten Priciest Sport Shoe Categories, 2003)

Exhibit 15:

46

Source: (http://nike.jp/nikebiz/global/pdf/repo/vision.pdf)

47

Exhibit 16:

Nike distribution center in Memphis, Tennessee

Source: (Maloney, 2000).

48

Exhibit 17:

Nike Regional Sales Offices

Source: (www.NikeBiz.com)

Exhibit 18:

Nike Locations in Europe, Middle East & Africa

Source: (www.NikeBiz.com)

49

Exhibit 19:

Source: (http://nike.jp/nikebiz/global/pdf/repo/vision.pdf)

50

Exhibit 20:

Summarizes some of the media characteristics.

TV Radio News-paper(Sundayand daily

Magazine Posters Directmail

Web sitebanner ads

Audiencesize

Somewastage,large andnational (alsointernational

Nationalcoveragepossible

Large andmostlynational

Mostlynationalandinternational

Nationalcoveragedifficult

Largenationalandinternational

No nationalcoverage butglobalsegments 100million+

Audiencetype

Few 15-14years old

Manyhousewivesandcommuters

Socioeconomic

Lifestyle/Demographic

Commu-ters, cardrivers

Anytargetavailable

Beyondtechies.middle class,educated

Cost ofproduction

High Low Low-medium

Low-medium

Medium Low Low but likedweb site maybe high

Extraadvantage

Addscredibility toproduct andcompany

Transportablemedium

Quality Inexpensivemethod ofgaining webpresence(withouthaving tobuild)

Messageelements

Sight, sound,color,movementtime constraint

Sound andtimeconstraint

Nowmostlycoloredwith someblack andwhite

4-colour 4-colourand 3-Dpossibility

4-colour, 3-D,movement,sound,interactive

Serial adsequence

Viewedserially, nocompetitionfrom otherads oreditorial butzap

Serially, lesszapping

Must compete withthe other ads andeditorial on samepage

Non-linearmedium canjump backand forward

Transition Highly transitory since onecan not refer back to ad onceshown (unless taped)

Can keep clippingsor refer back ifdesired

Can referback, walkback or drivepast

Canreferback/keepcoupon

Non-linear

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Demonstration

Ideal for usageand impulsepurchase

Difficult Benefits or resultscan be shown butnot product usagedemonstration

Only shortimage benefit

Yes Yes

Detail/technical

Viewer can notabsorb detail

Urgencyandtopicality

Yes Yes No Yes yes

Ease ofmediabuying

Flexible Inflexible Inflexible Flexible

Yes

Lead times Long Short Short Medium long

Long Shortmedium

Short

Highfrequencyfacility

Hourly and daily Hourlyand daily

Yes Weekly/monthly

? Yes Yes

Nationalcoverage

Yes Yes Yes Yes Yes Yes No but globalsegments

(Smith, P.R., 2002)

Exhibit 21:

Source: http://www.pg.dk/advertising/thomsen.pdf

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Exhibit 22:

Source: http://www.pg.dk/advertising/thomsen.pdf

Exhibit 23:

Top 25 Search Engines

1.) Google - Google UK - Google ImageSearch

2.) Ask Jeeves - Jeeves For Kids - AskJeeves UK

Google is a search engine that makes heavyuse of link popularity as a primary way to rankweb sites. Users across the web have inessence voted for good sites by linking tothem.

Innovative online search service thatprocesses plain-language queries withsurprising accuracy.

3.) Lycos - Lycos UK 4.) Alta Vista - Alta Vista UK - babelfishtranslator

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Lycos has been around since the early days ofthe net and is still one of the most popularsearch engines. The service employs humaneditors for some of its listings, complementedby crawler-based results. The name Lycoscomes from the Latin for "wolf spider."

An awesome site from Digital, it maintainsa HUGE index with powerful and FASTsearch functions. Coverage is excellent so itis good for broad searching and for offbeatsubjects but you can be overwhelmed by toomany hits. The Advanced Search is usefulfor finding images, MP3/audio and videofiles, and there's the useful BabelfishTranslator.

5.) LookSmart - Looksmart UK 6.) Yahoo! - Yahoo UK

LookSmart is the closest rival Yahoo has, interms of being a human-compiled directory ofthe web. The high quality of the directory isthanks to a team of nearly 200 full-timeprofessional editors.

Yahoo is the web's most popular searchservice and has a well-deserved reputationfor helping people find information easily.The secret to Yahoo's success is humanbeings. It is the largest human-compiledguide to the web, employing 80 or moreeditors in an effort to categorize the web.Yahoo has at least 1 million sites listed.

7.) MSN (Microsoft) 8.) BBC - Search The Web 5.02

Microsoft's MSN service features bothdirectory listings and search engine results.Powered by Inktomi, this is now one of themost powerful search engines.

The BBC's "family friendly" search engine,based on Google search technology. Resultsare clear, uncluttered, relevant, andcommercial free. "Our results are the onesthat best match your search words - not theones advertisers want you to see."Excellent!

9.) GigaBlast3.02 10.) GO Network

Gigablast is a new search-engine that looks setto challenge Google. It's been set up by a NewMexican Software Engineer, and alreadyproducing great search results.

Go is the reincarnation of Infoseek, a newlydesigned site claiming to have enhancedcapabilities, with a 50% larger search indexand search results pages that are 30% faster.It offers portal features such aspersonalization and free e-mail.

11.) HotBot 12.) Open DirectoryThis search engine has a great many loyalfans. It very often comes up with the goodswhere other engines fail.

NetScape's Open Directory Project aims tobuild the most comprehensive human-reviewed directory of the web, by relying ona vast army of volunteer editors.

13.) Teoma Search4.02 14.) FAST Search

Teoma, which means "expert" in Gaelic,determines the authority or quality of a site'scontent, by using Subject-Specific Popularity.

One of the new generation of searchservices, armed with next-generationtechnology. FAST aims to be bigger,

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Subject-Specific Popularity ranks a site basedon the number of same-subject pages thatreference it, not just general popularity.

speedier and more accurate than the existingmajor search engines.

15.) Multi Search8.02 16.) Webcrawler

Multi Search is a powerful tool which willsearch all the top search engines with oneclick.

One of the first and biggest search engines,and it still produces highly relevant results.

17.) REX 18.) HandiLinks

This is a VERY nice site - a little sense ofhumour, very professionally done.

This is a great directory. HandiLinkslistings are all organized into a hierarchicalindex and it's fast and easy-to-use. It hasextensive categorization, and uses a framedesign that aids rather than getting in theway of searches.

19.) Snap.com 20.) Scour.Net

Snap.com is a human-compiled directory ofweb sites, supplemented by search results. Itaims to challenge Yahoo as the champion ofcategorizing the web.

A useful multimedia search engine. Use itto find audio, video, images and animationScour.Net takes you directly to themultimedia you are searching for, quicklyand easily.

21.) AAA Matilda 22.) UK Plus

The most popular search engine outside ofNorth America. Matilda is a very individualsearch engine from Australia, and growingrapidly in popularity.

UK Plus features reviews of UK-relevantsites, prepared by a team of journalists.Reviews are grouped into various channels,covering everything from Arts and Businessto Travel and Work. They are alsosearchable.

23.) Direct Hit 24.) Dogpile

This Popularity Engine tracks the sites thatpeople actually select from the search resultslist. By analyzing the activity of millions ofprevious Internet searchers, Direct Hitdetermines the most popular and relevant sitesfor your search request.

Sends a search to a customizable list ofsearch engines, directories and specialtysearch sites.

25.) Britannica Internet Guide

This site strives to list only the highest quality sites on the Net. It's now integrated into theBritannicca.com website, so you get a high-quality search engine and encyclopaedia at thesame time

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Source: http://www.wisecat.verywise.co.uk/search-engines.htm

Exhibit 24:

Nike Ad agency: R/GAGot three of the four Pencils in the E-commerce Business to Consumer Website category

Gold Pencil www.Nikegoddess.comSilver Pencil www.Nikebasketball.com & www.Nikerunning.comGold Pencil www.nikelab.com: Corporate Image categoryGold Pencil www.Nike-Presto.com: Promotional Advertising Website category

Nike Ad agency: R/GA received 3 Gold awards, the most of any agency & tied for the number of silverwinners with 2.

The R/GA projects that were selected to be included in the traveling showand annual traveling exhibition in conjunction with the competition thatwill feature work published in One Show Annual Volume 25 include:Nike.com USA Homepage Corporate Image Business to Consumer

Website

Nike Basketball Corporate Image Business to ConsumerWebsite

Nike Basketball E-Commerce Business to ConsumerWebsite

Nike Goddess E-Commerce Business to ConsumerWebsite

Nike Goddess Corporate Image Business to ConsumerWebsite

Nike Lab Corporate Image Business to ConsumerWebsite

Nike Presto Promotional Advertising Website

Nike Running E-Commerce Business to ConsumerWebsite

Nike Running Corporate Image Business to ConsumerWebsite

Source: (R/GA Takes the…, 2003)

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Exhibit 25:

Sales & Net Income 1993 – 2003

1993 1994 1995 1996 1997 1998 1999Sales

($ mil.)3,931.0 3,789.7 4,760.8 6,470.6 9,186.5 9,553.1 8,776.9

Netincome($ mil.)

365.0 298.8 399.7 553.2 795.8 399.6 451.4

Incomeas % of

sales

9.29% 7.88% 8.40% 8.55% 8.66% 4.18% 5.14%

Sales & Net Income continued: 1993 – 2003

2000 2001 2002 2003Sales

($ mil.)8,995.1 9,488.8 9,893.0 10,684.4

Net income($ mil.)

579.1 589.7 663.3 716.4

Income as % ofsales

6.44% 6.21% 6.70% 6.71%

2002 Footwear Sales$ mil. % of total Sales

5,753.7 58

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2002 Total Sales

Americas $ mil. % of totalUS 5,258.8 53

Other 691.0 7Europe 2,731.5 28Asia/Pacific 1,211.7 12Total 9,893.0 100

The breakdown of Footwear revenue per region:

Fiscal 2002 Fiscal 2001 FY02 vs.FY01 %CHG(In millions)

Fiscal 2000 FY01 vs.FY00 %CHG

USA RegionFootwear

$3,185.0 $3,208.9 (0.7)% $3,351.2 (4.2)%

EMEARegion

Footwear

1,551.8 1,422.8 9.1% 1,309.4 8.7%

Asia PacificRegion

Footwear

657.7 632.4 4.0% 557.0 13.5%

AmericasRegion

Footwear

359.2 355.2 1.1% 343.9 3.3%

TotalFootwearRevenue

5,753.7 5,619.3 2.4% 5,561.5 1.03%

Exhibit 26:

Advertising and Promotion Expenses: 1999-2002

1998 1999 2000 2001 2002

$978.2 million $978.6 million $998.2 million $1,000.5 million $1,027.9 million

Estimated Advertising and Promotion Expenses: 2003 – 2006

2003 2004 2005 2006

$1,056.1 million $1,088.4 million $1,125.1 million $1,171.5 million

Internet marketing startegy for Nike

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