Last week was an important week for Nike’s communication to its investors — and Sports Executive Weekly had the exclusive opportunity to bring the news home to the industry. At the Annual Investor Day held Thursday inside the Emerald City, SEW was able to learn more about the key consumer segmentation strategy that has been the centerpiece of Nike’s re-distribution policy in the U.S.

Charlie Denson, Nike brand co-president, began by stating that the U.S. footwear business had become “unhealthy”, dominated by retailers who were focused on price rather than product. Denson’s assessment was that Nike could not grow in an unhealthy environment and that steps had to be taken to return the business to its former levels. Noting that “excitement at retail is starting again”, Denson cited improved POS presentation and positive retail events, as well as a return to regular price selling.

Nike sees its future as determined by the following initiatives:

  • Focus and alignment on consumer segments
  • Cross Product connectivity
  • Concept creation
  • Shortening time to market
  • Increasing local relevance
  • Improving innovation
  • Leveraging consistency

In order to better manage its connection directly with the consumer so vital to their success, Nike brand has segmented the consumer into more than a dozen distinct groups. Specific products are then built for each consumer segment and market plans are created around the product concepts. Finally, the appropriate retailers are then selected to carry the clearly defined products.

Nike is clearly making a total company effort to align products and marketing around each unique consumer and then working with the appropriate retailers to showcase the products.

Nike re-defined the mall in the late 80’s/early 90’s by classifying retailers as key basketball, running, etc… retailers, with each receiving priority allocation of product based on their classification. This latest initiative takes Nike’s segmentation strategy to an aggressive new level by classifying the consumer first and then determining which retailer best serves that consumer.

Earlier in the week at the annual meeting held on Monday in Beaverton, shareholders voted to adopt a new stock compensation plan, which called for increasing the pool of shares available for employee stock options by one-third. Two-thirds of share holders voted in favor of increasing shares available for stock compensation to 50 million shares from 37.5 million shares.

Two additional measures were also approved by shareholders, as they re-elected Nike's 12-member board and electing PriceWaterHouseCoopers as the company's outside auditors.

Nike executives spent the bulk of the 90-minute shareholder meeting outlining plans to take a larger share of global sales of soccer merchandise, which the company believes will be a key driver of future growth. Nike plans on being the largest supplier of soccer boots in Europe by 2006.

Sandy Bodecker, vice president of special projects, said the company committed back in 1994 that, if it wanted to become a true global brand, Nike had to create a strong position in soccer.

Since then, Nike has built its position to be number one or number two in all major soccer categories
“We acknowledge we didn't have a heritage in the sport, and we had to develop that and learn and look for the future,” Bodecker said.

Don Remlinger, Global Brand Director of Nike Soccer, told investors that the company has plans to overtake global soccer powerhouse adidas in market share of soccer by 2006. “We are never satisfied with being No. 2 in anything,” Remlinger said.

The company appears to be taking its involvement in soccer quite seriously, even going so far as to file suit against FIFA, the sports governing body, over the phrase “USA 2003”.

Nike claims in its suit that it has the right to use the phrase to promote the U.S. women's national team even though trademark rights might be violated in the process. The action is seen as a preemptive move before FIFA was able to file a suit of its own.

FIFA, in a letter to Nike dated September 11th, had threatened a suit over trademarked phrases such as “France 98,” “Korea/Japan 2002” and “Germany 2006.” The organization has fought and defended its rights to those trademarks and considers “USA 2003” to be no different. FIFA told Nike it was engaging in unfair competition and false advertising and was likely to confuse consumers, who might believe that Nike was sponsoring events staged by the association.

The lawsuit, filed in U.S. District Court in Manhattan, asks the court to rule that Nike's use of “USA 2003” does not infringe in trademark rights or violate any laws or rights of the association.

The 2003 Women's World Cup, which started last weekend, was first slated to be played in China but was moved to the U.S. after the SARS outbreak last spring.


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