- Inspiration: as a consumer company Nike has learned how to leverage marketing to generate and stimulate demand. This is at the core of Nike business model. Indeed, Nike spends billions of dollars each year to boost demand for its products
- Innovation: Nike positions itself as an innovative company that is willing to innovate its products over and over. This is another critical element as innovation implies substitution of the old for the new. Thus it enhances its sales over time, this is part of Nike flywheel
- To every athlete: Who’s an athlete for the company? According to Nike “if you have a body, you are an athlete.” This connects to the inspirational element. Most of Nike slogan follow an inspirational tone, and that is part of its demand generation strategy
In this mission we can extract three key elements:
- Human potential: once again Nike has to inspire, and it needs to leverage on consumers psychology to be always on top of their mind when making a sport’s purchase. Making a person believe it can get better by wearing the shoe is part of that strategy
- Groundbreaking sports innovations: If you innovate you can come up with new products and those products will generate more demand
- Sustainability: (new generations follow mission-driven companies) and Nike has made of sustainability a crucial part of its management
to use the power of sport to move the world forward. We believe in a fair, sustainable future—one where everyone thrives on a healthy planet and level playing field.
Demand generation isn’t an easy game
In Nike Business Model I highlighted how Nike strategy moves around demand generation. It is important to remark that when I say Nike, I refer to the company which owns several brands in six categories Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Training and Sportswear (our sports-inspired lifestyle products).
To have an idea of how expensive it can be demand generation, one of the critical strategies that Nike uses is to stipulate endorsement contracts with athletes. As you can see from the table above, until 2023, Nike has over $10 billion planned for spending in those endorsement contracts:
The amounts listed for endorsement contracts represent approximate amounts of base compensation and minimum guaranteed royalty fees we are obligated to pay athlete, public figure, sport team and league endorsers of our products. Actual payments under some contracts may be higher than the amounts listed as these contracts provide for bonuses to be paid to the endorsers based upon athletic achievements and/or royalties on product sales in future periods. Actual payments under some contracts may also be lower as these contracts include provisions for reduced payments if athletic performance declines in future periods.
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