NikeFree Run 2+

Dec 6, 2011 Board Presentation: Marketing Plan

NikeFree Run 2+ 2

Agenda:

i. Executive Summary………………..(p.3)

ii. Situation Analysis…………………..(p.8)

iii. Product Overview…………………..(p.11)

iv. Competition…………………………(p.19)

v. Market Analysis………………….....(p.23)

vi. Product Branding………………......(p.29)

vii. Financial Analysis……………….....(p.41)

viii. Marketing Strategy…………………(p.46)

ix. Q & A …………………...…………...(p.70)

NikeFree Run 2+ 3

i.ExecutiveSummary

NikeFree Run 2+ 4

Mission:

Principal business is the “design, development and worldwide marketing and selling of high quality footwear, apparel, equipment, and accessory products.”

Company goal is to “deliver value to our shareholders by building a profitable global portfolio of branded footwear, apparel, equipment and accessories businesses.”

Corporate strategy is to “achieve long-term revenue growth by creating innovative, "must have" products, building deep personal consumer connections with our brands, and delivering compelling retail presentation and experiences.”

2011 10-K filing

NikeFree Run 2+ 5

Place:

North American Market36% of Revenues in 2011, 35% (2010)

363 Stores 20,000 Retail accounts

International Market64% of Revenues in 2011, 65% (2010)

393 Stores 20,000+ Retail accounts

2011 10-K filing

NikeFree Run 2+ 6

Customers:

Products are marketed through 2 channels:

Direct to Customer (B-to-C) 700+ NIKE owned retail stores including NIKETOWNs & NIKE

Factory Outlets Internet sales at www.nike.com

Wholesale Distribution (B-to-B) Independent distributors & licensees in over 170 countries

worldwide Partnered Experiences with major athletic retailers (shops within

shops): • Dick’s Sporting Goods “Fieldhouse”• Foot Locker “House of Hoops”• Finish Line “NIKE Running Lab”

2011 10-K filing

NikeFree Run 2+ 7

Product Revenue:(in millions of USD) FYE 2011 ∆ % FYE 2010 ∆ % FYE 2009

Overall Contribution

Footwear 11,493 11 % 10,332 0 % 10,307

Apparel 5,475 9 % 5,037 -4 % 5,245

Equipment 1,013 -2 % 1,035 -7 % 1,110

Other 2,881 10 % 2,610 4 % 2,514

Total Revenues 20,862 10 % 19,004 -1 % 19,176

(in millions of USD) FYE 2011 ∆ % FYE 2010 ∆ % FYE 2009

Footwear

North America 5,109 11 % 4,610 -2 % 4,694

Western Europe 2,327 0 % 2,320 -3 % 2,385

Central & Eastern Europe 600 8 % 558 -17 % 673

Greater China 1,164 22 % 953 1 % 940

Japan 396 -9 % 433 1 % 430

Emerging Markets 1,897 30 % 1,458 23 % 1,185

Overall Contribution 11,493 11 % 10,332 0 % 10,307

55 % 54 % 54 %2011 10-K filing

NikeFree Run 2+ 8

ii.SituationAnalysis

NikeFree Run 2+ 9

Benefits: Strengthens the muscles, tendons and

ligaments of the foot Endorses a natural running posture that

is less susceptible to injury

Claims: Shoes provide support, which doesn’t

allow the foot to strengthen and support it self

Shoes reduce proprioception, the body awareness of itself to its environment

Shoes add mass to the foot, slowing down the runner

Starting out: People are encourage to start by walking

barefoot, increasing their time gradually so that the sole has time to become conditioned.

Barefoot Running:

http://design.spotcoolstuff.com/barefoot-running-shoes/newton-vibram-five-fingers

NikeFree Run 2+ 10

Minimalist Footwear:

Lightweight Footwear – shoes that weigh 9oz or less in men’s shoe size 9

Accounted for 28% of the running category during 2Q 2011

Minimalist Footwear – subset of lightweight, designed to emulate the barefoot running style while protecting your feet from the hazards of hitting bare ground

Accounted for 5% of running category for same period

According to market analysis firm SportOneSource, Lightweight products are on track to hit $1.8 Billion in sales in 2011.

"It's such an important new idea in footwear that in a couple of years, we probably won't be talking about lightweight anymore, because everything will be lightweight…But right now, everyone is playing the hot hand, so they'll be putting their marketing dollars behind it." - Matt Powell, analyst with SportOneSource`

NikeFree Run 2+ 11

iii.Product

Overview

NikeFree Run 2+ 12

Product Highlights:

NikeFree Run 2+ 13

Product Highlights:

NikeFree Run 2+ 14

Product Highlights:

NikeFree Run 2+ 15

Product Highlights:

NikeFree Run 2+ 16

Product Highlights:

Nike+ sensor: $19Nike+ iPod kit: $29Nike+ SportBand: $59

NikeFree Run 2+ 17

NikeFree Run 2+

Since 2005, the line has undergone numerous revisions to improve performance, comfort and durability

Nike Free offers two levels of barefoot feel with 3.0 and 5.0 soles, allows users to enter the market and train at their own pace/comfort.

All models are lace-up style Extremely breathable

Provide cushioning without sacrificing barefoot feel Nike + and Nike ID available options

5.03.0

NikeFree Run 2+ 18

Customerization:

Customerization with Nike ID

Free to chose

Cushioning: with 5.0 and 3.0 sole for reduced weight and enhanced flex.

Width: standard or wide.

Materials: matte, reflective synthetic, or water resistant treated.

Colors: choose the base mesh, accent webbing, lining, laces, mid sole rim, sole.

ID or Logo on tongue top.

NikeFree Run 2+ 19

iv.Competition

NikeFree Run 2+ 20

Adidas Climacool Sketchers Gorun Vivobarefoot Evo Saucony Kinvara Saucony Hattori

$90 $80 $120-160 $90 $79-89

NikeFree Run 2 + Vibram FiveFingers New Balance Minimus Merrell “glove” Reebok RealFlex

$90 Base$95 w/ Shield

$115 w/ Nike ID

$90-125 $99 $110 $90

Competition:

NikeFree Run 2+ 21

Points of Parity:

Promote barefoot feel and movement Lightweight minimalist construction Breathable upper Flexible sole

NikeFree Run 2 +

Vibram FiveFingers

New Balance Minimus

Merrell “glove” Reebok RealFlex

NikeFree Run 2+ 22

Points of Differentiation:

NikeFree Run 2 + Vibram FiveFingers New Balance Minimus

Merrell “glove” Reebok RealFlex

Std Price $90 Std Price $90 $99 $110 Std Price $90

Sole choices 3.0, 5.0 Vibram Sole Vibram Sole Vibram Sole

Lace up styleStd

Lace up styleStd

Lace up styleStd

Lace up styleStd

Glove-like fit Glove-like fit Glove-like fit Glove-like fit

Supportive Cushioning with barefoot feel

Minimal “drop” Minimal “drop” Minimal “drop” Supportive Cushioning

Available at major retailers

Specialty Stores Available at major retailers

Specialty Stores Available at major retailers

Nike ID Customization

Nike +

NikeFree Run 2+ 23

v.Market

Analysis

Customer Expectations:

The Nike brand of athletic shoes is the most popular among the younger sets, with popularity diminishing with age; over-65’s are least likely to purchase this brand. Nike…has built a reputation on pushing the limits of athleticism, and…they (consumers) will buy these shoes because of that very perception of athleticism that is bestowed upon them via purchase.

NikeFree Run 2+ 24Source: Mintel/Experian Simmons NCS/NHCS: Winter 2010 Adult Full Year - POP

Brand of Athletic shoes in last 12 months, Feb 2009-Mar 2010

Base: 13,740 adults who bought athletic shoes in last 12 months

NikeFree Run 2+ 25

Positioning the Customer:

Sneakers Purchased in last 12 months$75K-$99.9K - 59%$100K+ - 63%

OtherHiking

AerobicTennis

BasketballCross-Training

Exercise/WalkingJogging/Running

Casual

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35

14%

4%5%

6%9%

16%26%

30%34%

$100K+ households

Mintel/Experian Simmons NCS/NHCS: Winter 2010 Adult Full Year - POP

NikeFree Run 2+ 26

Target Market:

Potential Market - All sneaker buyers who have a favorable opinion of the Nike brand

Available Market - All types of runners and casual/style sneaker wearers who already own, or would, own Nike shoes

http://www.prweb.com/releases/running_shoes/market_research/prweb3956384.htm

Weekend Warrior

20 - 25 miles per week

25 - 35 years old

male and female

This person is looking for quality and an affordable price.

Running for Attention

6 -10 miles per week

30 - 55 years old

male and female

This person wants to look like a runner regardless of ability.

True Runner

20 - 40 miles per week

25 - 45 years old

male and female

This person wants the latest in technology, regardless of price.

NikeFree Run 2+ 27

Unique Selling Proposition:

The NikeFree Run 2+

Is The Ultimate Running Trainer

Strengthens FeetThat Reduces Injury

Enhances Performance

For The “Competitive” Runner

Strengths:

NikeFree Run 2+ 28

Pioneer in the Barefoot Market

Strong Brand Portfolio

Celebrity Athlete Endorsements

Research & Development

Wide Supplier Base

http://galenet.galegroup.com.ezproxy.lib.uconn.edu/servlet/BCRC?vrsn=unknown&locID=22516&srchtp=glbc&cc=1&c=1&mode=c&ste=60&tab=1&tbst=tsCM&ccmp=Nike+Inc.&mst=nike+&n=25&docNum=DC306325&bConts=8993

NikeFree Run 2+ 29

vi.Product

Branding

NikeFree Run 2+ 30

SWOT Analysis:

Strengths•Capacity of Innovation, Brand recognition

•Light weight & Durable

•Strong CRM, Celebrity spokespersons

•Marketing campaigns

Weakness•Adoption Time

•Not for watering activities

•Lack of Search Engine Techniques

Opportunities•Innovation

•Expansion into emerging markets

•Internet sales - Growing e-commerce’s positive

•Sports Events

Threats•Competitors

•Company’s business model

•The impact of foreign currency fluctuation

•Labor and political unrest

Five Force Analysis:

NikeFree Run 2+ 31

Threat of

entry (Low/Medium)

Supplier Power (Low)

Threat Of Substitute (Low/Medium) Buyer

Power

(Low)

Rivalry (High)

Source: Group Estimate

NikeFree Run 2+ 32

5 Product Levels:

Fun Running Experience –

Track your success

Flexibility in Options and Appearance

Quality, Durable Shoe Comparably Priced

Stronger Foot & Leg Muscles to reduce Injury

Barefoot Running

Experience

Value Proposition:

NikeFree Run 2+ 33

Durable

Responsive Cushioning

Flexibility

Customizable

Nike+

Vibram FiveFingers

New Balance Minimus

ReebokRealFlex

Saucony Kinvara

AdidasClimacool

Vivobarefoot Evo

Merrell “glove” Saucony

Hattori

Nike Free Run 2+

NikeFree Run 2+ 34

Distribution Channels:

http://www1.american.edu/carmel/ms1137a/industry.htmlClass Derived this data from 2.8% of Nike share

NikeFree Run 2+ 35

Pricing Calculator:

Availability Of Substitutes

Characteristic Relative to

Competitors

Brand Positioning

Income/ Target Markets

Price/ Strength Of Demand For

Related Products

Market Environment

Competition

Source: The art of Pricing - Rafi Mohammed

Brand Messaging:

NikeFree Run 2+ 36

Sincerity•Down – to earth•Honest•Wholesome•Cheerful

Excitement•Daring•Spirited•Imaginative•Up-to-date

Competence•Reliable•Intelligent•Successful

Sophistication Charming

Ruggedness•Outdoorsy•Tough

Jennifer Aaker – Dimensions of Brand Personalityhttp://www.youtube.com/watch?v=hbV6qsWEESw

Video - Our Brand

NikeFree Run 2+ 37

Customer Based Branding:

High Quality Shoe

High Technical Performance Symbol of Status

Innovation Achievement

Activities

To bring inspiration and innovation to every athlete* in the world

*"If you have a body, you are an athlete." - Bill Bowerman

NikeFree Run 2+ 38

Growth Rate:Nike Free Market Share

Revenue in Billions

Nike Revenue Growth

Source: Google Insight & Factivia Data

NikeFree Run 2+ 39

Sustainability Framework:

Strategies Economies of scale NIKE Sports research Lab Better Financial Controls Customer Engagement – Design new products

Comparative Advantage

Valuable Rare Non-Imitable

Non-Substitutable

Assessment

Brand Recognition

Y Y N Y Sustainable

Cost Efficiency Y N/A N N Temporary

Inventory Management

Y N/A N Y Sustainable

Product Quality Y Y Y Y Sustainable

Effective – In Store operation

Y N N N Temporary

Contemporary Strategy Analysis - Grant R.M Values are Group Estimates

NikeFree Run 2+ 40

Product Lifecycle:

Video – NIKE FREE

http://www.youtube.com/watch?v=jO2oBiZ6k2k&feature=related

NikeFree Run 2+ 41

vi.FinancialAnalysis

NikeFree Run 2+ 42

Nike Running Growth:

Running accounted for 24% of Footwear sales in Fiscal 2011 30 % Growth in 2011 “Running is one of our most important innovation engines. Lunar technology,

Dynamic Support, the Tempo Short and NIKE FREE all came out of the Running category.” – Charlie Denson, President

“Fueling the growth of our NIKE Brand footwear business was the increased demand in our performance products, including the NIKE Lunar and Free technologies which are used across multiple categories.” “The increase in unit sales was primarily driven by double-digit percentage

growth in Running, Men’s Training, Action Sports and Women’s Training products.”

2011 10-K filing, Earnings Release FY2012 Q1

NikeFree Run 2+ 43

Footwear Market: US

Mintel

Forecast for U.S. Footwear Sales 2011-2015

NikeFree Run 2+ 44

Budget & Expectations:figures in USD $MM (include currency translation effects) 2008 2009 2010 2011 CAGR 2012

 

Total Revenues 18,627 19,176 19,014 20,862 4% 21,665

 

Footwear Revenues: 9,733 10,307 10,332 11,493 6% 12,148

% of Total Revenue 52% 54% 54% 55%   56%

 

Western Europe 2,411 2,385 2,320 2,327 -1%

Central & Eastern Europe 702 673 558 600 -5%

Greater China 738 940 953 1,164 16%

Japan 374 430 433 396 2%

Emerging Markets 1,031 1,185 1,458 1,897 23%

North America 4,477 4,694 4,610 5,109 4% 5,339

% of Total Footwear 46% 46% 45% 44%   44%

 

Demand Creation Expense* 2,308 2,352 2,356 2,448 2% 2,496

% of Total Revenue 12% 12% 12% 12%   12%

 

Total Footwear Marketing Budget** 1,206 1,264 1,280 1,349 4% 1,400

North American Footwear Marketing Budget** 555 576 571 600   615

 

*Consists of advertising and promotion expenses, including costs of endorsement contracts

**Theoretical, calculated by growth & "% of Sales"10K Filing

NikeFree Run 2+ 45

Budget & Expectations:

figures in USD $MM (include currency translation effects) 2010 2011 2012

Total Revenues 19,014 20,862 21,665

Footwear Revenues: 10,332 11,493 12,148

Running Revenue 2,100 30% 2,730 30% 3,549

% of Total Footwear Revenue 20% 24% 29%

North American Footwear Marketing Budget** 571 600 615

Running Shoe 80 84 123

% of Total Demand Creation Expense * 14% 14% 20%

*Consists of advertising and promotion expenses, including costs of endorsement contracts

**Theoretical, calculated by growth & "% of Sales"

10K Filinghttp://invest.nike.com/phoenix.zhtml?ID=1422879&c=100529&highlight=&p=irol-newsArticle

Category Offense 2011* 2012

Action Sports 14% > 20%Basketball 14% 6.7%Football 14% 6.7%Running 14% > 20%Sportswear 14% 6.7%Training (M) 14% > 20%Training (W) 14% > 20%

100% 100%

*Assumed as flat percent

2 Major Running Lines:

Free 50% $61.5

Lunar 50% $61.5

NikeFree Run 2+ 46

vii.MarketingStrategy

NikeFree Run 2+

Strategy Execution: Past

Nike Free launched at the height of the barefoot running trend

Strong advertisement presence

Strong media presence New York Times Oprah listed the Frees on the “One of Her Favorite Things”

episode in 2005 Commercial campaigns: http://youtu.be/8u-yA6fe_Ts

47

http://www.nytimes.com/2005/06/23/fashion/thursdaystyles/23Barefoot.html?pagewanted=2 http://nl.newsbank.com/nl-search/we/Archives?p_product=MWSB&p_theme=mwsb&p_action=search&p_maxdocs=200&p_topdoc=1&p_text_direct-0=10A923A40C2FB109&p_field_direct-0=document_id&p_perpage=10&p_sort=YMD_date:D&s_trackval=GooglePM http://www.nytimes.com/2005/06/23/fashion/thursdaystyles/23Barefoot.html http://www.wired.com/science/discoveries/news/2005/08/68474?currentPage=all http://completerunning.com/running-blog-mark/index.php/archives/2005/11/23/oprah-winfrey-nike-free/

NikeFree Run 2+

Campaign: Power To Your Feet

48

http://www.coloribus.com/adsarchive/prints/nike-free-training-shoes-58-muscles-7337355/http://www.coloribus.com/adsarchive/prints/nike-free-training-shoes-strength-7337455/

NikeFree Run 2+ 49

Marketing Plan Objective

• Reintroduce the Nike Free as the leader in the barefoot running industry

Goal:

• Print• Digital• Live events

Create New Ad Campaign

• Duration Mix• Network vs. Local• Day Part

Keep TV Execution

• Website• Banner• Broadband• Paid Search

Keep Digital Execution

• Facebook• Twitter

Increase Social Media Usage

NikeFree Run 2+ 50

Campaign: Just Free It

Designed by: Lisa Alberts

NikeFree Run 2+ 51

Campaign: Just Free It

Spinoff on Nike’s “Just Do It”

Opportunity to get people buzzing about barefoot running

Display in malls, movie theatres, gyms, on billboards

Ad emphasizes the similarities of Nike Free to running barefoot

Use in conjunction with editorial opportunities (Runner’s World, Health Magazine)

Continue researching and opening new running stores

Emphasis on customization

NikeFree Run 2+ 52

Campaign: Just Free It

NikeFree Run 2+

Strategy Execution: Future

53

Total Advertisement In...

$61.5 MM

PAT: Professional athletic teamsCA: Celebrity athletes CAT: College athletic teams.

SPENDING BY TACTIC

Trade

OOH

Print

Digital

Sponsorship

TV

0 5 10 15 20 25 30 35 40

Network Cable

PAT

Banner

CA CAT

Broad PS Web Others

30%

35%

20%

8%

1%

5%

Others

NikeFree Run 2+ 54

Television:

Nielsen

Evolution of TV

NikeFree Run 2+ 55

Television:

Still Dominant form of media

P 18-49 May 2011

NikeFree Run 2+ 56

Digital Transformation:

Nielsen

Device Transformation

NikeFree Run 2+ 57

Digital Transformation:

Nielsen

What are people doing when they are watching TV?

NikeFree Run 2+ 58

Television:

Mix of 60% :15’s copies and 40% :30’s copies Utilize :15s copies to optimize ROI. :30s copies can be used to drive volume and increase share.

Mix of 65% Network and 35% in Local Network can be optimized for new launches, driving more

volume. Network can be used to sustain media presence while keeping

cost down. Local drives higher share growth while Network offers a more

efficient opportunity to maximize ROI.

Day Part Prime Time and Late Night are the most effective times during

the day

NikeFree Run 2+ 59

Digital: Broadband

Yahoo, Vevo, ABC, AOL, CBS, Hulu, NBC, CNN, MSN.

NIKE Free Running Shoe

NikeFree Run 2+ 60

Digital: Banner

Google, Amazon, CBS interactive, Yahoo, Facebook, Pandora, Weather.com, Discovery.

Yahoo, Bing, WebCrawler, Dogpile.

NikeFree Run 2+ 61

Digital: Paid Search

Google, Yahoo, Bing, WebCrawler, Dogpile.

NikeFree Run 2+ 62

Digital: Website

It allows viewers to buy Nike sports product online, custom design Nike products, place orders online, as well as access corporate information.

NikeFree Run 2+ 63

Social Media:

Goal: Build social authority

Supplements traditional marketing practices

Current Management of Social Media for Nike is Poor:

Facebook Page lacking No dedicated NikeFree page

Poorly managed Twitter account Outdated twitter feeds on the NikeFree website

http://en.wikipedia.org/wiki/Social_media

NikeFree Run 2+ 64

http://en.wikipedia.org/wiki/Facebook

http://www.telegraph.co.uk/technology/facebook/8283072/Facebooks-Mark-Zuckerberg-attacked-by-hackers.html

2004

•June: Facebook was launched

2010

•April:41.6% of US population had an account

2011

•June: Reached 1 trillion page views, making it the most visited site in the world

• June: 750 million users

•July: Over 800 million active users

Facebook:

NikeFree Run 2+ 65

Create “official” NikeFree page Dozens of unofficial NikeFree pages No single place to view this growing product

Facebook:

NikeFree Run 2+ 66

Benefits:Consumers spend more than 6 hours on social

networking sitesSmartphoneAnalyticsSEO Direct InteractionEmbedding

Facebook:

https://www.facebook.com/note.php?note_id=219338781435544

NikeFree Run 2+ 67

Twitter:

http://www.pcmag.com/article2/0,2817,2383408,00.asphttp://socialmediatoday.com/dom-bradbury/280032/twitter-businesshttp://twittnotes.com/

Information exchange

People go on to learn things and share what they know

Less busy Facebook

Older demographic (could translate to more disposable income)

Allows for real time interaction

Ideal for smartphone usage Put message directly in the pocket of the

consumer

NikeFree Run 2+ 68

Strategic Retail

Nike strategically opens up and develops specific types of stores depending on the location

10 Nike Running store locations Run clubs that leave from the store Back your Block

$500 million for new stores between now and 2015

http://www.hubmagazine.com/2010/06/the-new-swoosh-2/http://inside.nike.com/blogs/nikerunning_news-en_US/2010/05/04/newly-opened-nike-running-store-gives-palo-alto-runners-a-head-starthttp://help-us.nike.com/app/answers/detail/a_id/16208/~/where-are-the-nike-running-stores%3F

NikeFree Run 2+ 69

Sponsorships: Support person, event, activity financially or through products/services Athletes:

• Allyson Felix• Sanya Richards-Ross• Matt Tegenkamp• Lashawn Merritt

Events• Chicago marathon

Camps and clinics Cross country, track and field, running coach workshops Makes its name synonymous with sports success in the eyes of young

consumers The message they send is always the same: “If you have a body, you are

an athlete”

Sponsorship & Grassroots:

http://www.ussportscamps.com/running/http://phx.corporate-ir.net/phoenix.zhtml?c=100529&p=NewsArticle&id=1128176http://en.wikipedia.org/wiki/Sponsor_(commercial)

NikeFree Run 2+ 70

viii.Q & A

NikeFree Run 2+

Thank You