Nike Report

Nike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a partnership under the name, Blue Ribbon Sports. Our modest goal then was to distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany's domination of the domestic industry. In 2000 Nike Inc. not only manufactured and distributed athletic shoes at every marketable price point to a global market, but over 40% of our sales came from athletic apparel, sports equipment, and subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in more than 100 countries targeting its primary market regions: United States, Europe, Asia Pacific, and the Americas (not including the United States).

Reaching the consumer

In a quest to predict consumer reaction, Nike have been evaluating applying game theory. However,

1) As companies trying to sell consumers stuff, they are not competing with them, only other companies,

2) companies evaluate their decisions rationally with the goal of maximizing profits as a group, whereas consumers evaluate their decisions as individuals with the goal of maximizing their personal satisfaction,

3) Game theory assumes consumers would make rational decisions, but as we all know, feelings often disrupt our rational decision-making processes, often resulting in irrational choices that we perceive as satisfying.

So how can they predict consumer reaction to something like our marketing efforts, when consumer decisions are not absolutely based on logic? As it is they need to identify some sort of constant on which we can base our predictions, given a set of pre-determined reactions.

Since creativity isn't a constant from which an outcome can easily be predicted using historical examples, they use share of mind as their primary constant. (Share of mind is the total number of people in a fixed population that are aware of our marketing message.)

Share of mind is achievable through an appropriate media mix. Since media reaches a fixed number of consumers, it then becomes a matter of what reaction they will have once they are aware.

Therefore, in order to predict how consumers will react to a message, we must correlate behavior with share of mind.

To clarify, sales are not a good indicator of consumer reaction, because they are interested in predicting the level of sales resulting from marketing. Also, based on strong sales, most media mixes attempt to replicate prior results, but as they all know, similar media mixes for similar products do not yield similar results.