avatar_48x48
Contact BSI
Derrick Daye
888.706.5489 Email us
Brand Management

How Nike Shifted From A Sales To Marketing Mindset

by

How Nike Shifted From A Sales To Marketing Mindset

When I stepped into the role of planning director inside Nike in the spring of 1986 marketing was a dirty word.

At that time a marketing department didn’t exist and Nike had never written an annual marketing plan. In its place Nike had product line managers, who would manage the product planning process and brief the sales organization twice a year at sales meetings on the new features, functions and benefits of the latest Nike footwear products.

In 1986 Nike was fifteen years old. It had grown to $860 million in annual sales. The apparel division was run the same way. It had departments for product design, production, product line management and sales but no marketing department and no annual marketing plans. The apparel division like the footwear division had not yet figured out how to introduce the annual planning discipline of marketing.

There were three main obstacles preventing Nike from adopting a brand planning process.

1. Paralysis by Analysis: There was a fear among Phil Knight (Nike’s Co-Founder and CEO) and top management that marketing planning as practiced in other fast moving consumer packaged goods brands (like P&G) would create paralysis by analysis. And this paralysis would kill the Nike brand because every quarter hundreds of new footwear products and thousands of new apparel SKU’s were introduced. To slow down the flow of new product creation to analyze in advance what people wanted was considered a very bad business, brand and cultural idea.

2. Go-To-Market Efficiency: Nike was at a stage in its planning evolution where the go-to-market focus was on getting the product designed, priced, packaged and sold in the most efficient way. It was product, production and sales oriented in its processes. Its go-to-market efficiency didn’t make time for pre-testing products or advertising.

3. Sales Orientation: Once the new product information and product samples were handed off to the sales organization then it was up to sales to figure out how to get it sold. They were the champions of growth and strategy. Up to that point in time 80% of Nike product sales were made on the futures program. Nike’s futures program was a footwear industry innovation. Retailers were presented with samples of forthcoming new products and if they placed a sales order at least 5 to 6 months in advance they received a 10% discount on price and a guaranteed delivery date. This program reduced inventory risk. As the footwear industry growth trend was a visible phenomenon, retailers knew if they didn’t commit to a futures order in advance that next seasons hot selling product might not be available for shipment as an at once order. This motivated the retailer to take the inventory risk instead of Nike.

The Journey To Marketing Leadership

So given Nike’s internal systems orientation and it’s fears of paralysis by analysis how did it turn the corner and become known as one of the worlds premier marketing organizations?

The transition began with a meeting I requested in the spring of 1986 with Mark Parker (Product Design Director) and Tom Clarke (Product Line Management Director). Note: today Mark Parker is CEO of Nike and Tom Clarke is former CEO, currently President of Nike Innovation). At that time I was a Financial Systems Analyst working for Nike’s Controller and was just completing a two year project to redesign Nike’s core financial systems, upgrading Nike’s chart of accounts, 52 different sets of books governing consolidated financial reporting and management reporting. In the course of working in finance I had the opportunity to interview every department manager at the company on their reporting needs. In those conversations we had to anticipate future reporting and management control issues globally as the organization grew.

As a result of that work I was surprised to find that Nike didn’t have a marketing department. I also learned it had never written a marketing plan and it didn’t have feedback systems to help gauge the effectiveness of its product line management, advertising, sports promotions and other elements it was using to increase its selling effectiveness. So in calling the meeting with Parker and Clarke my intention was to convince them that the company would benefit greatly if it added marketing planning, systems and research to how business was currently being done. My boss told me that an Ivy League MBA had tried to impose a more formal planning system on the company two years earlier and after nine months of trying had been ejected from the company like a virus. So it was with some trepidation that I approached Parker and Clarke to present my ideas on what had proven to be a very unpopular topic.

In that meeting I presented them with two pieces of paper. On each piece of paper I had drawn a map. On the first sheet I traced the process flow for bringing a new product to market and the major hand off points between departments. This map I called the status quo. On the second map I presented a process flow that included a simple marketing planning framework that could be owned by the product line managers. This map allowed me to present a few research tools to serve marketing planning. I also presented how the budgeting process could be altered to better serve product line management (the precursor to marketing management). By putting the two maps side-by-side Mark and Tom were quickly able to grasp how adding a few additional steps wouldn’t slow down the flow of new products but it would increase the strategic insight into how to make more effective business development decisions.

After this meeting Tom Clarke told me that he would discuss the idea with Phil Knight and get back to me. One week later I was offered a new job (without a title) working under Tom Clarke to quietly bring the ideas in that breakfast meeting to life. In agreeing to the plan I had presented, Tom told me that Phil had given him some additional advice. He told Tom: “Just don’t let Jerome build an empire. I don’t want to slow the flow of new products. I don’t want paralysis by analysis. I don’t want our designers, developers and product line managers to lose their gut instincts.”

So in the spring of 1986 I transitioned from the Financial Systems Analyst to Nike’s first Director of Marketing Planning. For any Nike historians out there this was six years before the Nike Campus was built. My transition was from a cubicle to an office that was glassed floor to ceiling on one side and looked like a large shoebox in the middle of the product design bullpen called the sandbox. My secret weapons were my education; Nike core systems knowledge and an Apple McIntosh (the first in the company). I wasn’t given a job title until about one year after the job move. I had a clear mandate but I was asked to make no grand announcements as to my formal role. This was because the intuitive nature of how the organization worked was so strong that to announce in advance that I was going to lay new systems, planning and research tools on the organization would have guaranteed cultural resistance and failure. So when people asked me what I did during my first year in this new planning position I would make something up like, Oh I’m the product intelligence officer. That was sufficiently ambiguous and mysterious enough to keep the naysayers lurking in the weeds confused and quiet.

A Brand Culture Is Born

So how was the idea of planning successfully seeded into a Nike culture that was hostile to how companies like P&G conducted marketing planning? Here’s how it was done.

I wasn’t just an analytical geek that knew how Nike core systems, data flows and decision points worked. I was also a runner. At this time in Nike’s history everyday at lunchtime a large contingent of management could be found in the locker room suiting up for their daily run. So I was able to get to know all the senior managers as runners and people as conversation would permit. Some of these guys were college track stars and keeping up with them was painful to say the least. Running is a sport where you gain an intimate knowledge of your abilities, limits, expanding radius, improving times and potential. There is an honesty that runners have in self-assessment. You can’t fake it in a race, either you have done the training, built up your base, endurance, speed or you haven’t. Running is a sport that breeds intellectual honesty.

I befriended the running product line manger at the time, Claire Hamill and told her I’d like to help her develop a template for what a marketing plan for the company would look like. I told her I’d do most of the initial work and that it wouldn’t impose a big burden on her time. So we developed the first marketing plan together for the footwear running product line.

The initial fifteen-page document outline looked something like this:

Market Situation Analysis:

  • US Running Category Size and Growth Rate
  • US Running Category Market Shares (Leading Brands)
  • Nike Sales and Market Share Current Year & Projected Two Years Out
  • Target Running Consumer Profiles & Segmentation (by product / pricing levels)
  • Nike Running Product Line by Season Projected Two Years Out
  • Competitive Analysis (Brands, Key Products – How Nike was ahead, equal or behind)
  • Channels of Distribution Analysis (Strengths & Weaknesses)
  • Advertising & Communications Analysis
  • Sports Promotions & Events Analysis
  • Issues Analysis: SWOT Analysis (Internal Org Strengths & Weaknesses vs. External Threats & Opportunities.

Marketing Goals:

  • Financial Goals: Current Year plus Next Two Years (sales, units, margins)
  • Brand Positioning Goals: What people believe now versus what we wanted people to believe about Nike’s running presence 2 – 5 years in the future.

Marketing Strategies:

  • Product Line Plan (18 months to 2 years out)
  • Products Linked to Consumer Segments, Learning & Needs in Sales Toolkit
  • Advertising Plan (Identification of statement products, athletes, stories and campaign concepts)
  • Promotions Plan (Athletes, Events, Camps, Clinics, etc.)
  • Public Relations Plan (to augment advertising reach)
  • Consumer Research Plan (To eliminate key marketing blind spots)
  • Organization Plan (To develop new talent, skills, technical capabilities to succeed)

It was very difficult gathering all the information to write this first plan. But once a year the product line managers were expected to request a budget to help move sales in their category forward. And in order to develop a holistic vision of how all the marketing mix elements could be aligned and focused to achieve the greatest synergy there needed to be one person responsible for a category to pull together the organizational insight and learning. In the process of writing the first plan the running product line manager had to go out and interview the heads of other business functions to understand what they could and would support. In the process of conducting those interviews consensus was being built before the plan was written.

Also, I emphasized with the product line managers that marketing is not a department. It’s a process. It’s the process of organizing scarce organizational resources and focusing them on satisfying customer and consumer latent and tacit needs. After Claire and I had written that first plan some of the intangible benefits of marketing planning started to become apparent. Especially the power of focusing elements across the matrix organization on achieving campaign impacts, much like in the launch of a movie.

The first marketing plan was put in a ring binder. Pages could be taken out and updated as new information arrived. The second year effort to write the plan took a fraction of the time to produce. It didn’t create paralysis by analysis. Instead it created a narrative, form recognition and shorthand communications between business functions to focus company resources on creating greater marketplace brand synergies and impact.

Before any of these benefits were realized there was still the challenge in that first year of seeding the need for planning with all the other product line managers in the footwear division. So next I called on the basketball product line manager Ron Hill. I showed Ron what had been done for the running category and told him about the process that Claire and I had gone through to produce the running plan and asked him if he wanted to try something similar for basketball. Ron could have refused to participate and shown me the door and that would have been the end of it. But, Nike is a very competitive culture. Ron immediately grasped that he was competing for scarce organizational resources to grow the basketball category. He immediately saw that the running product line manager had a better story, a justified story for why she was asking for millions of dollars in marketing support money that she hadn’t asked for in the prior year. And it was justified by the size of the market, Nike’s market share and growth rate and all the other assets and resources that Claire had shown she was focusing on in the plan to achieve seasonal campaigns to grow sales. So Ron immediately came to the conclusion he needed a marketing plan for basketball too.

In this manner all of the other product line managers learned about the marketing plan template and soon, my phone was ringing. Can you help me write one too? By the second year all of the product line managers in the apparel division were also writing similar plans. By the third year I was asked to travel overseas to show country managers how to think about marketing planning.

Marketing Becomes The Hero

At the end of that first year of getting marketing plans written for all of the 12 footwear product lines several interesting things happened. First, management noticed something different in the sales meetings. The footwear product line managers were the lead trainers and cheerleaders to the sales organization. By virtue of the fact that they had gone through the effort to analyze, plan, imagine, strategize, organize and lead the thinking behind the marketing development effort, they were much more informed, inspired and fluid on stage in the sales meetings. Their arguments for Nike superiority became more clear, profound and considered. They developed perspective on where the brand was going that never existed before. The materials they presented to the sales agents as aids to selling became more effective. The storytelling about marketing direction strategically built upon Nike’s brand strengths, it remedied competitive product weaknesses, blunted competitive brand threats and provided far more detail in profiling new opportunities and how those efforts would be supported in the calendar year ahead.

Prior to the advent of this new planning process Nike was still a great organization. It had streaks of marketing genius. For instance in 1984 Nike signed Michael Jordan and the Air Jordan phenomenon was born. But, while Nike was rising in stature what the public couldn’t see is that the depth and breadth of all of its product lines were not being optimally managed. Product category management lacked synergy, coordination and focus. Functional heads across the matrix organization pursued their own sub-unit goals, unconcerned about external team impacts.

The key to seeding the marketing planning discipline inside a culture that was allergic to planning was to show them how it could be done without creating paralysis by analysis. The management needed assuring that we wouldn’t slow the flow of new product launches down and we wouldn’t reduce the need for product line managers to rely heavily on gut intuition and gut instincts to make most of their day-to-day decisions.

The annual marketing planning process that was developed avoided these obstacles. Ultimately the new planning approach succeeded because it created a framework for annually analyzing the business more rigorously to justify increased investments in developing the business and brand further. It also allowed the matrix organization to learn how to mesh to support campaign launch events. The results of these changes were profound. In the next ten years after the installation of annual marketing planning Nike grew over 800% in annual sales. The process of annual marketing planning was the key to organizational learning from successes and failures. And it’s fair to say that today, as Nike exceeds $30 billion in annual sales that marketing and marketing planning are no longer dirty words but rather a welcome way of life that has led to market dominance.

These and other insights into brand truth, purpose and deep campaigns is covered in greater detail in my new book, Soulful Branding – Unlock the Hidden Energy In Your Company and Brand. For more about Nike, here’s what I learned working on the Just Do It campaign.

The Blake Project can help you make the shift. Please email us for more about our purpose, mission, vision and values and brand culture workshops.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

FREE Publications And Resources For Marketers

Recommend this story

Subscribe, Follow and Stay Connected to BSI

Submit

Leave a Reply

Submit your comment