Nike Abandons Performance Marketing for Brand Storytelling
Recently, Nike announced an expected movement from performance marketing to brand building. This comes as a result of the thorough failure of Nike’s direct-to-consumer strategy which sought to digitally transform the business model of Nike from its physical channels and retail partner-based strategy to selling directly to consumers.
In what has been described by Modern Retail as an overzealous strategy, DTC led to Nike’s worst market performance since it was listed in 1980. On June 28th, 2024, Nike lost over $27 billion of market value, losing over 20% of market capitalization in one day.
It also faced the threat of a class action suit to boot. Schall Law Firm, a national shareholder rights litigation firm in their allegations, highlighted that Nike misinformed its shareholders by making false and misleading statements about the direct-to-consumer strategy developed by CEO- John Donahoe at the time. The strategy failed to generate sustainable revenue growth for the cultural icon.
John Donahoe, a former eBay and Bain & Company CEO was selected by shareholders to pursue a desired digital strategy and digital sales direction. He was selected because of his experience with the tech sector. The DTC direction aligned with his recruitment brief, but culture always win when it has a showdown with initiative. Clearly, the alienation of retail partners robbed Nike customers of the experience they consumed when making a purchase. Compounding its woes, Nike altered its marketing mix and reduced branding efforts, choosing to focus on performance marketing, which complements a pure play digital strategy.
In view of this failure, CFO of Nike; Matthew Friend called for a “bigger, bolder brand storytelling”, basing his hypothesis for Nike’s rebound on the need to tell big stories and the success recorded on Nike’s Paris Olympics marketing campaign which helped garner “over 60% of total share of voice and evidence that advertising resonated with Gen-Z consumers; according to Modern Retail.
Strategic Restructuring Blunders at Nike
Nike’s DTC strategy required certain restructuring, which led to the following blunders
- Reorganization of the company from sports divisions to men’s, women and kid’s categories, thereby altering previous storytelling and branding potential which made Nike top of mind in these sports. It also affected operational efficiencies internally.
- Nike had to sever longstanding relationships with wholesale partners in order to justify its digital play (direct-to-consumer strategy).
- The worst implication of the restructuring is that innovation on classic brands such as the Air Force 1 line, Air Jordan line and Dunks was stifled, thereby leaving the market open for innovation from competitors like Hoka, On, and New Balance to create and capture new value.
Overall, Nike’s revenues were impacted, with a further focus on performance marketing and disengagement of wholesale and retail infrastructure, further adversely eroding brand equity.
Recently appointed CMO; Nicole Hubbard Graham, who left after 17 years is now back to drive the brand building effort. The era of bean counting at Nike is over, giving way to a more CMO and messaging driven sales process.
The advent of programmatic advertising and other digital automated marketing tools from Alphabet’s Google and Meta’s Facebook impacted advertising investment in consumer retail, justifying pure and risky digital plays like that of Nike.
Let’s see if Nike’s return to its cultural roots of storytelling and individual connection will pull it out of its self-imposed but well-meaning revenue downhill.
