Inside the Mix

Nike's marketing acumen should help it swoosh successfully into the discount sneaker market

Nike's marketing acumen should help it swoosh successfully into the discount sneaker market

There aren't many popular consumer goods you won't find on a Wal-Mart shelf, but Nike's swoosh is a notable entry on that exclusive list.

Having long argued that selling its products in discount stores will devalue the brand, Nike nonetheless recognizes the lucrative market it's missing out on - it cites research by NPD Group showing that 70% of the athletic footwear sold in the US in 2003 cost less than $45 - so thanks to its acquisition of discount athletic brand Starter last year, Nike's new, swooshless discount sneakers are now on Wal-Mart's shelves.

The first question that came to mind was, just how important is it to the person who buys Nike sneakers, or any other apparel, that it's obviously Nike? With it's $40 price point and no logo, the fact that the Starter sneakers come in far pricier than the other discount athletic shoes at Wal-Mart, but at the same time don't have any branding to push the perceived value up, means that Nike's going to need people to understand that the shoes are superiorly engineered.

Nike's marketing is so far beyond selling product now that one almost has to think back to the Air Jordan days to recall such a time. Nike sells sports now, and has arguably grown the category to the extent that other brands are enjoying a halo effect, a common occurrence. The difference is that Nike is about what it is; many other sports brands are about what they offer.

Take Saucony as an example, which describes itself as the "Dr. Pepper of running shoes." Its products are specific enough to appeal to a small elite who are serious about running. Or, to people like me who hope that by putting a pair on, some sort of osmosis will occur that will shave three minutes off their sluggish mile time. Research by Sports Marketing Surveys from last winter showed that the number of retailers carrying Saucony shoes is growing yearly, and more importantly, that 90% of retailers characterized them as "performance" running shoes - a more than 30% increase in the number who did so in 2000. Not to belittle Saucony's marketing prowess, but at least some of that growth is surely due to Nike growing the category. Indeed, Saucony CEO John Fisher said in a USA Today article last fall, "When Nike sneezes, Saucony gets pneumonia," adding that Saucony needs Nike to be strong for itself to succeed.

My previous pair of running shoes were Nikes, and I bought them having tried on a number of pairs in a specialty store. Those and my current Sauconys were in the same price category, though I'm delighted that the pair that were the most comfortable this time were Saucony - and I wear them as a badge of pride.

Nike's Starters aren't competing in that same price market, though the aforementioned price difference between them and their cheaper shelf rivals is significant. Someone making the decision to pay a premium for a pair of athletic shoes, whether it's brand or performance that drives the choice, is less likely to quibble over a $20 difference. However, to someone who buys athletic shoes in Wal-Mart, a $20 hike can also mean a 100% hike. But Nike set the price at the highest one the value market will bear, which will likely give the shoes a best-in-class aura - provided the actual customer can see that without the swoosh pointing the way.

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