Will Nike’s digital drive build stronger ‘one-to-one’ relationships with consumers?

Discussion
Source: nike.com/snkrs-app
Jun 30, 2020
Tom Ryan

Like others, Nike is accelerating its digital transformation due to the pandemic. However, in a linked move, member engagement is being made an equal priority.

“We’ve talked about membership as a growth driver and differentiator before, but now we’ll align our business to make it central to everything we do,” said John Donahoe, CEO, last Thursday on Nike’s quarterly call.

The pandemic has likewise demonstrated the importance of Nike’s shift toward making digital “being at the center of everything they do,” he said.

Nike reiterated that it expects combined online sales from its own and wholesale partner sites to eventually reach half of sales, up from 30 percent projected for the just-started fiscal year and 15 percent in 2018.

Much of Nike’s digital push is about driving engagement, particularly with members.

“Membership is a big word, but in my mind it breaks down three simple things,” said Mr. Donahoe. “Do we have an identified one-on-one relationship with a consumer? Can we increase our level of engagement with that consumer in value-added ways? And then does that increased engagement lead to greater retention and share of wallet if there are other purchases?”

In the fourth quarter ended May 31, workouts on the Nike Training Club app more than tripled, peaking at nearly five million workouts per week during April. The gains were helped by Nike’s move to make the app free amid stay-at-home orders. App usage also accelerated for Nike Running Club and SNKRS, which offers limited-edition sneaker drops with a gamification component.

The online engagement led to 25 million new members in the quarter, double year over year.

At physical retail, the member focus is represented by Nike Live, which features an inventory mix based on local member activity and buying patterns. In-store, members use Nike’s mobile app to scan barcodes for more product information, reserve product, book appointments and fetch special perks.

Ultimately, Mr. Donahoe said, increased engagement drives increased purchases.

“Someone may only buy footwear and apparel a few times a year, but engaging with us each week, maybe even each day, brings Nike into their lives,” he said.

DISCUSSION QUESTIONS: Does it make sense for most brands to prioritize driving digital engagement offline to loyalty members as well as online? Is Nike on the right path?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Brands have to become a part of people’s lives to survive going forward. This is putting the customer first in all decision making which is a no-brainer."
"I’m quite tired of CEOs using the digital shiny bauble to draw attention away from what appear to be very challenging times for Nike."
"True consumer relationships, both physical and digital are built upon consumers trusting the brand to exhibit integrity beyond just trying to sell a consumer a product."

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14 Comments on "Will Nike’s digital drive build stronger ‘one-to-one’ relationships with consumers?"


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Jeff Sward
BrainTrust

If a brand is not driving digital engagement with its customers, then they haven’t been paying much attention lately. It was important pre-COVID-19 and the pandemic has now punctuated that strategy with multiple exclamations points.

Ricardo Belmar
BrainTrust
Nike has mastered two important aspects of their digital transformation. First, integrating digital-driven experiences into their stores in a transparent way that doesn’t create friction, it removes friction and fosters an environment that causes customers to come back again and again. Nike successfully engages their customer on the customer’s terms with as much, or as little, of a digital component as they desire. Second, they have expertly tied their loyalty membership to those digital experiences in a way that adds value to the brand relationship for the customer. During the pandemic, Nike wisely made their workout club app available openly to everyone, and that has driven new digital relationships with consumers. The result? More digital interactions will lead to purchases in the future. While this wasn’t enough to recover from having stores closed across the country in the same way it drove sales in China, the future path seems clear for Nike – continue to drive membership in the loyalty program and create digital experiences that can either stay digital or connect the store experience… Read more »
David Weinand
BrainTrust

Digital engagement is the path to go for a lot of retailers and brands. For Nike, a brand that has carefully curated affinity and loyalty for years, it’s a no-brainer. However, not all retailers are ripe for a full-blown commitment to digital engagement. Retail is famous for “me-too” behavior and many are not ready yet. Digital transformation is definitely table-stakes at this point but each retailer must determine where they are in the journey and take steps that are right for their business.

Harley Feldman
BrainTrust

This Nike strategy will not work for all brands. It works for Nike because the user gets involved with physical activity that is healthy in an offline mode, i.e. when and where the person chooses. The same person would also be interested in Nike product offerings online. Not all brands have such a connection for offline use as does Nike. Nike is on the right track as the offline and online accesses complement each other.

Stephen Rector
BrainTrust

Brands have to become a part of people’s lives to survive going forward. This is putting the customer first in all decision making which is a no-brainer. Others should follow Nike’s lead.

Raj B. Shroff
BrainTrust

I don’t know the intricacies of the Nike ecosystem (I’m a runner but I am a Garmin guy) but from the outside their approach seems more product-centric with generic customized services wrapped around it. Whereas Lululemon’s Sweat, Grow and Connect strategy, for example, seems more human-centric with product and service opportunities abound. Absent to me in Nike is a human connection. I think it works for Nike but seems more transactional than a 1:1 “relationship.” Are they on the right path? Time will tell.

Ryan Mathews
BrainTrust

It all depends, as always, on the execution. Having a program is not the same thing as having the right program. That said, Nike seems to be doing a great job with this approach so it’s obviously worth looking at, but only if the consumer can easily see defined benefits. I’d challenge any “benefit” — including increasing share of wallet — that doesn’t touch the consumer first. Do that right and you won’t have to worry about share.

Doug Garnett
BrainTrust

We need not believe that “the way it is during the pandemic” represents strategically how it will be in the long run. This Nike release is a classic example.

Online sales (through all channels — not only their own) are expected to be 30 percent of sales in the next year. Nice. But that is driven by the pandemic. Without it, what would online be? 18 pe-50%? That’s my guess.

I’m quite tired of CEOs using the digital shiny bauble to draw attention away from what appear to be very challenging times for Nike. Nike is far too large of a company to have digital play this role.

As to engagement? I thought we’d seen that “engagement” was a mis-direction pursued in the past. It’s quite concerning to see it trotted out as a headline this far after we learned it lacked the power promised.

Chuck Ehredt
Guest

The CEO may have emphasized this in the earnings call, but Nike has been building customer-facing technology for years in order to achieve understanding of the people they serve. This is loyalty strategy in action (without a points program). Their sales to individual customers may lack frequency, but usage of their products (for most) would have very high frequency. Nike recognized decades ago that they could serve people who are passionate about fitness and build a tight bond – which in turn generates very useful data that can lead to greater personalization. Such a flywheel creates advocates that talk openly about how Nike aligns with life goals – and grows the business. The latest releases are simply building upon the empire that has a solid foundation. Brands with relatively low purchase frequency need to find ways to convert their products into services, so they can remain top of mind and create defensible moats around customer insight.

David Slavick
Guest

Nike is a highly regarded brand, with high awareness and affinity, and has built this strength over time. They have the leadership and expertise to accomplish it. I believe that there are levels of offline and online engagement that can be accomplished. Every business case differs based on current state capabilities, business metrics and to what extent 1:1 relationships with shoppers, consumers and advocates is valued. If you have nothing, get something. If you see weakness in your current solutions and tools – assess it and solve for it. If you don’t know how to build a business case, hire someone to to help you. Digital engagement is the future. Better to get there sooner vs. kicking the can down the road.

Cynthia Holcomb
BrainTrust

One-to-one is a sound bite. As a female, it is disappointing to learn of Nike’s internal biases being litigated in lawsuits against Nike. People do vote their beliefs with purchase. Last I heard 49.6 percent of the world is female. True consumer relationships, both physical and digital are built upon consumers trusting the brand to exhibit integrity beyond just trying to sell a consumer a product.

Ethan Chernofsky
Guest
14 days 19 hours ago

Everything Nike does is centered around the brand relationship and that’s the genius of the company. Whether the consumer begins their journey online or offline, Nike is able to create an exceptional cross-platform experience. The digital side is “easier,” what makes them so impressive is the ability to bring that focus offline as well.

Ananda Chakravarty
BrainTrust

Of course it needs to be prioritized. It costs 5x more to acquire a new customer than keep a customer. Loyalty is a key to success for retailers and manufacturers. Loyalty builds leverage, demand and success, while reducing risk.

Digital loyalty engagement has always been a part of the ongoing omnichannel experience. If brands aren’t building loyalty, then either they’re going out of business or they’re in locked industries that have implicit loyalty. We all know the 80/20 rule and Pareto curve for a loyal customer vs one that is not.

Nike is continuing to build to customer needs, especially when the customer can only engage digitally. Even when the pandemic wanes, customer loyalty will be key to business and both online and off. Donahoe and top retailers know this and almost all their innovations play to building tighter relationships with their customer through personalization, “membership,” and digital (omnichannel) engagement.

Rachelle King
BrainTrust

Most consumers are omnichannel shoppers, so having an offline and online engagement strategy is smart. What is going to make a significant difference for Nike is their decision to make their app free while millions are stuck at home. This is an incredibly smart tactic to drive engagement and build loyalty.

What brands need to remember — as Nike is demonstrating — is that playing the long game during this pandemic has great potential to create emotional bonds with consumers. Emotional bonds drive engagement and build brand loyalty. Smart.

wpDiscuz
Braintrust
"Brands have to become a part of people’s lives to survive going forward. This is putting the customer first in all decision making which is a no-brainer."
"I’m quite tired of CEOs using the digital shiny bauble to draw attention away from what appear to be very challenging times for Nike."
"True consumer relationships, both physical and digital are built upon consumers trusting the brand to exhibit integrity beyond just trying to sell a consumer a product."

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