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Direct to consumer advertising or marketing is a popular form of marketing endorsement that is aimed in the direction of the end patient rather than
healthcare professionals. Nike’s distribution system was traditional system in which the customers used to get their products through the vendors.
However, after the introduction of social media everything changes. The biggest change that social media brought with itself is the change in
business concepts (Distelhorst et al. 2016). Most of the business organizations started to use social media as their promotional tool. However, things
changes when some companies started online sites from when customers can buy products without walking into shops. Nike noticed this trend in
business and saw that some organizations gained tremendous success through this process. Aamazon is the biggest example of that. After that the
management of Nike decided to hop into e-commerce and introduced their online shopping site named as Nike.com (Ross 2013). In a little time the
organization realized that their decision was not wrong as they started to gain more attention and from customers and their profit started to go up in
an unexpected manner. That was the time when the management of the organization decided to enhance this process in order to strengthen their
market hold.
Nike has started to use Direct to Consumer (DTC) channels in order to improve their brand statement and to push sales of premium products.
Through DTC, Nike is able to have better flexibility over pricing, inventory and commodities decisions. The management of the organization expected
that, as DTC channels sales are periphery accretive, it will help the association to reach its target of a 0.4-0.6 percentage point growth in its gross
margin each year through fiscal 2020 (Hoejmose et al. 2013). From the figure 1, it can be said that Nike was able to meet its targets till date by using
DTC channels. However, there were some other major reasons that allowed Nike to implement such as channel in their supply chain.
Figure 1: E-commerce sale of Nike
(Source: Schaltegger and Burritt 2014)
Marketing department of Nike could understand that web services will provide greater options to Nike which will give them a competitive edge over its
customers and will provide a better customer services. Besides, the organization also understood that being a sports good selling company, they
must have a digital initiative which will serve as an important source of customer data helping them to develop new products targeted as specific
consumer segments (Buddress 2013). Besides, Nike also understood that social media is a necessary tool for engaging with the customer that will
help its marketing team to provide better customized and personalized options. Product customization by NiKEiD and improvements it it’s SNKRS
app was introduced in February 2015. These options allows Nike to stay ahead of new footwear brands such as Skechers that reported a sales
growth of over 30% in the year of 2015 (Kozlenkova 2015).
More importantly, e-commerce business has emerged as a profitable one and a margin enhancer for all the business organizations. It is also
responsible for attracting more customers towards a brand. For example, if a customer is looking for a sports shoe and walks into a retailer shop, the
retailers will obviously prioritize what sells (Pullman and Collins 2013). If that customer is not sure about a pair of shoes from Nike, but they can close
the same deal by buying a Reebok, retailers will sell the Reebok shoes to them without thinking twice. This situation will not take place in case of e-
commerce selling which is direct to customer process. Besides, at its initial stage, Nike.com helped the organization to acquire more sale than any
other competitor in the market there it came out to be a profitable venture for the organization. According to Qrunfleh and Tarafdar (2014), direct to
consumer sales of Nike grew by 15% and reached to $3.7 billion in the last quarter of 2015 which was supported by a 10% increase in same-store
sale and high growth in their e-commerce channel.
As mentioned by Shi and Yu (2013), rise of upgraded mobile technologies, technologies related to social and cloud processes, customer
expectations continue to rise. Customers are nowadays looking for a more seamless experience. In the industry from where Nike belongs, customer
experience is a new battlefield. It is considered as a major competitive advantage that attracts and keeps customers. Direct to consumer sales
process through online sites allows business organizations to envision how the customer journey should take place. As a result, marketing team of
that company can implement the tactics necessary to make that vision a reality (Sajjad et al. 2015). Nike management considered these points and
then decided to open direct to consumer channels.
Another major reason behind Nike’s decision to open direct to consumer is the facility of DTC that allows an organization to collect customer
behaviour data. Direct to consumer channels are a big chance for companies to develop the lifetime value of consumers because those companies
can garner knowledge about their consumers and tailor personalized sopping experiences them. However, it is also true that data cannot provide a
complete knowledge on the current customer behaviour; therefore, an organization should also use traditional channels to keep a steady
communication with the customers (Lemke and Petersen 2013). Nike’s decision to implement direct to consumer channel was also influenced by the
introduction of several newly launched organizations that are having unique marketing style. The organization decided to reach to its customers more
precisely and that is why they decided to hop in e-commerce business.
Advantages of packaging:
Packaging provides different advantages to different types of segments. Some advantages of packaging are provided below,
Advantage to manufacturers: Packaging helps the manufactures of Nike to keep the product safe while transporting it. Packaging also helps to
facilitate storage and also helps in advertising and sales promotional activities. Besides, it is responsible for increasing demand and profits of an
organization.
Advantage of middleman: Packaging will help the middlemen to store the product in is proper place. Based on the packaging, it will be easy to exhibit
it before the customers. By Looking at the packaging, the workers working in a warehouse will be able to understand what is inside the package and
they will be able to handle it accordingly.
Advantages of customers: Packaging will reduce the chances of tarnishing and it is also helpful in providing important knowledge about the product
and the organization that manufactured it. It also includes steps and instructions from which customers will be able to understand the procedure
through which the product will be used.
Advantages of labelling:
Labelling is not different from packaging and all its advantages are nearly same as the advantages of packaging. Labelling will allow the
manufacturing organization which is Nike to give a clear instruction about the users of the product. As a result of labelling, the manufacturing
organization can make sure that the product is being sold by its original price. Labelling also helps to develop manufacturer and buyer relation. As a
result, manufacturers are encouraged to develop only standard products which buyers can easily identify. Besides, from labelling, a user can get
various types of information about the product like the date of manufacturing and the date of expire. However, in case of Nike this advantage will not
count, However, by the process of labelling a user will be able to understand if this product will meet his demands or not.
Accident elimination:
Nike will be able to control the distribution of the materials properly so that there will be limited chance of any accident. The company effectively
focuses on careful handling of the materials, which help them to avoid any kind of hindrance regarding the supply of the materials to the customers
as well as various divisions of the operation (Ivanov et al. 2016). Besides, it is also important to protect the products from theft or the prevention of
misuse. Material handling will help Nike to eliminate those problems while it is transported to consumers or to any distribution centre.