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Nike likely to cut 2009 marketing budget

Published: 25 Apr 2009 13:14:49 PST
CHICAGO, Feb 11 - Nike Inc will likely "just do it," cutting its marketing budget this year as part of
its push to reduce expenses.

The world's largest athletic shoe and clothing maker said late on Tuesday it would cut up to 1,400
jobs, or 4 percent of its workforce, as part of a review aimed at bringing products to market faster.

Nike's reining in ad spending, sports sponsorships and endorsement deals was not only likely,
but could be done without hurting its dominant position, analysts said.

"They have such penetration in their marketing budget that they can use attrition to cut off
contracts," Robert Boland, professor of sports management at New York University, said of Nike's
various sports contracts.

"You'll definitely see a different allocation and you'll definitely see some reduction," he added.
"When you're the biggest, you have the power to do that."

Companies such as General Motors Corp and FedEx Corp have cut marketing budgets,
including sports-related spending, in response to the recession.

Nike officials would not address specific plans, but indicated nothing is sacred.

"As part of restructuring our business, we're analyzing all aspects of our costs,
including sports marketing contracts, advertising and brand marketing, to ensure we're spending
resources wisely and focusing on thebusiness opportunities that will have the biggest impact,"
Nike spokesman Derek Kent told Reuters.

"There are opportunities for reductions in endorsement contracts and we are evaluating them on
a case-by-case basis," he added.

While Nike is known for its endorsement deals with such athletes as golfer Tiger Woods and
basketball star Kobe Bryant, as well as the Brazilian national soccer team, eliminating deals with
lesser athletes, pro and college teams, and sporting events could reap significant savings,
analysts said.
"They still want to uphold the spending on their marquee athletes, but there are opportunities to
cut back on the secondary and tertiary type athletes or even teams that perhaps didn't really
captivate or drive eyeballs to the brand," said Stifel Nicolaus analyst Tom Shaw, who rates
the stock "hold."

In the process of dumping contracts, however, Nike could create opportunities for smaller rivals
like Under Armour Inc, Boland said.

Nike spent an estimated $255 million to $260 million on sponsorships last year, up from $240
million to $245 million in 2007, according to research firm IEG, which is owned by advertising
giant WPP Plc.

The shoe giant spent $143.4 million on advertising in the first nine months of 2008, down slightly
from the pace of the prior year when it spent almost $184 million overall, according to
TNS Media Intelligence.

Nike surprised analysts in December by stressing cost-tightening during a conference call

following third-quarter results. In the past, the company has been known for its free-spending
ways.

"Nike's sports marketing strategy looking backwards was a little bit more free-spending than it will
be moving forward," said Paul Swangard, managing director of the Warsaw Sports Marketing
Center at the University of Oregon.

Credit Suisse analyst Omar Saad wrote in a Wednesday research note that Nike is at the
beginning of a longer-term restructuring that will extend beyond just job cuts.

"We think a story of slowing revenues will be overshadowed by Nike's willingness and ability to
cut expenses in the coming quarters," said Saad, who rates the stock "outperform."

Nike's North American marketing budget is likely four times the size of what No. 2 player Adidas
AG spends, far above what is needed to maintain its market share, he added.

Shaw said Nike has also started spending its marketing dollars more wisely, pointing to
the company's use of Kobe Bryant in so-called viral marketing, or marketing that makes use of
social networks, email and word-of-mouth to reach an audience.

"They're still using their brand power and big, marquee endorsement contracts, but instead of
coming up with an expensive TV campaign they came up with something that people are
watching on YouTube," he said. "It's more bang, less buck."

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http://snoo.ws/2009/04/30/nike-shifts-to-marketing-strategy-
users-can-relate-to/

Nike shifts to marketing strategy users can relate to

April 30th, 2009 (7:47am) Alisha Paul

In a new social media campaign

called What do you play for?, Nike encourages teens to share their success stories by
uploading photos of themselves playing sports.

In a marketing effort to increase participation with its brand, Nike has partnered with
the social media marketing firm Brickfish and the social network, Youth Noise.

Users are encouraged to upload photos and share personal sports stories and the
impact that sports has had on their lives or the lives of others. The campaign is a part
of a new Nike strategy to get teens to participate with the brand through online
communities.

Visitors to the Youth Noise site, can vote on their favourite photos and are able to
search through over 1,000 entries divided into five categories: newly popular,
ranking, most recent entries, most viewed entries and most viral entries.

Prizes will be awarded for the best photo and most viral. Selected by Youth Noise
from the top 250 highest scoring entries, winners will receive $500 in cash or
scholarship. The site also has a Sign-Up Sweepstakes where randomly selected
winners will each receive $100 in cash or scholarship.

Since the site launched in early April, it currently sits at close to 2,000 entries with
roughly three weeks left to participate. With more than 600,000 page views the
campaign is doing fairly well in attracting users to participate within the Nike online
community.

With this social marketing strategy, Nike is moving beyond solely showcasing
unattainable heroes like Michael Jordan and Tiger Woods, to customer inspired brand
power. The Nike example demonstrates how a brand can connect and impact its
customers on their level.

The campaign ends May 20, 2009.

Tags: Brickfish, marketing, Nike, Social Media, Youth Noise