Nike Brand Extension Report: Viability Of Nike’s Brand Extension Strategy By Partnering With Samantha May Kerr

Introduction

The level of competition between business entities has increased globally. Yet, a business entity can establish its dominance amidst the rise in competition through competitive differentiation. Companies pursue competitive differentiation by using brand extensions. Brand extension strategy relies on brand elements such as brand logos and name, which it can employ offensively or defensively. Brand extension strategy is much of a financial burden today than it was several years ago. Consequently, a successful brand extension must rely on unique elements that carry significant value to customers to differentiate itself from its rivals. This paper aims to describe the viability of Nike’s brand extension using the Samantha May Kerr name on new products.

Background Information

Despite the challenges associated with brand extension, such as significant financial tags, it is an attractive strategy because it provides an opportunity to take advantage of the parent brand’s equity.  Among top brands today, it is almost impossible to give examples of brands that understand the essence of competitive differentiation without mentioning Nike, Inc. During the 1980s, the brand experienced massive growth because of the permeation of diverse spaces and fiscal success. However, this success is because of such a famous embodiment, Michael Jordan. In the U.S. today, the place that Nike, Michael Jordan, and basketball hold is indicated by how Americans express their loyalties to the brand, sport, and person. Replicating this strategy in a different country while focusing on women athletes can build brand equity.

Brand Equity

Nike Inc. has leveraged all six major brand elements in promoting its brand image globally. It has targeted the correct audience by fulfilling its promises of quality products. It has gained global success in consumer brand perception that has contributed to the growth of customer loyalty. It has well-thought strategies to strengthen its equity in a competitive sports industry by using every element effectively. For example, swoosh captures much of the brand’s identity through memorability, meaningfulness, and likability. Advertising and an effective marketing strategy can influence the number number of customers that consider the brand’s elements to have a unique meaning.

Nike’s swoosh is likable, memorable, and is meaningful to the customers. For some customers, it symbolizes the brand’s spirit of ‘just do it.’ For others, it stands for celebrity, power, and elite athletes (Lucas, 2000). Using Samantha May Kerr as the new face of its new products in Australia can improve its brand image among women and awareness in the country and the world. An association between the brand and such an outstanding soccer player is a viable strategy.  The viability of the extension strategy is also partly because retailers will feel that Nike understands the women’s market. As described by Lucas, “retailers are particularly interested in whether manufacturers understand the women’s market and look for evidence of this in their advertising before purchasing a manufacturer’s line” (p. 153). Association of Nike brand name, Nike Logo (the ‘swoosh’), and the Nike slogans with the soccer player can drive massive attention from consumers in Australia. Consequently, using the image of athletes can improve a brand’s marketing strategy and ensure a better fit to the consumer’s expectations.

Extension Fit

Perceived fit is the relation between the parent brand and an extended category through broader associations. Related brand extensions have a positive impact on parent brand relationship quality. The sponsorship of Samantha May Kerr presents numerous opportunities for Nike to create branded products to generate sales from the Australian market. Similar strategies have proven successful, for example, the partnership with Michael Jordan that generated millions of sales in the U.S. According to Lee, Kroncke, and Johnson (2012), consumers may perceive a better fit between Nike if cobranded with a successful soccer player. As a result, the consumers’ purchase intentions may change favorably. In a survey conducted by Baek and King (2015), respondents chose Nike as the brand of athletic shoes because it could produce specific brand associations and be of high quality. Other than the perceived fit, such sponsorship would strengthen the brand’s competitiveness by becoming a point-of-difference.

Point of Parity (POP) and Point of Difference (POD)

Developing a brand positioning strategy begins by creating a specific frame of reference and communicating a distinct value proposition. The extension strategy can help Nike establish points of parity and develop brand points of difference. It is crucial to convince consumers within the Australian market to prefer the brand to the rivals. Most brands use athletes in their advertising strategy as a point of parity. Additionally, it creates a credible, relevant, and distinctive Point of Difference (POD) to sustain a unique competitive advantage. Nike can, however, extend this advantage by communicating those PODs to consumers to provide an effective strategy position strategy. If successful, there is a possibility of gaining a significant competitive advantage in Australia. Because Nike has high brand equity, there is a high possibility of benefiting from the extension. The perceived strength and symbolic value of Nike products contribute to the success of the brand extension.

Implications of the Extension of Brand Equity and Profitability

The extension will improve the brand’s equity in four areas; brand loyalty, brand awareness, brand association, and perceived quality. The customers’ loyalty within the Australian market will increase repeat purchases of the brand. The extension will increase the consumer’s ability to recall the brand. Because of the association created with the sponsorship, the brand association will result in improved quality perception. “Favored brands which are positively regarded by customers have a high chance of their new commodity in possession of the brand name being accepted” (Muiga, 2014, p. 15). Overall, the extension will improve the brand’s favorability and profitability.

Mitigating Feedback Equity Effects

A high-fit extension is less likely to affect price and convenience. However, a low-fit extension could result in the decline of the consumer quality evaluations of the brand. Emotion is also an influencing factor because a low-fit brand extension can cause a decrease in consumer confidence towards the parent brand. It leads them to doubt the quality of the parent brand’s product. Before launching the brand extension, the company should consider the success rate of the sponsorship resulting in more sales and profits and the negative influence it may have on the parent brand. It is not advisable to achieve product success at the expense of a negative brand influence. Nike should avoid such a seesaw effect and focus on realizing mutual benefits for both the parent brand and Samantha May Kerr as a brand.

Conclusion

Brand extension is a crucial competitive strategy that companies embrace to build brand equity. Nike is a global company whose brand is recognized and associated with quality. Its name and logo are among the elements that the company relies upon offensively to extend its market. Miss Kerr’s sponsorship deal can help Nike expand its market share in Australia while using this as an opportunity to differentiate itself in the market. As the level of competition in the market rises, organizations must develop competitive strategies while mitigating any potential detrimental feedback equity effects.

References

Baek, T.H. & King, K.W., 2015. When comparative valence frame affects brand extension evaluations: The moderating role of parent-extension fit. International Journal of Advertising, 34(2), pp.382–401.

Lee, D., Kroncke, C. and Johnson, J.E., 2012. Consumer evaluation of brand fit, attitude, and purchase intention of athletic team merchandise. International Journal of Sport Management and Marketing, 11(3-4), pp.158-171.

Lucas, S., 2000. Nike’s commercial solution: Girls, sneakers, and salvation. International Review for the Sociology of Sport, 35(2), pp.149-164.

MUIGA, J.K., 2014. Corporate Brand Extension and firm Performance: A case of the Nakumatt Blue label.

Rastogi, P., 2012. Effect of Brand Extensions on Parent Brand. Global Journal of Commerce & Management Perspective, 1(1).