Nike increased its brand marketing spend last quarter even as sales fell, a sign that chief executive Elliott Hill is sticking to his plan to rebuild the brand rather than cut his way back to growth. Demand creation expense, Nike’s term for advertising and marketing, rose 5 per cent to $1.3bn in the three months to 31 August, while revenue fell 4 per cent to $11.2bn, as Marketing Week reported.
Net income fell 2 per cent to $712m. Sales in China dropped 22 per cent, but Nike’s performance categories, including football, running, training and basketball, grew at a high single-digit rate. The marketing increase was driven by investment around big sports moments, after a quarter in which marketing spend had fallen 4 per cent as the company moved towards athlete-led storytelling.
At the same time Nike is cutting elsewhere. A programme called Pace aims to save $2.5bn over five years and will mean fewer roles, and the company will reorganise from four regional divisions to three by 2028.
Hill said the decisions were about “redirecting investment toward the areas most critical to winning: product innovation, brand storytelling, consumer connection, sport and growth”. He added that the company was building Nike “for the long term” and that “meaningful change takes time”.
This is the textbook argument made in practice. Under the previous leadership Nike moved money from brand advertising into performance marketing and direct sales, and the brand weakened. Hill’s response has been to put money back into famous advertising and sport while cutting overheads, which is exactly what effectiveness research says a brand in trouble should do and what most boards find hardest to approve when revenue is falling.
Whether it works will show up over years, not quarters. For a reminder of what Nike’s brand advertising looks like at its best, see our ranking of the best Nike adverts, and for a British brand that has just been rewarded for the same patience, Currys’ IPA Grand Prix.
He plans, buys and reviews advertising for a living, and helps score campaigns on the site against the same five Crown Score criteria alongside other authors and contributors.
75/100Wieden+Kennedy Amsterdam and Alejandro Gonzalez Inarritu built three minutes on the idea that one touch rewrites a career. Then almost every player in it went out early.
Twenty Nike films ranked, from Walt Stack crossing the Golden Gate Bridge in 1988 to the Paris Olympics, with year, Wieden+Kennedy office and director checked for each. Dream Crazy is number one.
88/100Nike put Colin Kaepernick on the thirtieth anniversary of Just Do It, watched a boycott start and the share price fall, then closed at a record high ten days later.