Two tenets sports marketers must live by today include:
- Know your demo.
- Be authentic and culturally relevant, and connect with consumers on an emotional level.
The first tenet has always been good business policy. After all, any good business should establish marketing strategies that feature targeted campaigns aimed at its core demos and audience. The difference is that, today, such campaigns are more digital and socially shared than in prior eras.
But the second tenet — the push for being authentic and culturally relevant and winning the heart of your consumers — has never been more critical to strategic brand management than it is today.
In part that's because sports differ from any other business, given the raw emotion and engagement levels at play.
In part that's because market research suggests the coveted millennial and Gen-Z consumers are less trusting of traditional ad messaging and crave an experiential, digital, personalized and socially shareable connection with the brands they wish to align with.
I have nothing but the utmost respect for men and women who currently serve or have served this country in the military, and I support their right to voice their opinions on any issue that is personal to them — including the NFL's anthem debate and their view on Colin Kaepernick. Speaking with friends who have served in the military, I understand that, for some, this issue stirs great passions and anger. I recognize that potentially sacrificing one's life in combat for your country is the ultimate sacrifice, and for those who have lost loved ones or friends in battle, those scars shape opinions — understandably so.
The discussion herein regarding Nike's choice to utilize Colin Kaepernick in its current ad campaigns, however, is not about politics for me. It's about looking at Nike's decision and execution from a purely objective business perspective (with the aforementioned tenets in mind), looking at available data and then assessing whether I believe the rewards of the strategy will outweigh the risks.
Ultimately, I strongly believe Nike's reward from aligning its brand with Colin Kaepernick will far outweigh the risks. And I believe this because:
- Nike has done its homework and knows its customer demographics, and thus believes a large majority of its core consumers will support its decision to utilize Kaepernick as a spokesperson.
- Nike is acutely aware of both the broader sports marketing environment that currently exists and the need to cater to millennial and Gen-Z consumers who want to align themselves with authentic and culturally mindful brands that aren't afraid to take a stand — no matter how unpopular it may be to segments of the population.
Understanding The Current Sports Marketing Environment
Before delving into Nike's decision, let's take a step back and consider the broader context of the current landscape for brands in the sports marketing space.
If I learned nothing else from completing my recently published sports business book (They Shoot ... They Score!), which features dozens of interviews with sports executives on current sports business trends, it is this: Because sports engender greater emotions and engagement levels than your average business, and as we consume sport differently because of technological advancements, all players within this ecosystem (brands, sponsors, leagues, teams, universities, athletes, consulting agencies, media networks) are trying to tap into the hearts and minds of sports consumers (fans and corporations alike) to boost the lifetime value of the customer relationship, and do so in an authentically experiential way that leaves fans feeling like they just consumed a trusted, personalized experience that enhances their desire for team or product engagement/activation.
Allow me to share two ideas that reflect the essence of the prior paragraph:
A market research report produced by GMR Marketing in early 2018, entitled "Experiential EQ: Going Beyond Data to Understand the Power of Emotions in Experiential Marketing," discusses four "emotional need-states" that drive consumers to seek out experiences at events — those need-states being release, enrichment, belonging and identity. In my opinion, these need-states also underlie the fundamental emotional reasons consumers purchase the brands they do, with belonging and identity likely leading the way.
Second, at the June 2018 Sports Business Journal's Brand Engagement Summit in San Francisco, Joao Chueiri (VP of consumer connections at Anheuser-Busch InBev) talked about ABI's revamped approach to sponsorships in light of the preferences exhibited by younger demos, with three key themes from his presentation being:
- Experiences build meaningful brands, and thus, attempts to activate sponsorships and enhance brand affinity should be constructed accordingly.
- There should be a movement away from traditional "signage and reach" and more focus on "engagement."
- There should be a major focus on being "culturally relevant" in all messaging.
Separately, a more general takeaway from the conference was that in light of how millennials and Gen-Z consumers place greater weight on having an experience when interacting with sports, it is crucial for brands and sponsors to create experiences that touch upon their emotions in some way to create strong brand recall and loyalty. Because, after all, consumers remember experiences much more than static corporate signage on a Jumbotron or a facility's walls.
In short, while brands do take a risk in alienating some consumers when it is perceived they are taking a side, the research shows that the coveted 18-35 demo want their brands today to be more culturally relevant, take a stand and be real.
In this respect, Nike's decision to use Kaepernick in its latest ad campaign shows tremendous awareness of the current climate within the sports marketing landscape. In this regard, Nike scores high marks for being in tune with these consumer sentiments.
Knowing The Demo
Know your demo.
As I told my sports business class at Washington University in St. Louis on Wednesday morning, if Nike believed its core avid consumers were over the age of 50 and politically conservative, it would not have remained vested in a spokesperson like Colin Kaepernick.
Clearly, Nike knows its demo. As a company with $34 billion in revenues, it can afford extensive market research into getting to know its demos quite well.
In my research for this article, here's what I learned about the Nike demo and recent strategy initiatives:
In an April 2015 Business Insider article, Ashley Lutz wrote that Nike was targeting three key demos: women, young athletes and runners.
(2) According to a June 2017 article by fellow Forbes contributor Pamela Danziger:
- Nike planned a consumer direct offense in targeting 12 key cities it believed would be responsible for 80% of the company's growth through 2020: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan.
- The company’s best customer prospects are active, high-earning young people. These high-earning young people — those Danziger calls HENRYs (high-earners-not-rich-yet), making $100,000-$249,900 annually in professional jobs — live in big cities, and Nike’s 12 key cities are the best place to find them.
During my September 4 appearance on CNBC discussing this matter, fellow guest Matt Powell (VP and senior industry adviser for The NPD Group) noted that his company's research indicated that over two-thirds of Nike's consumers were under the age of 35.
Now, before making assessments of how well Nike knows its demos, let's juxtapose the information above from Lutz, Danziger and Powell with recent polling data.
A March 2018 Pew Research Center study showed that 54% of those polled disapproved of the way President Trump was handling his job while 39% approved. However, the disapproval/approval split was wider (i.e., more disapproving) among women, young demos and college graduates (who, of course, tend to be more affluent than the rest of the population). For example, the disapproval/approval split increased to:
- 58%-34% when focusing just on women.
- 59%-32% for ages 18-29, and 56%-36% for ages 30-49.
- 64%-32% for college graduates, and 71%-26% for those with post-graduate degrees.
A May 2018 CNN Poll showed an overall approval rating of 42%, which actually represented a slight uptick. However, Trump's approval rating with women was only 33%, and it was only 29% with people aged 18-29.
So how does the polling data correlate to Nike's awareness of its own demos?
Well, if we presume Nike is still targeting women and high-earning young people, and if we assume most people who oppose President Trump (who himself has been vocal in his condemnation of NFL players who kneel during the anthem, as Kaepernick has) possess an ideology that supports players' right to freedom of peaceful expression, then it's highly likely that Nike's core demo leans more liberal. As such, there may be considerable support for Kaepernick and the issue of social injustice among Nike's core demo.
If this train of thought is consistent with reality, then Nike's use of Kaepernick will resonate particularly well with women, with young athletes, and with high-earners who are college-educated.
Moreover, we know that urban populations trend more liberal than conservative, as does the running population (based on two decades worth of informal observations and conversations with avid runners and other endurance athletes).
In short, Nike's decision to employ Kaepernick in its latest ad campaign was strategically wise because it catered to its core demo targets from the last several years and other segments of the population (e.g., runners, folks residing in the largest metropolitan areas across the world) more apt to share Nike's ethos and be sympathetic to Kaepernick's cause.
The Ethnicity Factor
Recall that the broader issue that triggered Kaepernick's initial kneeling was his perception of social injustice in various communities across the country. And there is no doubt that if we were to poll Americans regarding their support of Kaepernick's stance to kneel, there would likely be much larger support from minority communities.
This in mind, let's return to the March 2018 Pew Research data. Recall there was an overall disapproval-approval split for Trump of 54%-39%. When analyzed by ethnicity, however, Trump fares far worse. Among African-Americans, the split becomes 85%-9%. Among Hispanics, the split is 74%-17%.
In short, and using similar logic discussed earlier in this article, it is fair to conclude that Nike's prominent use of Kaepernick in its latest ad campaign will certainly not hurt the brand's popularity among the African-American and Hispanic communities. In fact, it may build brand awareness and/or loyalty. In that regard, Nike's reward for sticking with Kaepernick far outweighed the risk.
Being Culturally Relevant And Taking a Stand
As was discussed at the beginning of this piece, and as I've heard numerous sports industry executives exclaim over the course of the last several months during one-on-one interviews and at a variety of sports conferences I've attended, millennials and Gen-Z consumers want brands to have the courage of their convictions, to take a stand and deliver authentically personalized messaging aimed at their emotions.
I'm not a psychologist, but when I think about GMR's emotional "need-states" as I view Nike's still-frame of Kaepernick or the just-released commercial, I think:
- A portion of Nike's core demo target will identify with Kaepernick's right to express his beliefs on social issues.
- A portion of Nike's core demo target may feel a sense of belonging with the Nike brand, in that they feel good about the fact that the brand they wear supports a similar cause or ideology.
In short, Nike was willing to take a calculated risk in the hopes of being culturally relevant and creating a perception of taking a stand on an issue through its tacit support of Kaepernick, and it is my assessment that the benefits and long-term customer value generation created by these benefits will outweigh the lost customers from other segments of the population who respectfully disagree with Nike's use of Kaepernick.
And a quick side note for those who were freaking out about Nike's stock price dip on Tuesday. Well, not only did Nike's stock price begin a climb on Wednesday (albeit still lower than its pre-Tuesday levels), but Under Armour and Adidas (Nike's main competitors in the U.S.) also saw stock price reductions on the same day as Nike.
And a Bloomberg article regarding the exposure value of the initial ad release says, "In less than 24 hours since Kaepernick first revealed the spot on Twitter, Nike received more than $43 million worth of media exposure, the vast majority of it neutral to positive, according to Apex Marketing Group."
Again, this is just one man's non-politicized opinion. A man who respects members of the military for their service and sacrifice, as well as their right (or anyone's right) to be critical and voice opinions on the anthem issue — on either side of the debate. A man who also supports athletes (and others) who wish to engage in peaceful demonstrations to protest or shine a light on a cause important to them.
Objectively speaking, as a sports business analyst, it is my opinion that Nike's long-term rewards from utilizing Kaepernick as a product endorser will far outweigh the risk. And this is largely because it knows its demo and knows the Kaepernick ads are culturally relevant and therefore highly likely to resonate favorably with an overwhelming majority of its core demo.
