Table of Contents1. Introduction........................................................................................................................1

1.1 Relationship Marketing..............................................................................................................11.2 Transaction Marketing vs. Relationship Marketing.....................................................................21.3 Company Background.................................................................................................................4

2. Theoretical frameworks.......................................................................................................52.1 The Four Broad Partnerships of Relationship Marketing.............................................................52.2 The 30Rs of Relationship Marketing...........................................................................................6

3. Customer Relationships (R1)................................................................................................83.1 Ladder of Loyalty........................................................................................................................93.2 Knowledge Relationship (R21)..................................................................................................113.3 Electronic Relationships (R12)...................................................................................................12

3.4.1 Viral Marketing........................................................................................................................13

4. Supplier Relationships.......................................................................................................14

5. External Relationships (Mega Relationships)......................................................................155.1 Corporate Social Responsibility.................................................................................................185.2 Celebrity Endorsement.............................................................................................................195.3 Mass Media Relationships (R23)...............................................................................................20

6. Internal Relationships........................................................................................................21

7. Recommendations and Conclusions...................................................................................21

8. References........................................................................................................................24

1. Introduction In this section the subject of relationship marketing is discussed and compared to transaction marketing. Moreover a company overview of Nike is given.

1.1 Relationship Marketing According to Godson (2011), relationship marketing is a “marketing approach that is based on networks, interactions and relationships”. Morgan and Hunt (1994) propose that relationship marketing includes all marketing activities that aim at establishing, developing and maintaining successful relational exchanges. Gummesson (2008) defines relationship marketing as marketing that is “based on interactions within networks of relationships”. In line with the previous, Kotler (2011) delineates relationship marketing as having multifarious relationships with marketing partners.

Within the last two decades relationship marketing has become a widely accepted marketing paradigm (Finne and Grönroos, 2009) but It is debatable whether relationship marketing is a fundamentally new marketing approach or if it has been part of the traditional marketing theory all along (Payne, 1995).

Godson (2011) points out that the main aim of relationship marketing is the development and maintenance of long term relationships with all stakeholders of a business. The most important stakeholder for most businesses is the customer. Against the backdrop of an increasingly competitive business environment, companies are forced to keep their customers loyal, ensure their satisfaction and find out as much as possible about them (Kotler, 2011). Truly loyal customers are less price sensitive, more likely to give referrals and more responsive to promotion & communication campaigns (Godson, 2009). Hence, a company’s profitability and its ability to retain customers are positively linked (Reichheld, 1996). Instead of merely focusing their marketing activities on the acquisition of new customers, companies need to balance between customer retention and acquisition (Godson, 2011)

When applying Relationship Marketing it is important to add value for the

customer, otherwise he would not have a reason to enter a relationship with an organization. This added customer value can occur in the form of more trust to a company, a more customized service, a personal touch and the possibility to better answer customers’ expectations. Due to the characteristics of a product, it is a lot more difficult to offer genuine personal touch compared with services (Godson, 2011), which signifies a challenge for Nike.

1.2 Transaction Marketing vs. Relationship Marketing Transaction marketing focuses on a single sale instead of generating repeated sales. Transaction marketing doesn’t differentiate between a repeat customer and a new transaction (Godson, 2011) and disregards customer satisfaction and customer loyalty (Hartung, 2009). Additionally transaction marketing is focused on the product features, happens on a short time scale, neglects customer service (Payne, 1995) and is indirect, impersonal and a one way communication (Gummesson, 2008).

Relationship marketing on the other hand focuses on customer retention and continuous customer contact. This marketing approach emphasizes customer value and is long time orientated. A high level of customer service and commitment to meet the expectations of customers are also distinctive features of relationship marketing (Payne, 1995).

Transaction marketing activities revolve mostly around the traditional 4Ps of marketing; Price, Place, Promotion and Product (Grönroos, 1994), whereas relationship marketing applies more newly concepts such as permission marketing. Permission marketing was first introduced by Godin (1999) and means that the consumer gives his consent to receive marketing messages from companies. By doing so, the costumer is more receptive to marketing messages because the message is anticipated, personal and relevant (Godin, 1999).

Nike uses a mix of relationship and relationship marketing. Nike as a global brand is in the maturity phase of the product life cycle. At this level, relationship marketing aiming at customer retention and loyalty is most suitable. On the other hand, Nike constantly released new products. New

products are by nature in the introduction phase of the product life cycle. In this phase transaction marketing is most suitable (Gummesson, 2008).

According to the company’s homepage, the focus of Nike retailers around the world is on execution, product presentation and service. Moreover the homepage states that “it’s not about transactions, it's about connections” (Nikeinc.com). This statement underlines Nikes relationship marketing orientation. On the other hand Nikes uses mass marketing through standardized worldwide advertising campaigns. Mass marketing is indirect, impersonal and one-way (Gummesson, 20008) and therefore can be seen as a form of transaction marketing.

1.3 Company Background

Formation of the Company

Nike was founded in 1964 by the track runner Phil Knight and his coach Bill Bowerman. The company started with making running shoes and now has become one of the world’s leading clothing, footwear, sportswear, and equipment marketer and supplier.

Key Figures and Key Facts

Headquartered in Beaverton, Oregon the company directly employs 38 000 people in 2011 (Datamonitor, 2011). In their contract supply chain Nike engages even up to 1 million people (Nikeinc.com, 2012). In 2011, Nike recorded revenue of $20,862 million. Nike is well known for releasing the best-selling sport shoe of all times, the Air Jordan (Bloomberg BusinessWeek, 2006).

Mission Statement “Bring inspiration and innovation to every athlete in the world”.

Objectives and Goals

Nikes goal is ” to carry on a legacy of innovative thinking, whether to develop products that help athletes of every level of ability reach their potential, or to create business opportunities that set Nike apart from the competition and provide value for our shareholders.”

Fig.1: company background

Co-founder and chairman Phil Knight delineates Nike as a marketing orientated company and states that marketing their products is the company’s core competency (Willigan, 1992). Due to the company’s marketing activities and product innovations, Nike holds a strong market

position in most of its product segments which are Clothing, footwear, sportswear and accessories (Datamonitor, 2011). Nikes marketing activities are mainly revolved around the sponsorship of athletes and athlete’s teams and using top sportsmen as brand endorser. In line with the mission statement, Nikes key target group are athletes. Other than sportsmen, Nike targets the youth that have embraced the Hip Hop culture (Hopkins, ??).

One of Nikes major strengths is its strong brand equity (Datamonitor, 2011). Nike is an expert in brand building, the catch phrase “Just do it” has become more of an idiom than an advertising slogan (Willigan, 1992). In 2011, Nikes brand equity was valued at $14,528 million, which makes the brand the 25th

most valuable brand worldwide (Datamonitor, 2011). A look at the scope of duties of the different departments of Nike reveals that a central part of Nikes global marketing activities is telling a story about the Nike brand (Nikeinc.com, 2012). An authentic brand story helps to distinguish a brand from its competitors and brings the brand to life (van de Wiel, 2009). Nike emphasis their employers from the brand management department to the retail staff to tell customers the story about Nike. The objective is to make to customer want to become part of the story, which of course can only be achieved by buying Nike products. Moreover Nikes extensive use of celebrity endorsement has helped to establish a strong brand identity and brand personality (Roll, 2012). According to urbandictionary.com, a Nike head is “a person that is very much dedicated to wearing Nike sneaker” (urbandictionary.com, 2012). The fact that a special slang term evolved for its die hard customers underpins Nikes strong brand.

Involvement in a marketing sense is the relevance a person attaches to a certain product or brand, based on their needs, values and interests (Solomon, 2010). Relationship Marketing could be difficult to apply for low-risk, low involvement products, since in that area a relationship with the supplier can often hardly add a value to the customer. Relationship marketing is most qualified for high involvement products (Godson, 2011). The involvement with clothing is dependent on the degree to which the costumer uses clothing as a means of self-expression (Michaelidou, 2006). A sizeable proportion of Nike customers use the company’s products as a

means of self-expression and to be accepted within their peer groups; hence the involvement with Nike products is high.

2. Theoretical frameworks The examination of Nikes relationship marketing activities is based two theoretical frameworks. The report is structured according to the four partnership approach to relationship marketing. The 30Rs of relationship marketing model is applied to underpin the four partnership model. Both are models explained in the paragraphs below.

2.1 The Four Broad Partnerships of Relationship Marketing According to the four broad partnerships of relationship marketing model, there are four partnerships of an organization that form an important part of relationship marketing. These four partnerships are:

• External partnerships with competitors, alliances and governments

• Internal partnerships with employees, functional departments and internal business units

• Supplier partnerships with goods suppliers and service suppliers

• Customer partnerships with intermediate customers and final customers

At each of the four partnerships an exchange takes place and all of them affect the effectiveness of a company. Other than taking a simple buyer and seller approach, this model meet the requirements of relationship marketing by taking a constellation approach (Godson, 2011).

2.2 The 30Rs of Relationship Marketing According to Gummesson (2008) the 30Rs of relationship marketing are 30 identifiable relationships that encompass a mixture of relationships between organizations and other parties. The 30 relationships can be subdivided into four broad categories: classic market relationships, special market relationships, mega relationships and nano relationships. The classic market relationships and the special market relationships represent market relationships mainly with an organizations customers; suppliers and

competitors. The mega relationships and nano relationships comprise non- market relationships that have in indirect effect on the efficiency of the market relationships. The mega relationships are concerned with the economy and society at large. They exercise their influence on a higher level than the market relationships and set the conditions under which market relationships operate. Nano relationships on the contrary exercise their influence on a lower level than the market and represent relationships inside an organization. They are also referred to as internal relationships (Gummesson, 2008).

The importance of the particular relationships varies between organizations and specific situations (Gummesson, 2008). For Nike, the classic market relationship relationships to customers and supplier and the mega respectively external relationships are the most crucial. The table below shows a selection of the 30Rs applied to Nike.

Classic Market Relationships

R1 Supplier Customer Please see section 3.

Special Market Relationships

R9 Dissatisfied Customer

This relationship is closely linked to customer retention and loyalty (Godson, 2011), since only satisfied customers can have genuine loyalty toward a brand. Clothing in general requires less customer support as for instance technology products. Moreover Nike sells most of its products through third party retailers, so it’s likely that dissatisfied customer express complains directly at the store where they made the purchase. Nevertheless, Nike offers a free service hotline, email service and a live chat with Nike experts to manage the relationship with dissatisfied customer. The interaction with Nike through customer services adds a personal touch to the customer’s relationship with Nike. Nike on the other hand can gather first hand customer feedback which then drives the improvement of the products. Moreover, opportunity to get in touch with Nike makes Nike as a brand more tangible, which is important in order to have customers more emotional attached to the company.

R12 Electronic Please see section 3.4

R13 Parasocial

Parasocial relationships are special market relationships and involve relationships to objects or symbols. A strong brand can boost a relationship with the customer (Gummesson, 2008). This is the case for Nike. The famous Nike logo called the “swoosh” is one of the world’s most instantly recognisable logos (Hughes, 2008). The brand equity is one of Nikes main competitive advantages and lead certain customers to engage in an emotional relationship with Nike. Every customer

associates certain attitudes with the Nike swoosh. This could be characteristics like sportiness, fashionably or even sweatshops. The added value of Nikes strong brand for the customer arises from the fact that the customer exactly knows what Nike stands for. He can easily make the choice weather he wants be associated with the brand or not.

R15 Green

Green relationships comprise a company’s way to handle environment and health issues by offerings and relationships to individuals and communities (Gummesson, 2008). An example for a green relationship that Nike is engaged in is the green exchange program. This is a program that Nike conducts with several partners to promote the development of green technologies (Nikebiz.com, 2012). Nike made 400 of its patents available for the partners of the green exchange program. For instance, Nike uses environmentally preferred rubber to produce Nike footwear. This rubber contains 96% fewer toxins then the rubber used by competitors (Huffingtonpost.com, 2012). The licencing of this technology to other companies will promote the development of greener products. Nike recognized that he customer increasingly emphasis sustainable and green products. This green relationship creates value for the customer because he can purchase Nike products with a good conscience.

Mega Relationships

R21 Knowledge Please see section 3.3

R23 Mass Media Please see section 3.4

Nano Relationships

R25 Internal Customer Internal customers are customers that are directly connected to a company (Gummesson, 2008). A company sells its aims and values to its employees. In that sense the employees

are customers of the organization they work for. In the case of Nike, the values and aims of the company are defined in the mission statement. Employees in turn are customers of each other because they purchase the work of other departments within the organization (Godson, 2011).

Fig.2: Nike and a selection of the 30Rs

3. Customer Relationships (R1) The relationship between an organization and its customers is categorized as one of the three classic market relationships described by Gummesson. According to Gummesson (2008), the relationship between customers and supplier form the foundation of commercial exchange. Nike has millions of customers and it can be argued whether it is possible to create a relationship with all of them (Gummesson, 2008). It is important to notice that the transfer from transaction marketing to relationship marketing offers intermediary forms such as customized mass marketing. This marketing approach aims at creating an impression of a personal relationship between the customer and an organization and therefor is called pseudo-personal relationship (Gummesson, 2008). For a globally operating B to C organization such as Nike, pseudo- personal relationships are an efficient way to manage customer relations at reasonable costs.

3.1 Ladder of Loyalty The ladder of loyalty is a model used to evaluate customer’s levels of involvement with a company and its products and to delineate the transition from transaction marketing to relationship marketing

(Godson, 2011). Moreover the ladder of loyalty helps to identify the different stages of the development of long term customer relationships (Payne, 1995). The ladder itself comprises of the six stages: Prospect, customer, client, supporter, advocate and partner. Prospects have the lowest level of loyalty and involvement towards a brand and partners have the highest level. The transition from transaction marketing to relationship marketing happens on the client stage. Nikes aim should be to move customers up the ladder of loyalty. The majority of Nikes customers are considered to be on the customer, client and supporter stage but Nike has

customers on all stages of the ladder. At the supporter level, repeat buying behaviour turns into genuine loyalty to the Nike brand. The table below differentiates between the different types of Nike customers by applying the ladder of loyalty.

Customer type Application to Nike

Partner

Partner is a person who has a relationship of a partner with a company (Godson, 2011). A study conducted by Fournier (1994) revealed that “At the core of all strong brand relationships was a rich affective grounding reminiscent of concepts of love in the interpersonal domain”. Nike has a strong brand and there are people that have a partner like relationship with Nike. People that have tattooed the Nike logo on parts of their body can be considered to be on this of the ladder of loyalty (See picture below). Moreover, there are consumers like Jordan Michael Geller that have a partner like relationship with Nike. Geller is a collector of Nike shoes and possesses 2000 pairs of Nike displayed in a warehouse comprising 9000m2 (sneaker-magazine.com, 2011). Given an average price of 60$ for a pair of Nikes, Geller spend around 120000$ for his Nike collection.

Advocate

An advocate is a person who actively supports a company and does marketing for it (Godson, 2011). In the case of Nike, advocates are people review and discuss Nike products on blogs like nikeblog.com or nicekicks.com. People participating on those sites, actively recommend Nike products to others and thereby do marketing for Nike. People that share viral content about Nike online fall into this category as well. To encourage the buzz on the web, Nike regularly releases special and limited editions of sneakers and viral marketing videos. Thereby advocates constantly have Nike related topics to discuss.

Supporter

Supporters like to be associated with a brand (Payne, 2005) but only support the brand passively (Godson, 2011). On that level of loyalty, the strength of relationship marketing becomes apparent (Payne, 2005). The Nike supporters have genuine loyalty to the brand. Nikes secondary target group, the youth engaged in Hip Hop culture falls into this category. They are high involved with Nike products and use them as a means of self-expression. Nike uses permission marketing in form of newsletters on this stage of the ladder of loyalty. In agreement with the supporters, Nike sends them newsletters by email containing exclusive offers and product information (store.nike.com, 2011).

Client A Client is person has done business with Nike but might have a neutral or negative perception of the brand (Godson, 2011). Nikes main target group are athletes and sportsmen. They are clients that buy Nike products due to its utility but would also buy other brands when the products features and price

are convincing. Customers of this type don’t have genuine loyalty to Nike, they are just repeat buyers. In order to turn clients into supporters; Nike puts emphasis on building a strong brand. A strong brand helps to differentiate Nike from its competitors and will lead clients to build up an emotional connection with Nike. The client’s emotional involvement makes sure that he moves up the ladder of loyalty to the supporter stage.

Customer A Customer can be described as a person who has done business with Nike only once (Payne, 1995). In order to transfer customers to clients, Nike engages in

pseudo-personal relationships with customers. According to Gummesson (2008) memberships for commercial purposes is a growing marketing activity that aims at reinforcing customer loyalty and promote long term relations. Nike offers customers the opportunity to become a Nike member on nikestore.com. As a Nike member the customer enjoys free shipping and returns. This kind of pseudo member club ties customers closer to Nike and give them the impression of a personal relationship with Nike, which in turn may turn them into clients.

Prospect A Prospect is a person who is likely to do business with a company (Godson, 2011). They have a low level of involvement with the company’s products. A prospect for Nike is everybody in the target market of Nike. This target market comprises primarily athletes and secondarily teenagers engaging in the Hip Hop culture. Nikes uses transaction marketing to generate business within their target markets. The aim of classical transaction marketing is to turn a prospect into a customer (Payne, 1995). For Nike, generating new customers is very important, since customers in their target markets grow older and might change their style of clothing. Hence, Nike needs to guarantee a continuous replenishment of new prospects that can be moved up the ladder of loyalty.

Fig.3: Nike and the ladder of LoyaltyThe picture below shows a Nike partner with the company’s logo tattooed on his feet.

Fig 4: Nike partner with the company’s logo tattooed (Marketing Horizonte, 2011).

3.2 Knowledge Relationship (R21) Knowledge of the customer is valuable in order to identify and select target customers. A variety of CRM computer software is available that enables organizations to gather customer data from all customers touch points and subsequently feed it into a central database, where it is accessible to all members of the organization (Godson, 2011). According to Gummesson (2008), the knowledge relationship refers to the way an organization is able to gain knowledge that makes the organization compete more effectively. Nike operates company owned and branded Nike Stores as a touching point with the customers. These stores serve as a means of getting direct feedback about Nike products from customers. This customer information is then processed to the product development department, where it drives the development of new products (Crain, 2008). This system enables Nike to gain valuable customer knowledge without high market research expenditures. The value added for customers is that Nikes products are more in line with its needs.

3.3 Electronic Relationships (R12) Gummesson (2008) defines electronic relationships as all relationships, networks and interaction based on IT, whereas Godson (2011) describes electronic relationships as relationships that are kept by the usage of an electronic medium. It is important to differentiate between electronic

relationships that are controlled and managed by the company itself and those that are run by customers or fans. The advantage of online platforms run by the company itself is that the company is in full control of the content. Online relationships managed by fans or customers involve the risk of brand hijack and the difficulty of controlling the content (Godson, 2011). Brand hijack occurs when a customer commandeers a brand and drives its evolution. It is generally seen as a negative thing, since it is not the company anymore that shapes the brands image but the customers (Wipperfurth, 2005).

In the course of the world cup 2006, Nike decided for the first time to attract customers by using online communities. The Nike managed social networking side Joga.com allowed fans to blog, download videos, or discuss football related topics. The idea behind joga.com was to enrol customers to shape the marketing. By the end of July 2006, over a million users sign up and Nike CEO Mark G. Parker sees the results as a success. According to Parker, a strong relationship with Nike is created when someone joins a Nike community and this is the aim of brand management (Bloomberg BusinessWeek, 2006).

Nikeblog.com is an example of an online platform managed by customers. According to the operator, the blog has 1.148.257 page visits. The blog is not affiliated with Nike and its purpose is recreation and the discussion of Nike products (Nikeblog.com, 2012). On nikeblog.com, customers can upload reviews on Nike sneakers and engage in discussions about Nike related topics. Due to the fact that the content of the blog is written by customers, the blog has more credibility then company owned websites. Customers trust the recommendations of other customers more than company given information. Moreover Nike don’t have any costs in connection with blogs like that, hence it is free marketing.

The positive aspects of customer managed electronic relationships prevail over the negative ones. Customers have the feeling of belonging and being part the Nike community by engaging in blogs and online communities, which is added value for them. The interaction with Nike itself and other

Nike customers also gives the company’s relationship with customers a more personal touch. Nike profits from free online word to mouth marketing. Nevertheless Nike should regularly monitor the interactions on the customer run online platforms to prevent brand hijack.

3.4.1 Viral Marketing Viral Marketing is a form of online word of mouth marketing (Kotler, 2012). Due to the fact that viral marketing involves the internet as a medium it can be categorized as an electronic relationship of an organization with the customer. Nike launched several viral marketing campaigns in the recent years.

Nikes “Touch of Gold” viral campaign was awarded to best viral marketing campaign of the decade by the marketing magazine “campaign” (campaign magazine, 2009). The short clip, starring footballer Ronaldinho received over 50 million clicks on YouTube. Ronaldinho is shown kicking a ball against the crossbar back to himself over and over again. The amateurish camera work led to a heated debate amongst customers and fans about whether the clip is fake or real and made Nike one of the pioneers of the altered reality viral campaigns (campaign magazine, 2009). This campaign underpins Nikes focus on celebrity endorsement, by using Ronaldinho as the linchpin of the campaign. Moreover it shows the effectiveness of viral marketing: a less than 3 minute clip engaged millions of customers to discuss about Nike.

Viral marketing is an effective way of interacting with customers. Nike can create interaction with a high amount of customers with minimum expenses. Viral marketing videos give Nike a personal touch and sharing and discussing viral content within informal networks creates the feeling of belonging for the customer.

4. Supplier Relationships A supply chain is a system of all parties involved in moving a product or service from supplier to customer. Supply chain management describes the idea of managing a supply chain in its entirety instead of managing all separate components (Godson, 2011). Nike considers itself as being a marketing company, not a producing company. The company’s core competences are its product development and marketing. Nike realized that

outsourcing the manufacturing reduces costs (Crain, 2008). Nike does not own any of the factories where their products are produced. They merely contract the production to various factories and dictate the design, materials and the price they are willing to pay (global exchange, 2012). Effective 2004, Nike delivers around 300 million products yearly (Nikeinc.com) and licenses the production of their products to roughly 900 factories (Business week, 2004).

In 2004 Nike invested $500 million to implement a new supply chain computer system. Before that, the company, its suppliers and retailers used to connect over 27 different computer systems worldwide. The multitude of computer systems within Nikes supply chain led to delivery delays at the point of sale and made it difficult for retailers to return unsold product back to Nike (Bloomberg BusinessWeek, 2006). By implementing the new supply chain computer system, Nike made the interaction with its suppliers and retailers more efficient. Against the backdrop of the high production volume and the large number of parties involved in the production process, an efficient management of supply chain relationships is crucial for Nike.

A value chain delineates the several value added stages from raw materials to selling the final product (Crain, 2008). The figure below illustrates Nikes value chain. As the figure shows, Nike only manages three stages of its value chain in house: the product development, the marketing and the branded retail stores. The manufacturing, the assembly and parts of the retailing are outsourced. Moreover the figure shows the flow of customer information from the Nike branded stores to the product development department as described in section 3.2.

Fig.5.: Nikes value chain (Crain, D., 2008).

The costumer benefit from outsourcing the manufacturing is that lower production costs may result in lower retail prices. An efficient supply chain management system new system is added value for customer, since it reduces supply shortages at the point of sales.

5. External Relationships (Mega Relationships) External or mega relationships comprises all relationships of an organization that are located above the market relationships, namely in society in general (Gummesson, 2009). Organizations are influenced by a variety of external stakeholders. Nike manages its stakeholder relationships with a global communication department. The purpose of the department is to create a “deep, credible and authentic connections with consumers, employees and stakeholders the world” (Nikeinc.com). Stakeholders can be subdivided into normative and diffuse groups. Normative groups are stakeholders that have authority to withhold resources and take actions. Normative groups include governments, regulatory bodies, professional association and shareholders. Diffuse groups are aiming at protecting the rights of certain interest groups and include environmentalists, communities and special interest groups, public opinion leader and campaigning journalists (Godson, 2011). The management of relationships with diffuse groups is most crucial for Nike, since they can and have affected the companies view in the public eye strongly. Due to that, the focus of this paper is on the two diffuse groups anti-sweatshop organizations and environment protection organizations.

Several anti-sweatshop organizations such as “United Students Against Sweatshops” criticized Nike for using sweatshops. In the 1990s, Nike came

under heavy media scrutiny for having poor working conditions. Due to the fact that Nike doesn’t own the companies where their products are produced, the main argument of Nike to avoid responsibility for the factory conditions was to delineate themselves as “just buyers” and that they” don’t control what goes on there” (Global exchange, 2012). Under the increasing pressure of anti-sweatshop groups, Nike was put in a tight spot. The company’s image was heavily tarnished and the product sales declined. Instead of continuing to avoid responsibility, Nike then elaborated a scheme to monitor the labor issues at their supplier factories. In 2004, a staff of 97 internal inspectors was responsible to audit the labor standards at Nike supplier’s factories. Additionally, Nike allows certain human rights groups to randomly undertake factory inspections (BusinessWeek, 2004). On their website, Nike states that their greatest responsibly is to” play a role in bringing about positive, systemic change for workers within our supply chain and in the industry” (Nike, 2012). In order to implement this resolution, Nike formulated a code of conduct that expresses the expectations Nike have of the contracted factories within their supply chain. The code of conduct contains some fundamental labor and environmental/health standards which are binding for all of Nikes contract factories (Nike, Code of Conduct).

In 1998, the non-governmental environmental protection organization Greenpeace accused Nike of putting the greenhouse gas "sulphur hexafluoride" (SF6) into the air pocket at the bottom of the air max sneaker. The gas subsequently escapes into the atmosphere where it stays for 3200 years (Green Peace, 1998). Nike reacted by replacing SF6 with nitrogen and so avoided the release of millions of tons of CO2 equivalent (Americancarbonregistry).

The sweatshop problem is still existent, but the criticism on Nike died down. This is mainly due to the way Nike responded to the criticism. By implementing the code of conduct and showing pressure groups serious efforts to fight the sweatshop problem, Nike nowadays doesn’t receive much bad sweatshop publicity anymore. Instead, environmentalists and human rights activists tend to address the host countries of the supplier factories directly. The way Nike managed the allegations of Greenpeace showed that Nike learnt from past mistakes made at managing the

sweatshop problem. Instead of ignoring the allegations of Greenpeace or avoiding responsibility, Nike gave in. Thereby no bad publicity was created. The opposite is true: Nike made a boast of avoiding millions of tons of greenhouse gases. Still Nike needs to put maximum effort on managing the relationships to diffuse groups, and not to give them a target. The biggest value added for the customer resulting from Nikes management of external relations is that the costumer has a good conscience about buying Nike products. Customers don’t want to be associated with a brand that has the reputation of exploits third world nations or destroys the environment.

Normative Groups that set the conditions under which Nike operates are for instance governments. They have great power but small interest in Nikes business as long as not laws are violated. Other normative groups are employees and shareholder. Nike manages its relationship with the company’s shareholder through its investor relation department. Stock information, investor news and financial reports are available on the company’s homepage. Due to the wildly spread shareholding, the individual shareholder has small power.

The power/interest below provides information about how Nike can manage the relationship with particular stakeholders

High

Low

Stakeholder’s Level of Interest

Minimum Effort

Competitors (e.g. Reebok, Adidas, Puma)

Keep Informed

Shareholder Employees

Keep Satisfied

Governments (US and Governments of the host countries of the factories)

Public opinion Leader

Maximum Effort

Environment Protection Organization Anti-Sweatshop Organizations

Fig: 6 Interest/Power Matrix (Johnson and Kevan, 1999)

5.1 Corporate Social Responsibility According to Nike co-founder and chairman Phil Knight, all businesses should be good citizens (Willigan, 1992). In academic literature this approach is referred to as corporate social responsibility (CSR. Corporate social responsibility describes a company’s role in society and can be defined as company’s effort to have a positive impact on the public (Kotler, 2012).

Stakeholder’s Level of Power

In an interview from 1992, Phil Knight emphasizes the importance of making a company’s good deeds visible for the public (Willigan, 1992). In line with the statement of Phil Knight, Nike released a 176 page CSR report which is available to the public online. The report covers all of the companies CSR efforts, from the factory conditions to the protection of the environment. Phil Knight’s successor and current Nike CEO Mark Parker describes sustainability as a crucial part of Nikes growth strategy. As a matter of fact, the focus of this report is on improving Nikes environmental and social sustainability. As part of Nikes corporate social responsibility, Nike has also initiated a charity campaign called RED that aims at fighting AIDS in Africa. Consumers can purchase a pair of red laces and Nike then donates 100% of the profits made by selling these laces to a global fund and football based programs helping to fight AIDS (nike.com, 2011)

Critics might question whether Nike implements everything described in the CSR report but nevertheless the report underlines the company’s intention of good corporate citizenship. The RED charity campaign was criticized for its lack of transparency and inefficiency. The advertising costs for the campaign exceed the income through donations by far (africomnet.org, 2012). Still the charity campaign could be seen as a value added for the customer, because purchasing Nike products gives him the feeling of doing a good deed. The

sustainability efforts represent added customer value in term of a customization of Nike products to the customer need for more green and sustainable products.

5.2 Celebrity Endorsement Celebrity endorsement is part of public relations and can be described as a written or spoken statement of a celebrity, in order to highlight the quality of a product or service (Kotler, 2011). Nike manages its external relationships by using of top athletes as representative for the company. This celebrity endorsers shape the public image of Nike. An important celebrity endorsement was the collaboration with golfer Tiger Woods. Nike signed him to a $105 million agreement, one of the largest endorsement deals ever (Roll, 2012).

Using celebrity endorsement involves risks. The public exposure of Tiger Woods personal problems forced several big brands to immediately end their collaboration with the golfer. Nike on the other hand stayed with Tiger Woods and stated that they would support the golf star while he worked through his personal problems. Nike took a similar approach when Basketball stars and Nike endorser Kobe Bryant was accused of sexual assault. Nike stayed loyal to Kobe Bryant and was rewarded when Bryant’s athletic performance and subsequent Boy Scout behavior overshadowed his past mistakes (Kotler 2011).

Celebrity endorsers are a great way to give the Nike brand a personal touch. Moreover, for customers it’s are more likely to build trust to a person then to an intangible asset like a brand name. Nikes wait and see approach in regard to the bad publicity of some of its endorsers is highly reasonable. First of all, both Woods and Bryant were capital investments for the company and cancelling the relationship to them would mean losing a significant amount of money. Second, especially in the case of Kobe Bryant the public proofed to be forgiving when his on court performance overpowered his sexual assault charges. Finally, staying loyal to their celebrity endorsers during their difficult times is well in line with Nikes marketing approach of telling a story. Every good story has its up and downs, so does Nike and its celebrity endorsers. This makes the company

more authentic and customers might even find themselves in parts of Nikes story.

5.3 Mass Media Relationships (R23) As part of the mega relationships, mass media relationships occur on a higher level than the market level. The media is rather part of society then the market but still influences organization (Gummesson, 2008). Gummesson (2008) argues that the ability of business leaders to build relationships with media can be their most important marketing activity.

The social critic and activist Michael Moore criticized Nike for outsourcing jobs into low cost locations. Consequently, Phil Knight faced up to an interview with Moore to justify Nikes way of doing business. The interview between and Nike chairman Phil Knight was featured in Moore’s film „The Big One”. Phil Knight mentioned in the interview that he didn’t care about the fact that 14year old children working in Nike factories in Indonesia. This quote obviously put Nike in a bad light. After having received a full version of the interview, Nike insisted on having scenes removed from the interview but Moore released the interview as it was (industry central.net, 2012).

This is an example of a bad management of media relationships, since Phil Knight created bad publicly for its company. Even though he claimed to be misunderstood, his utterances had a negative impact on the corporate image of Nike.

6. Internal Relationships Internal relationship marketing activities are undertaken to improve a company’s performance in the external market. Employees are marketing resources that shape the customers experience with an organization (Godson, 2011). Research conducted by Alvarez, Casielles and Martin (2011) reveal that having trained and motivated stuff that is fully committed to a company’s objectives is essential to build up stable customer relationships.

Nike sees its employees as one of the companies its most important asset (Nikebiz.com, 2012). In order to motivate the employees, Nike helps them to build successful careers through constant training and development, improving management development, and welcoming ideas (Nikebiz.com,

2012). The added value for the Customers that arises from motivated employees is a high service and product quality.

7. Recommendations and Conclusions In addition to the ones given in the main body of the report, the table below contains conclusions and recommendations for Nikes relationship management.

Relationship Recommendation and Conclusion

Customer Relationships

Nike uses the right mixture of transaction marketing (customer acquisition) and relationship marketing (customer retention) to manage relationships with customers. Nike understood the importance of attracting new customers by using transaction marketing in order to keep the company’s “gene pool” of customers alive. Nike also understood that relationship marketing is vital in order to create genuine customer loyalty and customer retention. Nike engages in different types of customer relationships, depending on their level of loyalty to the brand and aims at moving customers up the ladder of loyalty.

Taking the huge amount of customers and the nature of the companies’ products into consideration more personal interactions and relationships

with customers would not be economical and it is recommended that Nike sticks to its current customer relationship management.

External Relationships

Nike clearly understood that its way of doing business effects it’s cooperate image. Nike made a change in its management of external relationships and stopped to ignore allegations from society especially in terms of the sweatshop situation. Nike also recognized the customers need for sustainable and green products and incorporated this in their CSR activities. But critics question the effectively of some of Nikes CSR activities, especially the charity work.

In order to further improve the external relationships, it is recommended that Nike undertakes measures to make the company’s CSR activities efficient.

Electronic Relationships

Nike recognized the benefits of viral marketing as a means of interaction with customers. Also Nike engages in electronic relationships with customers through blogs and online communities. Nike need to consider that most of the electronic relationship is difficult to control and the online bad publicity about the company spreads as fast a good publicity. It is recommended that Nike further engage in electronic relationships but monitors the interactions between customers.

Supplier Relationships

Nikes strategy of outsourcing the whole manufacturing of the company’s products is economical. But as long as Nike is not in full control over the conditions of the licencing factories there is the risk of bad publicity as described in section 5. It is recommended that Nike considers handling part of the manufacturing in-house to have more control over it.

Mass Media Relationships Based on the negative effect that the appearance of Phil Knight in Michael Moore’s movie had, it is recommended to led the public relation department manage all media relations.

Word Count: 4888 (Excluding: Tables/Models and References)

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