👋 Hey, it’s Sundar! Welcome to experiMENTAL: a weekly newsletter on B2C marketing & data science how-to guides, frameworks, and stories from 15 years including early Uber.

There’s a general assumption that Brand isn’t quantifiable and that it doesn’t have an ROI. Well, the best way to prove that is to show the opposite: A loss of Brand results in a loss of value.

What happened to Nike from 2020 to 2024 is evidence of exactly that. While there were many factors involved in Nike’s value destruction, I explore it from the perspective of their marketing decisions.

To set the scene, in January 2020, Nike brought on a new CEO, Jack Donohoe to lead the swoosh. He was the former CEO at Ebay and had been on Nike’s board for a while, but there’s an important call out: He’s never worked at Nike or in retail.

He was there from Jan 2020 to Oct 2024, but his tenure effectively ended on Jun 28, 2024 when Nike’s shares dropped 20% in 1 day erasing $28 billion following a poor earnings call. In addition, Nike’s stock was down 48% over the previous three years while the S&P 500 was up 34%. If we know anything about C-suite compensation, it’s that the stock price is a big factor in it.

Over Jack’s time there, there were 3 broad categories of marketing changes made: strategic, tactical, and organizational.

Strategic

In May 2020, Nike decided to commit to a new strategy to selling their gear:

1. Grow Nike’s direct business

2. Reduce wholesale.

Nike.com would be the new center of attention and focus. The timing couldn’t have been better. With the pandemic in full swing and consumer preferences shifting almost 100% online, Nike.com was booming and Mr. Donahoe’s decision to move to DTC looked absolutely genius. His mistake though wasn’t changing the business strategy. It was not changing it back.

In a 2020 earnings call, Donahoe said “The accelerated consumer shift toward digital is here to stay. Nike’s strong digital presence and capabilities are fueling our consumer connections, driving our commercial momentum.”

But, as we know, things started to come back. It’s what’s known as reversion to the mean and its a phenomenon that happens for every trend ever. Things always go back to a smooth average (cool chart below shows this).

In addition, Nike went through a massive restructuring where they eliminated individual lines (think basketball, football, etc.) and shifted towards categories (men’s, women’s, kid’s).

Tactical

As mentioned, the transition to D2C had 2 main pillars:

• Reduce wholesale

• Increase traffic to Nike.com

First, Nike began to reduce wholesale by ending or reducing agreements with many local business partners. This meant that physical stores either had less overall products with only Nike.com having the best products. This happened across the world eroding partnerships that they had built for years.

Retailers then had to make up for that lost revenue by bringing in inventory from other brands (mainly Hoka and On). All of a sudden, Nike was losing market share in categories (running for example) that they had always been the dominating leader of. No one would think of competing with Nike on running, but a window and opportunity was created and competitors jumped on it.

Second, Nike began to change their marketing strategy. Under Donahoe, Nike’s advertising budget actually went up but it was all invested into performance marketing and programmatic display advertising.

Nike has always been known as a branding powerhouse creating some of the most iconic ads of every generation. But from 2020 - 2024, there wasn’t really a classic iconic Nike ad. The Olympics Ad that was old school Nike came in June 2024. A little too little. A little too late.

Even this ad was controversial. Nike forgot to include 3 time Olympic Gold Medal Winning and Nike Athlete Kevin Durant. Damn.

The problem with performance marketing and display advertising is that they only work if you’re in the market for a shoe. The average American buys a shoe once a quarter (4x a year) which means that the majority of the time that you’re spending money on performance and programmatic ads you’re wasting money.

Also, the aforementioned competitors started marketing too meaning that advertising competition (and prices) also went up. There were marketing inefficiencies everywhere , which showed up in Nike’s earnings reports.

Organizational

The organizational changes at Nike were some of the biggest changes Nike had seen in years.

1. Nike reduced the number of people working for sales teams in local markets. If you don’t need to liase with retailers, why do you need a sales team? Unfortunately, this also meant that the feedback loop with retailers and Nike went down. Nike’s inventory on hand sky rocketed because they just couldn’t sell the right things.

2. The brand communications function which was responsible for thinking through how to keep the brand relevant was absorbed by brand design. The brand design team prioritized how to style the creatives instead of how the creative would resonate with audiences (which was what Nike was known for!). They literally got rid of their bread and butter. Foolish.

3. Marketing was centralized to create a more efficient engine that would cater to all of digital marketing. This also meant reducing local marketing/creative talent and local investments to align with the new vision of a unified global empire.

Over 6 months, hundreds of employees were fired as part of the restructuring. Unfortunately, layoffs have 2 unintended consequences: lower morale and lost institutional knowledge. Nike had lost decades of experience and expertise in specific verticals and with that a loss of understanding customers and preferences. Boy would that come back to bite them.

Cumulative impact

In summary, Nike destroyed it’s mental availability. The question was never be “Do you think about Nike?”. The question was “Do you think Nike when you want to buy a shoe?”. The answer more and more became “No”.

But the damage goes even deeper. Not only did Nike erode brand perception, they eroded brand value. Nike is one of the few brands that feels accessible AND aspirational. Many of us own Nikes (accessible) but it still feels dope to wear Nike and many people want to wear it (aspirational).

By shifting to a D2C model, Nike had to price it’s product to compete with other online D2Cs and removed it from stores. Lower prices made it less aspirational and removal from stores made it less accessible.

Two birds. One swish. That’s something they’ll have to work on for a long time to fix.

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