One per cent per year--the overall US market share growth goal recently stated by New Balance CEO Jim Davis (Steven David, Product Marketing Manager, New Balance, personal interview, August 18, 1998). Such a goal would be quite modest for one of its larger publicly owned competitors. But for New Balance Athletic Shoe, Inc, a privately-owned manufacturer in the highly-competitive athletic footwear industry, this represents a significant brand management challenge. No longer can the company be content to serve its loyal base of "baby boomers" (40- to 55-year-olds), it now must court "Generation X" (25- to 35-year-olds).
This study illustrates the brand management efforts of a niche specialist, New Balance Athletic Shoe, Inc. Based in Boston, Massachusetts, USA, New Balance is a privately-held corporation whose 1998 estimated revenues of $550 million amounted to less than industry leader Nike spent on advertising in that year. While particular interest is paid to the branding efforts of New Balance, its efforts are analyzed in comparison to those of the three market leaders, publicly-owned corporations Nike, Reebok, and Adidas.
This case study is comprised of five sections. The first section provides a brief overview of brand theory. The second section highlights the current status and trends of the athletic footwear industry in the United States. Using brand theory, the third section presents a summary of the brand management practices of Nike, Reebok, and Adidas. Based on this analysis, the fourth section provides a detailed account of how New Balance manages its brand to differentiate itself from its competitors. The case study concludes by offering conclusions about the brand management efforts of a niche specialist in a fiercely competitive industry. While derived from the athletic footwear industry, these conclusions are also salient for the broader sporting goods industry.
An Overview of Brand Management
The effort to create and manage brands is a practice widely studied by marketers throughout the world. Keller (1998) defines a "brand" as a name or symbol attached to a product that allows for differentiation from similar product offerings. For example, both the Nike name and the ubiquitous swoosh logo are components of the overall Nike brand. The goal of brand management is to continually build on the strength associated with a brand, thus developing brand strength, or equity. The set of assets (both positive and negative) that consumers attach to a particular brand constitute "brand equity" (Aaker, 1991).
Many researchers have undertaken efforts to dissect brand equity into different components and dimensions. Perhaps the most widely-accepted model for understanding brand equity was presented by Aaker (1991), who suggested brand equity is comprised of five components:
1) Brand awareness
2) Perceived quality
3) Brand loyalty
4) Brand associations
5) Other proprietary brand assets
The remainder of this section will focus on describing these five components as a basis for analysis of brand management practices in the athletic footwear industry.
Brand awareness is the starting point in the development of brand equity. It represents the consumer's ability to recall a brand name when given a product category (Aaker, 1991). For example, when a person is asked to name a brand of basketball shoes, they are more likely to mention Nike, Reebok, Converse or Adidas than they are to name LA Gear or Spalding.
According to Keller (1998), brand awareness is important to brand strategy for three reasons. First, awareness of the brand ensures the brand enters the consumer's consideration set when looking to make a purchase. Second, brand awareness can affect choices within the consideration set. If one brand has a larger presence through advertising, it may be considered more favorably. Third, awareness can impact the development and salience of associations with the brand. For example, 58% of consumers contend well-known brands offer better quality than lesser-known brands (Silverman, 1998).
However, brand awareness alone does not result in sales. Dyson, Farr, and Hollis (1996) found brand awareness levels alone could not discriminate between incidences of consumer loyalty. Instead, it was important for the brand awareness to have relevance to the consumer. Thus, while brand awareness is an important strategic consideration, it is also very important to manage the quality and associations with a brand in an effort to garner loyalty.
Perceived quality represents a consumer's judgments of a product's overall excellence relative to its intended purpose (Aaker, 1991). For example, given its rich heritage with the sport of football (1), Adidas is commonly perceived to produce a high-quality football boot. Because it has been shown to drive financial performance (return-on-investment), perceived quality is often the focal point of corporate strategy (Aaker, 1996). Besides the actual make-up of the product, pricing strategies may impact a consumer's perception of quality (Keller, 1998). Therefore, in athletic footwear, as in many other industries, higher price may connote higher quality.
According to Jacoby and Chestnut (1978), brand loyalty is defined as the repeat purchase of a particular brand over time. That is, if a person buys a pair of Asics running shoes, will they be so satisfied with the product that they will continue to purchase Asics running shoes? There are two main reasons why brand loyalty is an important strategic consideration. First, in terms of marketing costs, it is much less expensive to sell a product to a current customer than it is to attract a new customer (Aaker, 1991). It is easier to sell a product to a consumer familiar with the product than it is to educate a potential consumer on the merits of a product. Second, loyalty provides assurance that a predictable level of sales will occur (Grossman, 1994; Shocker, Srivastava & Ruekert, 1994).
In the athletic footwear realm, sales fluctuate by category on a regular basis, and the steady maintenance of a loyal base of core customers is essential. Even footwear behemoth Nike has experienced cyclical and recent downturns in its fortunes (Katz, 1994; Solnik, 1998). If marketers can develop extreme levels of loyalty, only one brand will enter the consideration set when making a purchase. However, as the plight of Nike demonstrates, such loyalty is difficult to achieve.
Baldinger and Rubinson's (1996) study of 27 brands revealed that barely one half of all customers that considered themselves "extremely loyal" to a brand remained "extremely loyal" after one year. Thus, even strong loyalty can be spurious, leading researchers to expand their understanding of brand loyalty. For example, Fournier (1998) stressed the need to investigate the relationship between the consumer and the brand as a means to better understand why people purchase and re-purchase particular items.
Any memory in the consumer's mind linked to a brand represents a brand association (Keller, 1998). Both the intangible and tangible attributes of a brand constitute its associations (Aaker, 1991). These attributes may also be experiential and symbolic benefits offered by association with a brand. For example, the "Air Jordan" brand name (and associated "jumpman" logo) connotes the ability to excel and reach new heights on the basketball court. According to Aaker (1991), "the selection of associations will drive all elements of the marketing effort" (p. 156). When mentioned, a successful brand will result in strong links in consumers' minds. Perhaps the best example in athletic footwear is …