14MMC206

Product Innovation Management

Assignment 1

MARKET RESEARCH & PRODUCT

SPECIFICATION
NIKE, INC.

Karim Habbas
B122608

29th April 2015

Professor Chris Backhouse

Executive Summary
This report is the first of a two part series aimed at implementing a new product introduction
strategy for Nike, INC. The scope of this report encompasses analysis of Nike, INCs existing
product portfolio, documents market research to elicit customer needs and derives a Product
Design Specification as a result of a House of Quality.
Nike designs, develops and sells high-quality athletic performance gear and sports-inspired
lifestyle products, categorised as: Footwear, Athletic Apparel and Equipment / Accessories.
Respectively each business unit accounted for 62%, 32% and 6% of Nikes $26.1 billion
revenue for FY13/14, with 11%, 8% and 2% growth from the previous year. Winning battles
in key geographies such as Northern America, Western Europe and Greater China is
essential for Nike to establish further dominance amongst its growing rivals.
BCG and McKinsey Multifactor matrix results indicate the increasing excitement around
wearable technology is accelerating consumer demand for new product innovations. An
estimated 58 million wearable tech products will be sold in 2015, potentially increasing to as
high as 177 million units by 2018. Currently Nike holds 14% of a market that is forecasted to
grow by a CAGR of 52%. Leveraging Nikes position as a global leader in sporting goods
manufacture, passion for innovation and deep sporting connections, it can capitalise on the
market by introducing a distinctive wearable tech product.
Nike PRIME is an intelligent wearable training aid, which provides critical metrics, powerful
analytics and coaching recommendations to maximise performance on and off the track,
pitch, court or gym. Nike PRIME facilitates peak performance.
Weighing no more than 20g, Nike PRIME is comfortable to wear at all times during any
sporting activity. Processing speeds clocking in at 2.8 GHz and 1GB of RAM are essential to
ensuring that the device can handle large streams of real time data, compute results
analysis and simultaneously make useful training recommendations. Integration of a large,
crystal clear OLED touchscreen, force pressured, display with 480 pixels per inch resolution
as well as a wide variety of sensing units and high resolution of feedback are Unique Selling
Points of the product. Modularity and customisability of the product is also a key in appealing
to a diverse consumer base. PRIME will be the most personal product the company has ever
launched. The aforementioned target PDS points surpass or if not match competitor
products. Once achieved, Nike PRIME will become recognised as the best personal training
device on the market.
PEST and SWOT analysis as well as customer needs identification helped establish the
customer requirements of the product; while the 7Ps Marketing Mix details optimum
channels to market in order to connect the consumer and maximise Nike PRIME sales. High
profile endorsements create a wining mentality among consumers who are loyal to the
brand. At a RRP of 195, Nike PRIME will appeal to athletes looking to improve performance
in a particular sport/activity as well as consumers who are sporty or seeking a healthier
lifestyle. Casual sports or exercise consumers will be treated as part of a second tier market
strategy.
Investment in fundamental technological can pave the way for future generations of products
across Nikes portfolio. The battle for the wearable tech market is currently wide open, with
no clear market king present. Nike PRIME provides a unique opportunity for Nike to claim a
significant stake in one of the most significant, and profitable trends of this decade.

Table of Contents
Executive Summary..ii
1.0 Introduction ..................................................................................................................... 1
2.0 Nike, INC Product Portfolio Analysis ............................................................................... 2
2.1 Financial Performance & Growth Expectations ............................................................ 3
2.2 Channels to Market & Sporting Preferences ................................................................ 5
2.3 Footwear. ...................................................................................................... 7
2.4 Athletic Apparel ........................................................................................................... 8
2.5 Equipment & Accessories ............................................................................................ 9
2.6 Boston Consulting Group Matrix ................................................................................ 10
2.7 GE/McKinsey Multifactor Matrix ................................................................................. 11
2.8 Ansoff Matrix and Product Life Cycle Renewal .......................................................... 13
3.0 Market Needs Research................................................................................................ 14
3.1 Core Benefit Statement ............................................................................................. 14
3.2 PEST Analysis ........................................................................................................... 15
3.3 SWOT Analysis ......................................................................................................... 16
3.4 7Ps Marketing Mix .................................................................................................. 17
3.5 Customer Needs Identification ................................................................................... 18
3.6 Affinity, Tree & Kano Diagrams.................................................................................. 19
4.0 Quality Function Deployment ........................................................................................ 22
4.1 Needs-Metrics Scoring Matrix .................................................................................... 23
4.2 Pareto Analysis.......................................................................................................... 24
4.2 House of Quality ........................................................................................................ 25
5.0 Discussion of Recommendations .................................................................................. 26
6.0 Conclusion .................................................................................................................... 28
7.0 References.................................................................................................................... 29
8.0 Appendix ....................................................................................................................... 30

1.0 Introduction
This report aims to establish a new product offering for Nike Incorporated. Utilising historical
data, a variety of strategic analysis tools, and empirical research an analysis of Nike, INC.s
current product portfolio will be used to establish its competitive position in the market.
Identifying a suitable gap in the market will be followed by market research to specify the
fundamental customer needs of the new product offering.
Translating the qualitative, consumer language data, into technical specification outputs will
be achieved through the use of a House of Quality. The House of Quality will provide a
comprehensive collection of quantitative object targets. A successful product is ultimately
defined by its ability to meet the needs of the target customer.
Represented by one of the most recognisable logos in the world, Nike Incorporated is a
world leading athletic footwear, apparel and equipment company dedicated to inspiring every
athlete to reach their full potential. Named after the Goddess of Victory, in Greek Mythology,
Nike was founded in 1964 by Bill Bowerman and Phil Knight. Figure 1 below states the
philosophy and vision statement for the company (1).

Figure 1: Nikes Mission Statement

2.0 Nike, INC Product Portfolio Analysis

Nike, Inc. wholly owns 5 distinct subsidiary companies: Nike Brand, Converse, Hurley
International, Nike Golf and Jordan Brand (2). For the financial year ending 31st March 2014,
Nike Brand attributed to 93.9% of Nike, Inc.s $26.1 billion revenue (3). Due to this, the
report will focus solely focus on Nike Brands core products and services. Nike Brand
designs, develops and sells high-quality athletic performance gear and sport-inspired
lifestyle products, categorised as:
1. Footwear
2. Apparel
3. Equipment & Accessories
Respectively each category accounted for 62%, 32% and 6% of Nike Brands revenue for
FY13/14 (3), with 11%, 8% and 2% growth from the previous year. For simplicity; Nike Brand
will be referred to as Nike throughout the duration of this report.
Identification of the most popular sports, in terms of historical and projected revenue intake,
will be cross referenced with these three product categories to establish the greatest
potential for a new profitable product offering. Furthermore, the greatest representation of
sales, and forecasted sales, by geographical regions must be considered to in order to
effectively plan, develop and successfully implement a new product offering.
Nike is the most valuable sports brand in the world and is ranked 24th in the overall most
valuable brands list as of 2014 (6). At the start of 2015 Nikes market value cap stands at
$85 billion, an increase of $16 billion from the start of 2014 (7).
Nike caters for elite, training and lifestyle athletes in all of its product offerings. The tired
approach allows for maximum coverage of the sports markets with little additional effort in
terms of further development. Furthermore, by not singling out any particular level of athlete
consumers can feel part of the Nike team, thus creating brand loyalty. Young athletes want
to wear what their idol sports starts wear on an international scale. The inclusive, circular
community creates a distinctive feeling of wining.
Nike was awarded with 554 patents in 2013 (4), demonstrating the companys commitment
to innovation and intention to expand into new markets by manufacturing new products that
continue to satisfy the needs of its existing customers. Furthermore, it provides insight into
the companies push for expanding their market share, and perhaps reaching out, and putting
emphasis on product offerings that satisfy the needs of non-traditional customers.

2.1 Financial Performance & Growth Expectations

Figure 2 below indicates the revenues of Nike across the last two full financial years,
FY12/13 and FY13/14, categorised by geographic region and broken down into Nikes three
core business units: footwear, apparel and equipment. All data is sourced from published
financial statements documented in Nikes 2014 Annual report (3). Figure 3 illustrates the
Profit before Interest and Tax (EBIT) for the same period. Furthermore, a representation of
the percentage change in profit from FY12/13 to FY13/14 is indicated by the line. Green
presents growth, with red representing a reduction in EBIT for a given geographic region.

Figure 2: Nike Revenues for FY12/13 & FY13/14 organised across portfolio categories, and
geographical locations

Figure 3: Nike EBIT for FY12/13 and FY13/14 with % increases, across geographic regions

Similar trends are mirrored in Nikes reported future growth, see Figure 4 below, based on
Nike footwear and apparel orders scheduled for delivery from January 2015 through to June
2015.

Figure 4: Nike estimate growth based on incoming orders for FY14/15

Western Europe is the largest growing market for Nike (33% increase on EBIT from previous
financial year and a 25% increase in future orders), with the North America region also
expected to grow by 11% on top of a 16% EBIT increase for FY12/13. Nike sees its
strongest return on its home geographic region. In the US Nike holds over 45% of the
athletic footwear market share (1). According to a report by Euromonitor direct rivals Adidas
hold a 13.3% share of the Western Europe sporting good market in 2012, while Nike market
share stood at 12.4%, see Figure 5 below (5).

Figure 5: Nike Market share in key markets as of 2012

A drive to overtake Adidas market share in Western Europe, the home territory of the
German based sports manufacturer, would greatly benefit Nike in order to establish itself the
top sportswear manufacture in the western world. By further capitalising on consumer
interests, utilising local knowledge and resources, Nike can continue to connect with its
customers to create demand which it can supply to. In all regions across the globe the
Footwear business unit provides the greatest revenue, and in total accounted for 62% of
Nikes revenue in FY13/14 (3). Perhaps, a new product venture, in a niche market, would
give Nike an additional edge in order to overcome Adidas in Western Europe specifically.
This notation will be explored later in the report.
4

Historically, Nike has been successful because it has taken the initiative and been first to
market by recognising and utilising key technological trends. At Nike, we are leaders. When
we fail, is when we follow. Tinker Hatfield, VP of Innovation. In 1991 Nike launched their
online store, 7 years later Adidas caught on (8). Similarly Nike leads with social media usage
as well as putting significant effort in closed loop sustainable initiative, and a big push for
corporate responsibility. Off the back of the heavy damages the brand suffered in the late
90s due to poor worker conditions in sweatshops in low economy countries forced a culture
change and emphasises on transparency in Nikes operations. This in many ways helped
elevate the brand on top of its continual ability to design, develop, and market its products in
innovative ways that connect directly with the target audience.
Popularity in various mainstream sports naturally differs with geographic location. Figure 8
below illustrates Nike products sold globally as categorised by their associated sport.

Figure 8: Nike % of sales based on sporting activity

25% of Nikes products sold arent categorised to a particular sport, but instead classified as
Sportswear. Sportswear refers to product lines that arent specifically associated with a
particular sport. For example many of Nikes footwear collections such as the Air Max, Air
Force 1, and Mavrk are casual fashion items of clothing, yet still part of the sports brand.
Following this, 19% of sales across all product categories, footwear, apparel and equipment
are attributed to running. Next is basketball with 13% which is then followed closely by
football and mens training at 10% - with womans training lagging behind at 5%, yet still
ahead of niche categories like action sports and golf.
From this analysis a new product introduction which could cover all the major sport, ranging
from running, basketball, football and both male and female fitness would clearly be
beneficial. A quarter of Nikes sales come under the Sportswear category and therefore the
potential to offer a generalist product with multiple, and specific sporting functions could
become Nikes flagship product. A product which resonated with the recent surge in
consumer interest for wearable technology, Nikes unique approach to innovation and
unrivalled brand power, a multi-faceted training device may be the exciting new product
introduction the company is looking for to maintain strides ahead of the competition.

2.3 Footwear
The global athletic footwear market is estimated to grow at a Compound Annual Growth
Rate (CAGR) of 1.8% to reach $84.4 billion in 2018. Comparatively, Nike's footwear sales
have historically grown at a far higher CAGR of approximately 20% over the 2012-2014
fiscal period (9). Figure 9 below demonstrates Nikes dominance in the global market share
of athletic footwear, as of 2011 (10).

Figure 9: Global market share of athletic footwear vendors, 2011

The athletic footwear industry enjoys a high average gross margin of approximately 45%
because of the low input costs of raw materials and the premium pricing of finished products.
Nikes production outsourcing strategy allows the company to focus on design and provides
flexibility to optimise cost control and supply chain management. Currently Nike have 785
certified contract factories, with over 1 million contracted factory workers producing over
500,000 different product per year (1). Differences in gross margins arise from businesses
degree of focus on direct-to-consumer sales (including sales through company-owned stores
and online). Adidas has higher gross margins of approximately 49.5%, compared to Nikes
43.59%, as its direct-to-consumer sales contribute a higher proportion of total sales (23%, as
compared to Nikes 19%) (11).
The new product introduction should connect with user emotions, such that transactional
relationships are turned into beneficial experiences. Introducing customer influence at more
of these stages could potentially give consumers of the new product offering a unique
experience. Consequently, Nike should see an increase in profits as a result of direct
communication with its consumers. Nikes value chain is as follows:
Plan > Design > Make > Move > Sell > Use > Reuse
Nike ID to some extent achieves the inclusion of the customer, whereby they can customise
a trainer online and influence the design stage of the value chain. Expanding the mass
customisation comportment of Nikes business to other areas to enhance the product
portfolio will be discussed further on.
7

2.4 Athletic Apparel

The global sports apparel market is expected to grow at a CAGR of 4% and be valued at
$178 billion by 2019 (12). Factors expected to drive market growth are the growing fitness
consciousness, rising income levels in developing countries, the increasing popularity of
womens sports apparel as well as the trend towards stylish and comfortable sportswear.
Athletic apparel, or activewear a new term covering the sports fashion element of the
products, whereby Consumers are drawn to its comfort and versatility, and the fact that it
still makes a fashion statement, as stated by Marshal Cohen a NPD Group Analyst (13).
Attention to fabrics, styles colour and pattern have helped Nike continue to meet the trends
of the fashion industry and gauge interest from consumers. For example, the runway trend
for camouflage patterns (14) has been integrated into this seasons core apparel product
range, including sweatpants, hoodies and rain jackets. In addition to the fashion element of
the apparel products, significant effort should be maintained to insure Nikes apparel
technically performs above the competition. The significant investment in the R&D innovation
labs set the brand apart. Dry-FIT, launched in 1991, is a lightweight moisture repellent
weave still used by Nike today to construct sports apparel. HyperElite, launched in line with
the 2012 Olympics, is a next generation iteration made from recyclable materials.
Figure 10 below indicates the global market share of athletic apparel vendors, as of 2011
(15).

Figure10: Global market share of athletic apparel vendors, 2011

Acquiring market share from Adidas must be the priority, through a diverse on trend range of
activewear product offerings. Counterfeit products as well as increased competition from
local and niche players damage Nikes market share. For example, during 2014 activewear
sales in North America rose 29% for Under Armour, compared to 13% for Nike (16). Both
Nike and Under Armour have started to collaborate with supermodels as brand
ambassadors to emphasise the fashion element of the brands. Moreover, sponsoring social
media socialites with new product releases can provide an effective marketing strategy as
these individuals have direct access to specific youth target consumers. Attaining brand
loyalty from an early age can subsequently benefit Nike in the long term.
8

2.5 Equipment & Accessories

Nike is becoming a company that isnt just focused on products.but is focused on
products and services, says Stefan Olander, VP of Digital Sport. A push for digital sport and
the accelerated interest in wearable technology, this space is vastly open to interpretation.
Consumers are not quite sure what they are after but the demand is there, the right product
has to be presented and the trend will kick off. Nike with its top tier brand image for sports
products is ideally suited to capitalise on this paradigm market shift.
Fitness trackers are a growing market, an estimate 58 million wearable tech products will be
sold in 2015, with optimistic estimates indicating that the market could increase to as high as
177 million units by 2018, see Figure 11 below (17). Nike's current share is 14% of the
worldwide market, where Fitbit, one of the earliest players, is the market leaders with a 58%
market share (18). Jawbone, another basic band competitor, also grew rapidly as it
expanded its international distribution after the initial launch of the UP24 in Q4 of 2014 (12).

Figure 11: Estimate the number of wearable units sold by 2018

Technology giants such as Apple, Samsung and Google are keen to get involved in the
wearable tech market, with a stream of product launches all hoping to gain traction with a
demanding consumer base. Various niches can be carved from wearables but currently the
main avenue is aimed at fitness and wellbeing. The Fuelband, Nikes first iteration of a
wearable tech product has frankly been outmatched on sales, according to Canalys
analyst Daniel Matte. "Its competitors speed, international reach, broader channel
distribution, integration with other fitness communities, superior Websites and multi-platform
support have proven to be major advantages." Given Nikes innovation reputation, reach and
marketing power this is unacceptable. Nike, utilising its deep connection in the sporting
industry as well vast knowledge in specific sporting segments such as running, basketball
and football could align a wearable tech product into a specific training aid. With Apple CEO
Tim Cook on the Nike board of directors for over a decade (19), another partnership with
Apple would continue to assist in the overlapping of two considerably large consumer
markets. Expansion of the already established Nike Fuel system through introduction of a
new advanced wearable tech product introduction could help achieve Nike CEO, Mark
Parkers goal of achieving 100million fuel users (20).
9

The Multifactor matrix considers market growth rate to be one of the many contributing
factors to an attractive market. This is mapped against the competitive position of a
particular business unit. The result is a quantitative measure of industry attractiveness and
the business units relative performance in that industry (22). The size the circle represents
the size of the market the business unit is competing in, the black portion of the pie chart
represents an estimate of Nikes market share. The arrow represents the business unit
direction, where the length represents how quickly it is traveling in that direction.
1 Athletic Apparel Nikes range of athletic apparel options are stuck in the middle ground
between medium market attraction and medium competitive position. With 9.9% market
share, being cannibalised by numerous competitors, and lack of performance differentiation
in the market; the best strategy would be to invest in technology specific application of
apparel, instead of diluting the marketing with non-essential appealer items. The fashion line
of Nike has a smaller role to play in the shadow of a performance focused kit.
2 Equipment & Accessories A crowded market with competitors from within and outside
of the sports industry. Nike has remained weak in its competitive position due to a lack of
product diversification. The market is experiencing an increase in attractive ness to an
average level. An appropriate course of action would be to harvest remains of the market
then divest capital expenditure and re-invest that into the wearable tech market, whereby
Nike would be re-inventing its equipment range by going down an innovative technological
approach. This however, poses risks, due to lack of core competence in areas of electronics.
Resource re-assessment would be required and the potential of outsourcing and
collaborating with specialists companies would have to be considered.
3 Footwear Collaboration with artists helps generate continual product lifecycle renewals,
by generating hype over new product skews with minor alternations. This will assist in
mitigating the effects of slowly reducing market attraction value. Holding over 33% of the
market and in a strong competitive position Nike can influence the market heavily by setting
trends and being first to market with innovation in footwear technology, such as the Nike
Flyknit woven trainer. Sponsorship deals with high profile athletes and sporting events such
as the Olympics and World Cup have helped Nike in the past see an increase in sales in
footwear (23). This relationship should further be leveraged in other product lines to
stimulate interest and growth in the new product offering.
4 Wearable Tech With the groundwork for a top tier wearable tech product already
established at Nike, and the increasing traction and popularity of the wearable tech market.
The best place for a new product offering would be in wearable tech. however, sufficient
conviction in the product offering has to ensure that the product isnt just a fashion item, but
can sustain a mature product lifecycle. Nike is in a position of strength to capitalise.
5 Nike ID Bolstering and encouraging customers to use the premium customisation
services can increases sales of specific SKUs of product lines. Leveraging customisability
and personalisation elsewhere in the business can attract customers and help grow the
market size and increase brand presence to maximise returns from trends e.g. combining
the Nike ID program with wearable tech options. However, in terms of sustaining the
capacity to deliver and meet increasing market demand Nike must continue to leverage its
already established customisation program and continually outdo rival comports such as
Adidas, who have until recently been lagging behind.

12

3.0 Market Needs Research

After the summary of the product portfolio, utilising the key findings of the analysis is critical
to informing the next phase of the new product introduction. Firstly, a core benefit statement
summaries the purpose of the product. Both PEST and SWOT analysis helped to convey
both internal and external attributing environmental factors along with exploring the optimum
method to connect with the target market via the 7Ps. Following this capturing the Voice of
the Customer in the form of customer needs must be achieved in order for the product to be
successful. Use of focus groups to brainstorm ideas provided direct channels to the target
market, which were then categorised, through Affinity, Tree and Kano diagrams and
converted needs into technical engineering characteristics in the form of a House of Quality.
3.1 Core Benefit Statement

Figure 16: Nike PRIME Logo

Nike PRIME is an intelligent wearable training aid, which provides critical metrics,
powerful analytics and coaching recommendations to maximise performance on and
off the track, pitch, court or gym. Nike PRIME facilitates peak performance.
Developed in parallel with top athletes from across the globe, across a variety of sporting
disciplines, PRIME assists in the physical and mental battle athletes must endure whilst
training and competing. PRIME is an evolutionary step, eclipsing the efforts of the Nikes
previous sports equipment product offerings. The simple to use device coupled with powerful
analysis tools will deliver immediate performance improvements.
Data is gathered through real time sensing capabilities, full analysis available through online
and app platforms, coaching and development AI programmed into the device. The Nike
PRIME platform offers an option for consultation with professionally qualified and certified
coaches, nutritionists, physiotherapists and doctors.
PRIME will leverage the established Nike+ training platform and will be marketed across all
sporting segments in order to maximise sales revenue. Currently there are over 30 million
Nike+ members (25). By developing the product as non-sport specific, PRIME will become
the flagship product in terms of Nikes technological product offering and will lead the charge
in an attempt to capture a larger share in the sports equipment and accessories market as
well as the fitness/health wearable tech market. Bolt on services for sport specific
applications offer product life cycle longevity by continually increasing Nikes direct contact
time with the customer. Ultimately PRIME is an integrated product/service personal training
solution.

14

Subsequently, the Affinity diagram was organised into a Tree diagram; whereby questions of
customer importance were posed to the focus group. Each individual response is recorded in
the Tree diagram analysis and an average score is given. From this, a priority rank of is
denoted in the far right column. The customer importance can be found in Figure 23 below.
The full Tree diagram and customer needs priority analysis is shown in Figure 24.
Customer Importance Ratings
5 Feature is critical. I would not consider a product without this feature
4 Features is highly desirable, but I would consider a product without it.
3 Feature would be nice to have, but Is not necessary
2 Feature is not important, but would not mind to have
1 Feature is undesirable

Figure 23: importance rankings for customer needs.

Tree Diagram
5
3
5
4

Focus Group
Reposnse
4
5
5
5
3
2
5
4
5
4
4
3

Priority
Rank
3rd
10th
4th
5th

5
5
3
5
4

5
5
3
4
5

5
5
5
5
4

5
5
4
5
3

5
5
4
4
4

5.00
5.00
3.80
4.60
4.00

1st
1st
6th
3th
5th

5
5
3
3
5
3
3
5
2
2
3
3
4

5
4
3
4
5
2
2
4
4
2
2
3
3

5
5
3
4
5
4
4
5
3
3
4
2
4

4
5
3
5
5
3
2
4
2
2
4
2
4

5
5
3
3
5
2
2
4
4
3
3
2
5

4.80
4.80
3.00
3.80
5.00
2.80
2.60
4.40
3.00
2.40
3.20
2.40
4.00

2nd
2nd
10th
6th
1st
11th
12th
4th
10th
13th
9th
13th
5th

5
4
3
3
4
5
3

5
3
3
2
3
4
4

5
3
2
4
4
5
4

5
4
4
3
3
4
2

5
3
4
3
4
4
3

5.00
3.40
3.20
3.00
3.60
4.40
3.20

1st
8th
9th
10th
7th
4th
9th

4
5
5

5
4
4

4
5
3

3
5
3

4
4
4

4.00
4.60
3.80

5th
3th
6th

3
4

2
3

3
3

4
4

3
4

3.00
3.60

10th
7th

4.00

5th

Figure 24: Tree diagram for Nike PRIME

20

4
2
3
5

Average
Score
4.60
3.00
4.40
4.00

From this data customer priority data was ranked a classified in accordance with Kano
analysis. Kano provides an extra dimension to the data analysis by mapping customer needs
to their importance in terms of a user satisfaction. Customer needs classified as primary, are
critical to the product, but may rank differently according to the Kano model. For example,
the need safe to use is considered as a critical basic need. No matter how well you make
the product safe the customer expects this level of satisfaction as standard. The need high
processing power is another example of a high ranking need, whereas the Kano rating
indicates it is a performance need. The level of achievement is proportional to customer
satisfaction i.e. the faster the product can perform computational calculations; the more
satisfied the user will be. Delighters such as wireless charging, may be ranked lower in
terms of importance but can significant increase the delight of the user experience if
achieved but wont lead to satisfaction if not implemented. Kano was The Kano ranking for
each need was provided in joint agreement of the focus group. The Kano rank and
corresponding diagram is illustrated below in Figure 25.
Kano Metrics
Basic Attributes Allows product to get into the market, if not fulfilled customer will not be interested
Performance Attributes Allows product to sustain and remain competitive the higher the level of fulfilment the higher the customers satisfaction
Delighter Attributes Allows a product to excel and be world class if needs not met no dissatisfaction - but fulfilling leads to more than proportional satisfaction

No.

Customer Needs

5
Lightweight
6
Safe
14
Sweat/waterproof
23 Training development AI
10
Real time sensing
11
Automatic feedback
1 Unclutterd User Interface
8
Ergonomic size
31
Breathable materials
3
Large screen
17 High processing power
28 Fast operating system
4
Online platform
9
Appropriate shape
22
Pressure toushscreen
30 Customisable / modular
35
Sports tech look/feel
7
Soft
13
Long battery life
32
Tough & durable
27
Device connectivity
34
Follows brand style
24
Realtime cloud sync
20
Media centre
25
Push notifications
29
Location features
2
Simple setup
12
Wireless charging
18
Low maintenance
26
Automatic updates
33
Unique
15 Biometric data security
16
Harddrive capacity
19
Easy to replace parts
21
Home docking stand

Rank
1
1
1
1
2
2
3
3
3
4
4
4
5
5
5
5
5
6
6
6
7
7
8
9
9
9
10
10
10
10
10
11
12
13
13

KANO Rank
Basic
Basic
Basic
Performance
Performance
Performance
Basic
Basic
Performance
Delighter
Performance
Performance
Delighter
Basic
Delighter
Performance
Delighter
Basic
Performance
Performance
Delighter
Basic
Performance
Delighter
Delighter
Performance
Basic
Delighter
Performance
Performance
Basic
Performance
Performance
Delighter
Delighter

Figure 25: Kano diagram for Nike PRIME

Based on assumptions and analysis derived from the portfolio analysis, backed by the
confirmation of both primary and secondary market research, Quality Function Deployment
must be utilised in order to ultimately ensure the product developed meets the identified
needs of the customer. The QFD provides an opportunity to translate language data into
quantifiable quantitative data.
21

4.0 Quality Function Deployment

Quality function deployment in terms of a House of Quality has been conducted to ensure
that the needs of the customer translate into quantifiable technical engineering product
design specification points. The Voice of the Customer is derived from the aforementioned
Affinity and Tree diagrams. The 25 defined technical characteristics are categorised into 5
groups: Form, Material, Hardware, Software and Function, whereby each technical
characteristic is quantifiable and measurable.
Firstly, to quantify the importance of the technical product characteristics a Needs-Metrics
Scoring Matrix was produced, see Figure 26 or Appendix A. The correlation strength rating
between the X and Y axis quantifies the strength of the relationship (1- Weak, 3- Moderate,
9-Strong) between the customer needs and the technical engineering characteristics
respectively. The absolute importance raw score of each technical engineering characteristic
is calculated by multiplying the needs-metrics correlation strength rating by the pre-defined
relative importance of the customer need. The higher the raw score of the technical
characteristic, the more important need or the greater number of needs it influences.
Moreover, the importance of a technical characteristic can be represented as a percentage
of the total number of specification points.
Following this Pareto analysis was conducted to graphically represent the technical
importance raw scores in an order of critical priority. The top 5 highest scoring
characteristics, in order are: operating system design architecture, processing speed,
product dimensions, number of sensors and screen size. The results indicate that the top 16
(64%) of technical characteristics correspond to 80% of the cumulative importance score
thus the majority of technical characteristics are interlinked with multiple customer needs.
Therefore, careful considerations, with multi-criteria decision analysis, will have to be taken
forward in the design/development stage of the product as the issues faced have significant
overlap. See Figure 27 or Appendix B for full Pareto analysis.
With the technical importance score determined through established methodology, the
House of Quality was produced. See Figure 28 or Appendix C for full House of Quality.
Scoring between the customer needs and technical characteristics is based on a positive or
negative relationship and mirrors the weighted relationships of the needs-matrix scoring. In
addition, competitor benchmarking was also conducted to gauge the potential performance
of Nike PRIME against top competitors in regards to meeting customer needs as well
specification values. PRIME has both marginal and ideal specification targets. The marginal
target is the minimal value of acceptance the technical requirement must satisfy for the
viability of the product. Ideal target values are the best result the development process can
aim for, and should be periodically referred to see of if the maximum performance
boundaries are indeed attainable. Furthermore, technical difficultly and estimated
development costs are provided for each technical characteristic to assist in project
planning.
The following three pages show the results of the Quality Function Deployment phase, after
which final project recommendations will be given. See Appendix A, B, C for larger scales
versions of the following Needs-Metrics Scoring Matrix, Pareto Analysis, and House of
Quality diagrams.

22

4.1 Needs-Metrics Scoring Matrix

Needs-Metrics Scoring Marix
Numeric Relationship Rankings: 9 - Strong Correlation | 3 - Moderate Correlations | 1 - Weak Correlation

Form

Function

Software

Hardware

Comfortable to wear

Online platform

Lightweight

Safe to use

No. of colour options

Visual impact of device

Impact resistance force

Hydrophobic Rating

Surface texture / finish

Life Usage Cycletime

Random Access Memory

(RAM) capacity

Processing Speed

Internal Storage capacity

Software

9
1

3
3

Soft

Ergonomic size

Appropriate shape

Real time sensing

10

Automatic feedback

11

Wireless charging

12

9
9

Long battery life

13

14

Biometric data security

15

Hardrive capacity

16

High processing power

17

Low maintenance

18

Easy to replace parts

19

9
6

3
3

3
1

9
9

24

25

Automatic updates

26

Device connectivity

27

Fast operating system

28

Location features

29

Customisable / Modular

30

Breathable materials

31

Tough & durable

32

Unique style

33

Follows brand DNA

34

Sports tech look/feel

35

Measurement (Units)

9
9

3
9

9
1
1
9

9
9

3
9

1
3

9
1
1

2x 2x13
.1

mm x
mm x Kg
mm

9
1

Push notifications

Realtime cloud sync

23

Training development AI

22

3
9

Pressure touchscreen

21

20

Media centre
Home docking stand

3
1

Features

Sweat/waterproof

Force required to operate

clasp mechanism
Force required to activate
pressure touch screen

Training AI predictive
calulation time
Operating system design
architecture
No. of compatible apps and
devices

Force of vibration notification

No. of interface buttons

No. of connection ports

Large screen

Screen size & resolution

Bluetooth connectivity

Wireless bandwidth

Simple setup

Hardware

Total Mass

Customer Importance

Uncluttered User Interface

Material

Battery Capacity

Easy to control

Customer Attributes

Form

Product Dimensions

Engineering
Characteristics

Need No.

Affinity Group

Direction of Improvement

No.of sensors ( Gyro,

Accelerometer, Heartrate,
Resolution of sensing accurac
per second

Technical Group

9
3

Subj.

logP

Ra
m

Yr.

GB

GHz

3
GB

Hz

mAh Mbps Y/N

ppi

Subj.

<1

>5

0.1

1.0

1.0

>5

0.1

0.8

0.8

25.5

10

3.2-0.

1.0

2.0

8.0

80

500

540

422

42x42x
13 2

20.0

10

15

32 01

1.0

2.8

16.0

120

500

692

480 <0.5

Technical Importance (Raw Score)

313

236

140

211

147

130

222

182

234

342

155

288

231

174

175

112

279

276

387

91

98

71

160

103

126

Technical Importance (Relative %)

6%

5%

3%

4%

3%

3%

5%

4%

5%

7%

3%

6%

5%

4%

4%

2%

6%

6%

8%

2%

2%

1%

3%

2%

3%

Technical Difficulty

Estimated Development Cost

Nike PRIME Marginal Target

Nike PRIME Ideal Target

Customer Importance Ratings

5 Feature is critical. I would not consider a product w thout this feature
4 Features is highly desirable, but I would consider a product without it.
3 Feature would be nice to have, but Is not necessary
2 Feature is not important, but would not mind to have
1 Feature is undesirable

Technical Difficulty Ratings

5 Extremely difficu t
4 Reasonably d fficult
3 Standard
2 Fairly easy
1 Easy

Development Cost Ratings

5 >500k
4 250k - 500k
3 100k - 250K
2 50k - 100k
1 <50k

Figure 26: Needs-Metrics Scoring Matrix for Nike PRIME

23

5.0 Discussion of Recommendations

Investigation into the needs of customers through use of focus groups, 1on1 interviews,
brainstorming as well as analysis of existing products informed the House of Quality
analysis. The output of product design specification targets will facilitate Nike PRIMEs new
product development process in order to fulfil the desired customer requirements to a
benchmarked performance level.
Weighing no more than 20g, Nike PRIME must be comfortable to wear at all times during
any sporting activity. A target size of 42x42x13.2mm has been set to achieve maximum
ergonomic fit on a range of wrists, whilst having the physical capacity to house the
touchscreen display, intelligent sensors and hardware microcontrollers.
Processing speeds clocking in at 2.8 GHz and 1GB of RAM are essential to ensuring that
the device can handle large streams of real time data, compute results analysis and make
useful training recommendations to the user simultaneous in a responsive manner.
Furthermore, an ideal target of 16GB of hard-drive memory would cater for ample room to
store user data, include a media centre in the product and display multiple analyses.
Integration of a large, crystal clear OLED touchscreen, force pressured, display with 480
pixels per inch resolution makes PRIME highly desirable. The user interaction with the
product, which is intended to be worn all day, or when users are undergoing specific sporting
activities, is the most critical element of the product as indicated by the Pareto analysis in
Figure 27. The operating system must be simple to us, intuitive and precise in
communicating key results to ensure PRIME delivers an outstanding user experience.
A wide variety of sensing units and the resolution of feedback are Unique Selling Points of
Nike PRIME. Going above and beyond what the current market offers PRIME will utilise 8
multifunctional sensors packed in overlaying housing which share the processing power from
a single microprocessor controller. Metrics tracked include:

Heart rate zones, % level of maximum output

VO2 Max oxygen uptake & haemoglobin oxygen saturation
Lactic acid build up & milestone performance targets
Internal body temperature & blood pressure
Sleep cycles & nutrition intake

The intelligent programmed chip, in communication with the array activity sensors, feed
channels of data and analyses back and forth to the display and all data is logged in the
large capacity hard-drive. The processing unit effectively manages all interdependent
components of PRIME and selectively provides key functionality as and when required. This
can occur at the users request, if he or she wants to see a specific metric, or autonomously
in the background. All data is securely stored on the device with the latest encryption and not
accessible by Nike. Once connected online, all data becomes available to the user only
through the online Fuel Network. Further holistic analysis of all metrics will be presented
here clearly. Various levels of detail will be accessible depending on the users preference.
A fundamental trade-off between battery capacity to power the technical performance of the
product versus the size and weight of the product is ultimately decided by current technology
available. Use of miniaturised large capacitance, slow discharge lithium-ion batteries can
achieve the desired capabilities but a higher cost.
26

This increase in cost would therefore have to be passed on to the consumers, and as a
consequence could result in a lower number of units sold. Further investigation must be
conducted if this is the case through the development phase, if the impact of the cost is too
high and the consumer is not willing to pay for the vastly extended battery capacity of
500mAh, then a lower cost smaller capacity of battery will be used and Nike Prime would
consequently require more frequent charging. Ideally, users shown enjoy daily use of Nike
PRIME with battery life lasting a full week, before 30 minutes to 1 hour charge time. A Sync
& Charge feature could mitigate the negative effects of more frequently charging by turning
it into an opportunity to connect with the Nike online community network for performance
reflection and setting of new goals.
Modularity and customisability in the design is also an influencing factor. In line with Nike ID
and Nikes in-season activewear sports apparel, making Nike PRIME customisable whilst
still being able to manufacture the product on a mass scale will also help Nike gain traction
in the market. This is another opportunity where Nike can connect with the user to deliver a
truly unique experience. Inevitably, Nike PRIME will be the most personal product Nike has
ever launched. The advanced predictive analytics software and array of smart sensors
facilitate self-performance improvement. Nike PRIME is a universal product, catering for
elite, training and lifestyle athletes whereby, according to Nikes mission statement, an
athlete is defined by someone who has a body.
As estimated by the technical difficulty and forecasted costs, this development will come at a
price. Traditionally, Nike have limited in-house hardware expertise and therefore a
partnership will industry experts through engineering and design consultancies would likely
have to be established to develop the product to its full potential. Alternatively, recruiting
specialists and forming a new sub-division of the Equipment & Accessories business unit
could help to stabilise product innovation in the long term.
If the outlined PDS targets are achieved by the R&D department, it is reasonable to assume
that Nike PRIME will far surpass anything currently on the market, and potentially leap over
current competitor new product development projects. Thus the framework for a sustained
competitive advantage can be put in place from release date. No other competitor has a
relationship with a specific pool of sports customers like Nike. Tapping into the loyal fan base
before they switch out to a competitor wearable fitness product is key in gaining momentum
of market share. Consequently, through targets marketing campaigns and international
endorsement and the expected popularity among early adopter a greater number of
consumers will be attracted to Nike PRIME.
The criticality of achieving the aforementioned PDS points is therefore paramount in the
success of the product. If PRIME achieves these PDS objectives, it has the potential to
become recognised as the best personal training tool on the market.
The presented strategy is risk positive. Referring back to the Ansoff Matrix, see Figure 14
the roadmap for Nike PRIME shows a product development and diversification route.
However, Nike has had positive experiences with previous generation wearable products,
such as the Nike + Sensor (A pedometer style sensor which is inserted into the soles of
specific Nike + shoes, introduced in 2007) and the more recently, the Fuelband introduced in
2012. Having established a growing online community and with new practical applications of
advanced technology, Nike PRIME caters for a surging market demand.
27

6.0 Conclusion
To summarise, Nikes Footwear and Athletic Apparel business units are major competitors in
their repetitive global markets with 33.6% and 9.9% market share respectively. The
Equipment and Accessories business unit has failed to control significant market share due
to the vast numbered of skews the market offers. Internally, Footwear accounted for 62%,
Athletic Apparel for 32% and Equipment / Accessories at 6% of Nikes reported $26.1 billion
revenue in FY13/14. This equates to $17.2 billion, $8.9 billion and $1.7 billion respectively
for each business unit with each unit experiencing growth in sales revenue from the previous
financial year in sales of 11%, 8% and 2%.
Winning battles in key geographies such as Western Europe and Greater China is essential
for Nike to establish further dominance amongst its growing rivals. Currently, Western
Europe is projected to offer the most growth, with a 25% increase in order take for 2015
already reported, with North America increasing by 11% and Greater China increasing by
6%. Japan is the only global region reporting shrinkage of product interest.
Running, basketball and football are the strongest individual sporting sectors globally for
Nike with male and female fitness combing to account for 15 % of product sales and general
Sportswear attributing to a quarter of Nikes global sales in 2014.
Results from both the Boston Consulting Group Matrix and GE/McKinsey Multifactor Matrix
indicate that pursuing wearable technology in a complete sporting application could have
significant benefits for Nike. With the wearable tech market expanding at an estimated
CAGR of 52% between 2013-2018, and Nikes ideally suited position as a world recognised
sporting goods manufacturer will provide an avenue for substantial growth over the
foreseeable future. The concept of Nike PRIME was consequently established, with a core
benefit statement as follows:
Nike PRIME is an intelligent wearable training aid, which provides critical metrics, powerful
analytics and coaching recommendations to maximise performance on and off the track,
pitch, court or gym. Nike PRIME facilitates peak performance.
PEST and SWOT analysis helped to identify influencing factors to the success of the
product. With the 7Ps Marketing Mix used to establish the best way to connect the target
market in order to maximise Nike PRIME sales. At a Recommended Retail Price of 195,
Nike PRIME will appeal to athletes looking to improve performance in a particular
sport/activity as well as consumers who are sporty or seeking a healthier lifestyle. Casual
sports or exercise consumers will be treated as part of a second tier market strategy.
Identifying and analysing customer needs was completed through methodological process.
Interviews, focus groups, brainstorming sessions and analysis of existing products helped to
identify customer needs. Tree and Affinity diagram helped categorise the customer needs as
a perquisite to a House of Quality. Furthermore Kano analysis was performed to understand
the level of satisfaction gained from each requirement.
Finally a House of Quality was produced in order to obtain a Product Design Speciation for
Nike PRIME. Needs-metrics scoring, Pareto analysis of the technical requirements as well
as detailed technical competitor benchmarking were included in the analysis. In achieving
these PDS targets Nike PRIME can be the definitive wearable tech sports development
training solution.
28

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3. . NIKE, INC. REPORTS FISCAL 2014 FOURTH QUARTER AND FULL YEAR RESULTS. Portland, Orergon : Nike
Incorporated, 2014.
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2015.] http://www.bizjournals.com/portland/blog/threads_and_laces/2014/01/a-record-554-patents-for-nike-in-2013.html.
5. Euromointor International. Nike vs. adidas: May the Best Strategy Win. Euromointor International. [Online] Euromointor
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December 2014. [Cited: 4 March 2015.] http://www.forbes.com/sites/greatspeculations/2014/12/22/nike-strong-europe-chinaperformance-drives-15-top-line-growth-in-q2/.
7. Parker, O. This Girl Can advert: Scared of working out? Watch this. The Telegraph. [Online] The Telegraph, 12 January
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8. Helixa. N ke, The Innovation Machine. Slideshare. [Online] Helixa, August 2012. [Cited: 10 March 2015.]
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9. Nasdaq. Division In Focus: The High Performing Footwear Division Fueling N ke's Growth. Nasdaq. [Online] Nasdaq, 4
November 2014. [Cited: 30 March 2015.] http://www.nasdaq.com/article/division-in-focus-the-high-performing-footwear-divisionfueling-n kes-growth-cm410613#/ixzz3Wq45kwcx.
10. Statista. Athletic footwear vendors by global market share of athletic footwear revenue in 2011. Statista. [Online] Statista,
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2015.] http://www.forbes.com/sites/greatspeculations/2013/05/13/why-nikes-growth-will-outpace-the-sports-apparel-markets/.
13. Cohen, M. Activewear Growth Sets Pace For Overall Apparel Market. NPD Group. [Online] NPD Group, 18 December
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14. Joans, B. 5 Mens Fashion Trends To Keep For 2015. FashionBeans. [Online] FashionBeans, 22 January 2015. [Cited: 03
April 2015.] http://www.fashionbeans.com/2015/5-mens-fashion-trends-to-keep-for-2015/.
15. Statista. Statista. Global market share of athletic apparel vendors of apparel revenue in 2011. [Online] Statista, December
2014. [Cited: 31 March 2015.] http://www.statista.com/statistics/246719/athletic-apparel-companies-global-market-shareathletic-apparel-revenue/.
16. Kell, J. Athletic apparel: Outperforming the competition in 2014. Fortune. [Online] Fortune, 25 December 2014. [Cited: 3
April 2015.] http://fortune.com/2014/12/25/athletic-apparel-top-performer/.
17. Shen, Ying. Improving Lives Through Wearable Technology. Cisco Blogs. [Online] Cisco, 1 May 2014. [Cited: 03 April
2015.] http://blogs.cisco.com/cle/improving-lives-through-wearable-technology.
18. Pachel, P. Nike FuelBand Was the First Fitness Tracker to Fall, But It Won't Be the Last. Mashable. [Online] Mashable, 22
April 2014. [Cited: 4 March 2015.] http://mashable.com/2014/04/22/nike-fue band-exit-apple/.
19. Nike. Corporate Governance. Nike Investors. [Online] Nike,INC., 2015. [Cited: 3 March 2015.]
http://investors.n ke.com/investors/corporate-governance/?toggle=directors.
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[Cited: 7 April 2015.] http://recode.net/2014/04/25/n ke-ceo-were-committed-to-digital-but-focused-on-software/.
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29

8.0 Appendix

Appendix A Needs-Metrics Scoring Matrix

Breathable materials

Customisable / Modular

Location features

Fast operating system

Device connectivity

Automatic updates

Push notifications

Realtime cloud sync

Training development AI

Pressure touchscreen

Home docking stand

Media centre

Easy to replace parts

Low maintenance

High processing power

Hardrive capacity

Biometric data security

Sweat/waterproof

Long battery life

Wireless charging

Automatic feedback

Real time sensing

32

31

30

29

28

27

26

25

24

23

22

21

20

19

18

17

16

15

14

13

12

11

10

5
3
4
4
5
5
4
5
4
5
5
3
4
5
3
3
4
3
2
3
2
4
5
3
3
3
4
4
3
4
5
4
3

3
1
9

9
9

9
1
3

1
9

9
3

logP

3.2-0.1

3.2-0.4

Ra
m

182

Yr.

Subj.

10

222

4%

9
3
1

9
9
3

3
1

9
9

1
3

1.0

GB

2.8

2.0

GHz

155

16.0

8.0

GB

1.0

342

3%

234

7%

5%

2
2

2
3

3
2

Features

Software

1
9

3
9

9
9

1
1

3
3
3

3
9

1
1

9
1

2%

103

0.8

10

3%

126

0.8

1.0

9
3

Hardware

9
9

9
1
3
9

0.1

0.1

Subj.

>5

160

71

3%

ppi

<1

>5

98

1%

422

91

2%

mAh Mbps Y/N

480 <0.5

387

2%

276

8%

1
Y

6%

5
4

Development Cost Ratings

5 >500k
4 250k - 500k
3 100k - 250K
2 50k - 100k
1 <50k

3
3

540

279

Hz

500

692

112

6%

80

500

175

2%

120

174

4%

231

4%

288

5%

6%

9
1

Force required to operate

clasp mechanism
Force required to activate
pressure touch screen

Force of vibration no ifica ion

No. of interface buttons

No. of connection ports

Training AI predictive
calulation time
Opera ing system design
architecture
No. of compatible apps and
devices

Screen size & resolution

Bluetoo h connectivity

9
9

Wireless bandwidth

Battery Capacity

No.of sensors ( Gyro,

Accelerometer, Heartrate,
Resolution of sensing accuracy
per second

Material

9
9

1
9

9
9

9
9

9
9

3
3

15

130

5%

147

3%

25.5

10

211

3%

42x42x13
.1

20.0

140

4%

42x42x
13.2

236

3%

313

5%

3
2

6%

2
1

2
2

3
1

Technical Difficulty Ratings

5 Extremely difficult
4 Reasonably difficult
3 Standard
2 Fairly easy
1 Easy

3
3

1
1

3
1

mm x
mm x Kg
mm

Internal Storage capacity

Processing Speed

Random Access Memory

(RAM) capacity

Life Usage Cycletime

Surface texture / finish

3
9

Hydrophobic Rating

Impact resistance force

Visual impact of device

No. of colour op ions

Total Mass

Form

Numeric Relationship Rankings: 9 - Strong Correlation | 3 - Moderate Correlations | 1 - Weak Correlation

Needs-Metrics Scoring Marix

1
2
3
4
5
6
7
8

Tough & durable

33
4
4

Nike PRIME Marginal Target

Nike PRIME Ideal Target
Technical Importance (Raw Score)
Technical Importance (Relative %)
Technical Difficulty
Estimated Development Cost

Product Dimensions

Technical Group
Direction of Improvement
Engineering
Characteristics

Customer Attributes

Uncluttered User Interface

Simple setup
Large screen
Online platform
Lightweight
Safe to use
Soft
Ergonomic size

Unique style
34

Follows brand DNA

35

Customer Importance

Measurement (Units)

Sports tech look/feel

Appropriate shape

Need No.

Customer Importance Ratings

5 Feature is critical. I would not consider a product without this feature
4 Features is highly desirable, but I would consider a product without it.
3 Feature would be nice to have, but Is not necessary
2 Feature is not important but would not mind to have
1 Feature is undesirable

30

Affinity Group
Easy to control
Comfortable to wear
Hardware
Software
Function
Form