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When Great Ads Just Aren't Enough

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new york Even before signs emerged last week that Wieden + Kennedy's decades' long stranglehold on Nike's ad business was weakening, the agency's flagship client was publicly distancing itself from the traditional media and marketing strategies that are synonymous with the Portland, Ore. shop.

Last month, Mark Parker, Nike's new CEO, told investors that relying on Nike's mass appeal was no longer good enough. Going forward, he said, the company needs to find new ways to forge closer and more meaningful connections to consumers through more customized, personal experiences—a shift significant enough to prompt Nike to reorganize to a more decentralized management structure.

"The Nike brand will always be our strongest asset, but consumers are looking for new relevance and connections," Parker said at the company's annual presentation to analysts on Feb. 6. "We're fundamentally changing the way we're organized as a company. It's really all about going deeper to get deeper connections and deeper insights, to get more innovation and more relevance, and to make us ultimately more competitive in each of the discrete pieces of our business. This allows us to be more informed and more surgical in creating products and optimizing our go-to-market strategies within each category."

He used the theme "The consumer decides" as a new defining mantra inside the company, declaring, "Clearly, the power has shifted to consumers."

While Parker has been in the top job for just a year, he's spent his career at the sportswear company, coming out of a design and marketing background. Having worked closely with Nike co-founder Phil Knight over the years, he similarly has a strong point of view about the company's communications. As he made clear to investors, there's now a lot more at stake in those efforts. Parker promised Nike will increase revenue 50 percent over the next five years, by $8 billion to $23 billion. That would make Nike as big as Coca-Cola is today, bigger than McDonald's and larger than competitors Adidas and Reebok, Puma, Under Armor and Old Navy combined.

Parker declined interview requests last week, but he's made it clear that finding closer connections to customers doesn't necessarily lie in award-winning 30-second films. At the time of the analysts' session, he said to AP: "You'll see [the Internet] move from a bit of a hobby for Nike to a massive commitment."

Nike has increased its Internet investment more than tenfold since 2002 to $11 million last year, according to TNS Media Intelligence.

In its 24-year history of working with Nike, Wieden has created some of advertising's most iconic, memorable work. But in the new digital world—which is where the majority of Nike's target customers increasingly live—those loyalties are being sorely tested. (A telling sign of change at Nike: Within its restructuring efforts, Stefan Olander, Nike Europe's brand communication director, was given the broader role of global director of digital media.)

Now Wieden is scrambling to catch up, sources said, adding that the agency is aggressively trying to poach top-level interactive creative talent from well-established digital agencies. Last year, Wieden hired Renny Gleeson, former managing director, Carat Fusion, to head up its digital strategies unit, but, sources said, Wieden still has limited interactive capabilities.

A source that regularly works with Nike said the marketer is dismissive about Wieden's digital and cross-platform capabilities: "They don't rate Wieden very high when it comes to interactive."

In recent years, Nike has developed relationships with top digital shops. In the U.K. and Asia-Pacific it uses AKQA and in the U.S., R/GA. The New York interactive company provides a benchmark of Nike's shifting priorities. R/GA's Nike business grew by 40 percent last year and is expected to post another 40 percent gain again this year to about $12-14 million in revenue, sources said.

Nike has worked with other advertising agencies as well over the years, particularly overseas. During those dalliances, Wieden has continued to enjoy its unchallenged role as Nike's lead marketing partner. But after Nike informed the agency on March 9 that the marketer's running shoe account is going into review, there were signs that this time it's different—particularly given the structural changes within Nike and word that Crispin Porter + Bogusky, which has been in talks with Nike for months, is said to be a likely contender. Furthermore, when the company confirmed its running account was going into review (first reported by Adweek.com on March13), its statement indicated that the company might be more willing to hear ideas from new sources or potential partners.

"As our business grows, our brand communications must also continue to evolve to meet an increasingly challenging marketplace," said Dean Stoyer, a Nike representative. He added that the company was "going through the informal process of evaluating the different talent out there and reviewing organizations" beyond Wieden. He added, "No decision is imminent to give a piece of business to any agency."

Executives at Crispin and Wieden declined comment.

Last year, Nike reorganized its marketing efforts to emphasize a multi-pronged approach across six main divisions, which are expected to generate 75 percent of the Nike brand's future growth: running, basketball, soccer, women's fitness, men's training and sports culture. (Previously, the brand was divided into three segments: footwear, apparel and equipment.) Nike has set up a new management structure where a new vice president was named in each division and is charged with responsibility for innovations, campaigns and interactive programs. They report to Trevor Edwards, previously vp, global brand management, who has had his duties expanded as vp, global brand and category management. Gary DeStefano, who had been head of U.S. operations, received greater geographic duties as president, global operations.

Executives in the new decentralized management structure are said to be looking for marketing partners with an orientation toward more of a 360-degree, cross-platform view of marketing initiatives, sources said, namely, agency models more akin to Crispin.

The long working relationship between Wieden and Nike has been characterized by the close dialogue between its top decision makers, Dan Wieden, president of the agency, and Nike's Phil Knight. As a result of Nike's structural changes, more voices have been brought into Nike's marketing process at the same time the agency has gone through its own top changes—and resulting staff upheaval, particularly on the Nike account.

Last week, Wieden confirmed the March 9 departure of Michael Folino, the lead creative on Nike, after just nine months. It is believed to be the same day Nike informed Wieden that it was seeking fresh ideas from others on the running shoe business.

A Wieden alumnus, Folino, who declined comment, succeeded Mike Byrne, who left last April to become a partner at Anomaly. Folino's departure follows several personnel changes on the Nike account.

Last September, managing director Tom Blessington took over Portland managerial duties from global COO Dave Luhr. Just weeks after Blessington was promoted, Rebecca Van Dyck, who worked on Nike for 12 years and had global oversight on the account for the last four years, left Wieden to join Apple. Around the same time, cd Hal Curtis, who worked closely with Van Dyck on Nike, was shifted to the agency's Coke business.

At the February analysts' session, Parker underscored the importance of emerging markets to the company's growth, particularly China, which is soon expected to become its second-largest market. While Wieden has gained ground with the client in recent years globally, winning plum assignments like China, those markets will test the agency's ability to reinvent itself. Given the constraints of China's government-controlled media, the country's emerging middle class is becoming the most interactive group of consumers on the planet.

Last month, Nike executives also made it clear that new products like Nike+, which incorporates an iPod sensor into running gear, offer an example of new brand priorities at the company. (Tellingly, Nike+ is part of the running assignment under review.)

"We've merged the digital world with the physical world of running and literally changed the entire landscape," said Charlie Denson, Nike brand president. "[People] want to be part of a community, whether it's a digital community, a virtual community or ... a physical community."

He continued: "We used to talk about the consumer in what we thought was specifics, but today feels like generalities. ... We used to put an 18- and a 22-year-old in a same set of psychographic, demographic targets … today they're living on different planets. ... We spent the last 20 or 30 years trying to bundle things, adding value to a purchase or a relationship. And now, it's almost in reverse, because you have to unbundle, everything if it's going to become customizable."—with Greg Solman, Andrew McMains and joan vOight