How Adidas is ‘Creating the New’ to recapture its winning streak
Adidas is adamant that it won’t repeat the mistakes that blunted its growth in recent years and after taking time to catch its breath is ditching its “functional” marketing principles to come back stronger as a customer-focused brand.
Every athlete knows that the moment you become complacent you start to lose. Therefore, Adidas is embarking on what it calls an “ambitious yet realistic” five-year charge to reignite sales after a failure to adapt fast enough to consumer demands and the unforeseen impact of Russian’s stuttering economy forced it to scrap its original Route 2015 plan.
Rather than see this an outright failure, the business has learnt from the disappointment and is pumping funds into the product, retail and digital success stories that defied the downturn. These three areas are emblematic of the company’s new guiding principles of speed, cities and open-source that it hopes will sharpen its focus on what matters most; the customer.
Becoming the ‘fastest sports brand in the world’
Adidas is overhauling its distribution and sales channels to increase the speed it gets products to markets in-season as well as enhance the way they look in its own branded stores, which are predicted to generate more than 60 per cent of its total annual sales by 2020. To achieve the momentum needed, the business is tightening its product range by 25 per cent over the next 12 months whilst increasing its marketing spend so that it can channel investments on its strongest brands such as Boost, Originals and Neo.
Speed will also come through digital with Adidas expecting online sales to quadruple from €500m over the next five years.
Global brands are shaped in global cities
Speaking to delegates at its Investor day earlier this week (26 March), Adidas chief executive Herbert Hainer, said the strategy was not dependent on the business winning everywhere but in those cities where the halo effects are created. It means Adidas will square up to rival Nike in some of the world’s biggest cities such as London, Paris and New York in a calculated gamble on its marketing pushing the brand beyond having a ripple effect across the countries.
"Global brands are made in global cities,” said Hainer. “Our business in London today is bigger than our business in Finland. If we’re running in London then we’re running in England.”
Ceding control of the Adidas brand
By its own admission, Adidas has been closed off to consumers, athletes and partners when it comes to shaping the future of the brand. This is changing with its marketers ceding some of the control in the hope of elevating creativity and innovation when it comes product design and advertising. It is already happening within the Adidas Originals part of the business, which has pared back the number of celebrities it works with but given those it does such as musician Pharrell greater creative control of the brand.
Hainer added: “We will open up [to consumers, athletes and partners] so that they can co-create the future together. We will take this spirit and give many more the opportunity to move closer to us and become part of us and our brand.”
'More by doing less'
“More by doing less” sums up the product element of the company’s marketing mix in the lead up to 2020. It aims to carve out efficiencies from a stretched product range that was eating into margins due to surplus stock and muddled lineup.
Speaking at the same conference Eric Liedtke, head of global brands at Adidas, said: “The place we wanted to cut down on is models. If we do a hoody and it’s black that’s one product. If we do it in 30 colours then that’s 30 SKUs but it’s still one model. That’s what a consumer wants, they want to see variation of a single model. That cuts [things] down from a workload perspective so that we can make more efficiencies as a brand because it’s just one hoody in a factory with different dyes.
“This isn’t a plan. It’s an action. Our 25 per cent product reduction is underway.”
Adidas plans to make the cuts to its product line by 2016 an will repeat over and over until it gets the right balance to be competitive with things that drive the market.
Redefining the category approach
Instead of defining “what is and what isn’t a key category, Liedtke said the business will talk about the role each category has been assigned; it wants to "lead" in every market for football and Originals, "grow" running and Neo, focus on “dramatic market share gains” in the training market and then "focus" on sports key to certain markets such as basketball in the US.
The brand is mindful that if it wants to lead in sport it needs to dominate the biggest of them all; football. To do this, it will push street football more in its marketing, dropping from five different silos to three that will focus on street football with boots for three different play styles; the playmaker with Ace range, the gamechanger’s Ex boots and the signature brand for Barcelona star Lionel Messi.
The redefined category approach will also steer the company’s push for women, which is now defined by two groups; the vertical athlete, when she’s in her prime, playing competitive sports, while the versatile athlete uses sport to make difference in her own life, typically doing four or five sports a week.
“[Women] is a good business for us right now but we’re not where we need to be, said Liedtke. “She’s the chief purchasing officer in the household. She’s 80 per cent of all athletic purchases. Obviously she’s 100 per cent for herself, 67 per cent for men and 91 per cent for kids. We have to be talking stronger [to women] than we are and have to be winning more of her heart and mind than we have been.
The company is increasing its marketing spend around fewer things in the belief that less is more. Investments will be spread across four areas, beginning with what Liedke said would be a “relentless” drive to communicate a “reason for believing” in the brand with a “clear point of view of being the creator”. Spend will also be spread across its tightened product lineup, building up a community loyalists and boosting loyalty for the brand at grassroots level.
Digital sports will also play a role in Adidas' more focused marketing strategy, channelling spend through wearable technology, start-ups, data insights and earned communities. Plans are underway to digitise its products in the hope of triggering over a billion consumer touchpoints it can use to keep talking to people long after they’ve made a purchase.
“We entered into wearables, apps and services,” added Liedtke. “Combined services generated last year alone 2.5 trillion data points that means we had measured of athletes speed distance, times of run. The quality of data is unmatched and we have many different companies coming to us for the data that we possess on athletes’ movement. We have the best teams in the world training with our miicoach elite teams system.
Creating the New
Five years ago Adidas presented an ambitious Route 2015 which targeted sales of €17bn by the end of 2015. While it ultimately failed to hit the target, it gave the brand a footing in emerging markets and increased revenues by more than 40 per cent since 2010.
Hainer: “We lost some of our brand desirability because we did not focus enough on the needs of our customers, this was a result of our function driven organisation which slowed down our decision making process making and we were too static and not nimble enough.
“Our most important lesson from Route 2015 was that we need to sharpen our focus on what really counts and what really counts is our customer. Our customer has to be at the heart of everything that we do in the future and we need to put our money where we can make a real difference in the customer experience.”