Why Nike became a membership business

Nike is one of the world’s leading retail and fashion brands. Founded in 1964 in Eugene, Oregon by Phil Knight and Bill Bowerman it grew over the next fifty years to become one of the most recognizable names in sports. Like most other fashion retailers for the majority of that time, Nike developed a traditional business and operating model. Products were developed and distributed to third party retailers and then on to the customer. But over the past ten years the company has undergone a fundamental transformation as it builds a new model - it’s now well and truly in the membership business with over 300 million members helping them to drive record results.

The evolution of NIke has learnings for businesses of every size that need to succeed in the digital age. Ultimately it was driven by a fundamental business need to increase profits, they recognized that by establishing a direct ongoing relationship with their users through Nike membership the business could reduce marketing spend, increase efficiencies in their business through better insights and develop a new product pipeline based on their greater understanding of customer needs.

Whilst many of their competitors in retail languished in transactional ‘rewards’ based loyalty, Nike realized they had to build something different based around the value their membership could offer to their customers. They consider their membership experience to be at the intersection of content, community and commerce according to their CEO John Donohoe.

“The more you have it, the more you can use it. You can use that consumer insight… personalizing a recommendation or anticipating a need on replenishing a product when you know they are going to need it” — John Donohoe Nike CEO

Their membership ecosystem now includes multiple app offerings from Nike Run Club to Nike Training Club, with experiences for wide variety of audiences from elite athletes to post-partum mothers.

‘The more you have it, the more you can use it. You can use that consumer insight… personalizing a recommendation or anticipating a need on replenishing a product when you know they are going to need it,” he said. “It also drives efficiency in our operations. We talk about building a digital supply chain. What that’s all about is having the intelligence to [have] the right product in the right place at the right time, so that we can deliver that product in a low-cost, convenient and speedy and in a climate-friendly way.”

This approach is a substantial shift from the linear world of retail Nike inhabited before. It was no simple task to move the entire business to focus on membership, but it was just that - the focus that was the reason it was possible. To be successful Nike execs had to focus on the entirety of its business units around membership, it became the center of their ecosystem. By understanding the value of membership and the role it played within the business every department from marketing, customer service, product development, partnerships understood the role that membership would play in the future of the business and focussed their attention on driving acquisition, engagement and retention of members.

Whilst this transition for a behemoth like Nike took a decade and billions of dollars, it’s now actually substantially easier for smaller businesses to achieve the same outcome. With the same mentality and more nimble approach small businesses across sectors can leverage the same principles to build their business more efficiently driving ROI.