Nike: Air Jordan
A New Product Case
Appreciation is extended to Sandra Rex and Douglas Todd for their help in the preparation of this case.

Michael Jordan played college basketball for the University of North Carolina, leading them to the NCAA championship in 1983. After leaving UNC he continued with basketball by playing professionally for the Chicago Bulls, and received nationwide attention and respect from both fans and players. NIKE took advantage of his new fame and developed the Air-Jordan basketball shoe.

The competition for the new shoe consisted of a variety of firms that also solicit the services of professional athletes. One such firm is Converse, which employed Larry Bird and Earvin "Magic" Johnson for promotion of a line of basketball shoes.

In deciding upon an introductory strategy for its new shoe line (or even whether it should be introduced at all), Nike decided to use the Fourt and Woodlock model of product penetration.

Using this model required them to project the cumulative penetration percentage, considering seasonal demand. They kept in mind that periods one, three, and five include the months of September through February -- peak times for the sale of basketball shoes. They also reminded themselves that periods two and four, representing March through August, indicate times where interests are on other sports, not basketball. However, basketball shoes are still being sold.

Market Forecast
Using the Fourt and Woodlock model, Nike decided to use the diffusion model for Air-Jordan basketball shoes to forecast a for a market segment that includes a population of 60,000. Nike projected the percentage market penetration would be 9,000, or 15% of the population.

Realizing that Michael Jordan is a role model for many junior high and high school basketball players, Nike further predicted that the 16% cumulative percentage penetration would exceed the 15% forecast. Moreover, they recognized that this would increase projected sales to 9,600 units, 600 over the initial projection. Because of "off-season" demand the second and fourth period projections would drop off. See Figure 1

Nike's third period projections indicate a drop in unit sales. They reasoned that consumers would have reasons for not buying Air-Jordan again. These include dissatisfaction with the shoe, price being out of purchasing range, and even competitors signing new talent to promote their own shoes.

Nike's fifth period projections go up compared to the third period because they assumed that the Chicago Bulls will be a dominant force in the NBA, with Michael Jordan leading the way. This will increase recognition of the Air-Jordan, and increase the market share of the new shoe.

If Nike's projections failed to meet expectations, then their forecast would need to be recalculated to determine the market share for the Air-Jordan.

                             FOURT AND WOODLOCK MODEL 
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    |MODEL INPUTS:                            # of Rpts.  Rpt. Purch Ratios| 
    |Average PRICE/UNIT:                 $50       1                 16.00%| 
    |Mkt. Size in UNITS:               60000       2                 14.50%| 
    |Maximum Mkt Share Percent:        15.00%      3                 15.30%| 
    |% Rate of Market Penetration                  4                 14.90%| 
    |  Of Untapped Potential:          10.00%      5                 16.00%| 
    |======================================================================| 
    |   DIFFUSION MODEL WITH FIRST PURCHASE AND DEPTH OF REPEAT PURCHASE   | 
    |----------------------------------------------------------------------| 
    |             First Purch. Repeat Purch.   Cumulative   Sales Forecast | 
    |   Period      Unit Sales    Unit Sales   Unit Sales        By Period | 
    |          1           900             0          900          $45,000 | 
    |          2           810           144         1854          $47,700 | 
    |          3           729           150         2733          $43,974 | 
    |          4           656           139         3528          $39,736 | 
    |          5           590           125         4244          $35,786 | 
    |          6           531                                             | 
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