How McKinsey Helped Nike Lose $223 Billion

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0:28Neil Patel:the agentic customer platform for growing businesses.

0:31Eric Siu:So Nike's market cap hit a peak of$280 billion in November 2021. It's now down$57 billion, $257 billion, so$223 billion drop. What's the market cap today, Neil? I feel like you're looking at it.

0:44Neil Patel:54.91, stocks at 37. It went lower.

0:47Eric Siu:Close. It went lower. Okay, it will be delisted from the S &P 100, okay? So former Nike branding exec, Massimo Yunko wrote a viral post in 2024 laying it all out. I don't know if you remember seeing this on X. I kind of remember it. He was basically blaming all the effort they were putting into direct-to-consumer. Remember he was talking about how everything's too trackable? And I think we did a marking school episode on this. So he blamed the CEO at a time, John Donahoe, 2020 to 2024, for going all in on direct-to-consumer with a cameo from McKinsey. So I think he worked at McKinsey before, the consulting company.

1:24Eric Siu:Oh, great. So a handful of things over here, right? Like McKinsey advised Nike to get rid of categories running basketball, soccer, and reclassify everything into women, men, and kids. And so I think we can react to each bullet point. But let me finish off this point, okay? So the logic was that Nike was duplicating resources and a pivot to DTC would provide enough customer data to inform product decisions instead of relying on category experts. A basketball vet that spent 20 plus years at Nike. A lot of these experts were fired and then Nike lost their insights. This was a clear L because Nike quietly brought back categories at the end of 2023.

2:00Eric Siu:So what do we think about this part, Neil?

2:02Neil Patel:So they eliminated categories, they brought them back. And yeah, I think that's a smart move. My recommendation to them is just revert all the stuff that didn't work and just go back to the ways that were working. Nike got a little too creative with some of their campaigns as well, in just my personal opinion. and they got away from a lot of the motivation and the just do it and pushing on the stuff that was doing really well for them for years. And a lot of these experts were helping them innovate the product line. It went from Nike was continually doing new stuff, pushing out new stuff to, oh, Nike's not really making any changes other than a new shoe design.

2:42Neil Patel:Their apparel was very similar and they were adapting to the times and it was like, all right, sounds good. Not gonna buy Nike anymore.

2:49Eric Siu:yeah and by the way like i haven't bought nike for a long time and i was a big nike fan growing up i think you were as well um and so i i think they didn't they didn't do enough like if you're gonna make a big change like this sometimes you might want to think about one talking to people but second thing maybe you roll it out in phases maybe you didn't roll it out all at once so i don't know if they did this all at once um it sounds like maybe they did um because keep in mind like 2023. So this is towards the end of this, you know, John Donahoe's tenure.

3:18Neil Patel:Well, here's a big issue here. In general in business, if a consultant is trying to tell you how to run something and what you should do, especially in McKinsey or, you know, Bain and Company or Boston Consulting Group, I usually would recommend doing something else. Because a lot of these people have never operated a business and they'll tell you how you should run your business. And then if you look at their track record, when they put a lot of these execs from McKinsey to be a CEO in a lot of these organizations, they tend not to do well. And then they got to go back to operators who are on the ground, who know how to run things and who are actually talking to the consumers versus a McKinsey person who's just looking at spreadsheets and be like, if you do this and move this around here, you can go from there.

4:07Neil Patel:And I've dealt with it. We've done M &A a lot. And I've seen people do spreadsheets like you should just buy this company. Look at this. If we combine it, look at the numbers and how great they'd be. I'm like, cool. You how about you do this with your money and you go try doing that because it usually doesn't work out the way it is in your spreadsheet or anywhere like that.

4:24Eric Siu:And it's like, hey, have you done any integrations? Oh, you haven't. OK, would you like to try it? Go try it with your own money.

4:29Neil Patel:Yes. Oh, no. But we've seen it work. Look at these case studies from a Harvard business review. And it works. Just follow that. I think it doesn't work like that in real life.

4:37Eric Siu:And that's a lesson, like going back to what we were saying earlier, when you're in the trenches and you're locked in there, you're going to do just fine if you keep going, right? I think a lot of situations people kind of tap out or they get this unfocused or they kind of go to do something else. That's when things start to fall apart. And by the way, again, like going back to what we were saying earlier, like adapt or die. That's kind of what it is. So hopefully Nike can bring it back because Nike was a great story kind of growing up. I'm going to move to the third point and come back to the second point over here.

5:07Eric Siu:Okay. So the third point here was they prioritize digital marketing. So Nike changed its marketing budget to focus on driving users to Nike digital properties and membership platforms. For decades, Nike spent 10 % of sales on brand advertising to create an aspirational halo, which is what Neil was just talking about, right? The prioritization of programmatic ad spend meant Nike went from create demand, new customers to serve and retain demand, retargeting existing ones. The result was a slowdown in sales. because of that writes Massimo who spent 21 years at the company, right? Long time. Nike invested a material amount, billions into something that was less effective, less effective, but easier to be measured versus something that was more effective, but less easy to be measured.

5:46Eric Siu:In conclusion, an impressive waste of money. The quality advertising was not so great. So without going into details, like I can show you the creatives because some of my other friends this week were showing me the creatives. We're not gonna talk about that. One thing I'll say here is going back to what Neil said, once you start to get away from what you were before and what you were known for, and you start going into whatever's trending at the time, people start to lose trust in your brand. And a brand is what people say about you when you're not in the room. And so for me, Nike before growing up, like Neil and I would share these commercials with each other.

6:18Eric Siu:It's like, you see Landane Tomlinson, the running back, right? At the time, running into Troy Palamalu, right? That's inspirational, right? Or you see like a World Cup thing or something like that, right? Doesn't matter if it's like women's sports, men's sports, whatever, I always looked at, I'm like, man, I want to be like that, right? But when you see stuff that doesn't make sense anymore, it's like, well, I don't want to be like that. And I don't want to be associated with that brand. Therefore, I cannot buy that brand's products. And therefore, whatever I'm saying behind the closed doors now is a negative thing.

6:48Eric Siu:And that word of mouth travels very quickly, which is kind of what's related to this brand piece over here. So again, I think Neil and I were big fans of digital marketing is what we do for people. But I think sometimes, you know, again, you want to make sure that you're like, if something's working for you, like, why would you eliminate it?

7:06Neil Patel:Yep. No. And this is what I was saying. It's like Nike created a lot of people who love their products from their commercials. I remember my nephew, Jaden, would tell my sister when he was younger, I need Nike shoes. And she's like, why do you need Nike shoes? You have these sketchers.

7:24Eric Siu:And he's like, I want Nike shoes. they make you run faster, right?

7:29Neil Patel:I'm not saying the shoe actually makes you run faster. And my sister did teach her son that some shoes may make you run faster, but a lot of running faster has to do with dedication, training harder, you know, and other, eating right, getting enough protein, getting the right amount of sleep than just purely the shoe. Of course, a really heavy shoe that weighs 10 pounds is gonna make you run slower than a shoe that is a pound. I'm making up the weight because I don't know actually how much shoes weigh, but you guys get the point. Running with a 10-pound weight in both your feet, you're not going to run as fast.

8:03Neil Patel:She did buy him the Nike shoes. He did end up learning the lesson, but that's a cool part about the campaign. When I dug into why he wanted Nike shoes, it wasn't just because he believed they help you run faster. it was a TV commercials and how they push people and people were successful and athletic and doing well wearing Nike products. And he wanted to be like one of those people. To me, that's good brand advertising.

8:30Eric Siu:By the way, when Neil buys a Tesla is because he just wants to be like Elon Musk.

8:34Neil Patel:It's no different.

8:37Eric Siu:I'm just kidding. Just kidding, guys. That's me being facetious.

8:40Neil Patel:It took Eric so long to convince me to get a Tesla. Dude, I didn't convince you anything, man.

8:46Eric Siu:You just kept talking about it. Noah was in the room too.

8:50Neil Patel:No, no, no, no. But years before when you had a Tesla, you told me you should get one. And I'm like, no, it's a crap car. And I would give all these reasons. And then I was telling Eric, I don't know when this was, call it like six months ago to a year ago. Maybe a year ago, I kept talking on and off about buying a Tesla. And they didn't say I should do it or not. They didn't really care. I eventually ended up doing it. And the reason I bought the Tesla was for one reason only, the self-driving technology. I do have to say, compared to a Mercedes, the car is not that comfortable. And you miss a lot of the perks that you would get in a luxury car over a Tesla Model Y, even a Tesla Model X or S or whatever they're called.

9:34Neil Patel:I still believe like the Mercedes build better cars. but that technology of self-driving for me, it makes up the lack of the other comforts. Yep.

9:47Eric Siu:Well, it's like in life, there's no solutions, only trade-offs. So the last point over here, so they ended wholesale leadership, okay? So Nike ended hundreds of relationships with wholesale partners and prioritized Nike's website over retail. The change looked genius during COVID but as customers returned to brick and mortar, Nike's product were nowhere to be found. It had burnt bridges with partners who were happy to give shelf space to upstarts. This wasn't covered, but I think On and Hoka, these are yoga brands or athletic brands, athleisure, took advantage of this for running. So there was a lack of feedback from retailers, which led to inventory issues.

10:22Eric Siu:The quote-unquote data-driven insights from online sales proved not to be a panacea. And so this is a situation, again, it seems like they kind of just ripped everything and tried to make these drastic changes. and when you do these changes with a big company, these drastic changes, it's hard to kind of unwind these changes. Yep.

10:39Neil Patel:On a side note, you have a topic in here. I think a lot of people have seen it. It's related to this because it's related to sports and marketing. Why LeBron James' Polymark partnership is a brand eroding move.

10:51Eric Siu:If you're building an e-commerce brand, you should check out DTC Pod hosted by Ramon Berrios and Blaine Bolas on the HubSpot Podcast Network. They speak with founders, marketers, creators, agencies, and platform experts about what it actually takes to grow a direct-to-consumer business from paid ads and influencer marketing to conversion, email, brand building, and consumer trends. I particularly enjoyed their conversations around scaling a brand without losing what made customers care in the first place. Listen to DTC Pod wherever you get your podcasts.

11:20Neil Patel:Real quick, if you want to acquire customers faster and more efficiently this year with the

11:24Eric Siu:latest strategies and tactics, then check out singlegrain.com. That is my ad agency. Again, www.singlegrain.com. Check it out. And if it seems like a fit, we'll get in touch and help you with a free marketing plan. Yep. So here, let me pull this up. So this is a guy I know named Bryson. So shout out to Bryson over here. So check this out. So by the way, I'm a big fan of LeBron, right? I'm based in LA. And you know, I'm a Laker fan. Oh, guess what? They deleted it. Oh, look at this. Okay.

11:56Neil Patel:So unless they paid Braun$100 million and gave him equity, I see no world where it even makes sense to partner with the prediction market.

12:02Eric Siu:So what was the original post that LeBron put up was him doing a commercial with Polymarket, him walking into Polymarket, right? Just so everyone knows, Polymarket is they call it prediction markets. Guys, it's just gambling, right? You're just gambling on what the score is going to be. You're gambling on, by the way, I've tried it, right? I bet on the Spurs to beat the Knicks when they're down 3-1. And I was like, I was so confident, right? lost the money clearly gambling right um so anyway i think he probably got a lot of blowback here um and so he was he was doing draft kings commercials before and then the poly market one i think a lot of people started talking about it but let's see what happened the post is gone

12:39Neil Patel:neil i believe i also am not a lebron fan so if he's eroding his brand i don't really care

12:45Eric Siu:yeah but let's talk about why we think it's a brand eroding move so you go first