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Quick Summary: Read about how Nike is helping customers create their own cultural currency with Nike+.

The Economics of Free

In an earlier post, I wrote about the ‘economics of free’ —

Free content -> Attention -> Free product -> Lock-in -> Paid bundled services -> $$$

The ‘Free content -> Free product -> Paid bundled services’ model is an extreme example of a trend we have been seeing for a while now — marketers bundling services with basically undifferentiated products in order to build a differentiation.

Free Content Can Convert Brands Into Cultural Currency

Take Nike as an example.

In spite of all the technology that supposedly goes inside a typical sports shoe, if you take away the logos, it’s almost impossible to differentiate between a Nike, a Reebok and an Adidas (or Puma or New Balance or…) shoe. So, Nike/ Reebok/ Adidas have instead focused on differentiating themselves by converting their brands into cultural currency. We have started talking about marketers becoming publishers and using free content to grab attention only now, but Nike/ Reebok/ Adidas have been doing it for decades. What’s more, it has worked out brilliantly for the sports shoe industry — even non-athletic types like yours truly have four pair of sports shoes — one for jogging, one for trekking, one for cross-training and one for tennis.

From Free Content to Customer Created Content

In spite of all its brilliance, the ‘free content as cultural currency’ approach also has a limitation — it stops converting into sales when you are not the only one using it. As a marketer, I’m in love with what Nike/ Reebok/ Adidas have done, but since I’m almost equally in love with all three, as a consumer, I end up buying a pair of shoes based on design/ price/ discount and not the logo on it. As a matter of fact, none of my four pair of sports shoes are from Nike — my tennis shoe is from Wilson, my cross-training shoe is from Adidas and my running and trekking shoes are from Reebok.

Therefore, marketers today don’t only need to create content that converts their brand into cultural currency, marketers also need to help their customers create their own content, and their own cultural currency, based on their interactions with the brand.

I think Nike has done this brilliantly, first with NikeID - which allowed customers to custom-design their Nike shoes - and now with Nike+.

How Nike Helps Customers Create Cultural Currency With Nike+

The Nike+ package consists of a pair of specially designed Nike+ running shoes, an iPod nano, and a Nike + iPod sport kit to connect the two. The kit consists of a sensor that fits into a built-in pocket beneath the insole of your left shoe and a receiver that fits into the iPod nano dock connector. The sensor uses a sensitive accelerometer to measure your activity, then wirelessly transfers this data to the receiver.

As you run, iPod tells you your time, distance, pace, and calories burned via voice feedback that adjusts music volume as it plays. In addition to progress reports, iPod also congratulates you when you’ve reached a personal best — your fastest pace, longest distance and time, or most calories burned. You can also choose a PowerSong that helps you run stronger and listen to it every time you need a boost.

This in itself is incredible, but Nike+ also lets you save your running data at nikeplus.com, so that you can set goals and track progress. What’s more, you can challenge friends and strangers to compete with you by sharing your running data with them. The Nike+ website also includes other web 2.0 features like user forums where you can meet and challenge other runners, ask questions, and give feedback; a challenge gallery where you can view all user created challenges; and a distance club where you can view everyone’s running milestones.

And, if you want to show off your running stats on your blog, you can even do that by using the third party Nike+ iPod Stats Wordpress Plugin.

So, Nike+ not only removes the tedium of running by introducing interactivity, it also changes a solitary activity into a community activity by allowing you to become a part of an online community of runners.

I really like how Grant McCracken sums up the impact of Nike+ –

One way to understand this innovation is to look at the private and public value it creates. The private value is that I exercise more. The public value is that I now “belong” to and participate with collectivities that would otherwise not much interest me. This is a kind of mechanized networking of the kind we see more and more of.

Did Nike accomplish something that is good for the brand. Well, in my own experience, it just went from being another sports supplier to an enabler that has changed the way I think about exercise and the way I participate in it. More than that, Nike has found a way to amplify my accomplishments… and then broadcast them.

Creating Cultural Currency Through a Fifth Pair of Sports Shoes

After I finish writing this post, I’m heading over to the Nike store at Phoenix Mill to check out Nike+. Maybe, Nike+ is what Nike needed to make me buy one of their shoes. Maybe, Nike+ is what I need to start running again.