Pricing Strategy of Nike

Nike was founded by Phil Knight and Bill Bowerman in 1964 and has become one of the leading global sports brands. Nike focuses on apparel, footwear, and other sports-related services. Nike’s marketing mix strategies made this company the market pioneer, and as a result, the firm led the market share worldwide, with global revenues of more than 34 billion U.S. dollars, according to Nike News in 2018. The company competes with various sportswear brands in the market, and through its pricing strategy, Nike reinforced its ability to protect the business from the strong forces of competition. Since competition is extremely high in this industry, pricing is a major factor that makes this company one of the world’s largest sellers of athletic footwear and sets it apart from others.

Pricing Strategy of Nike

Nike has used various pricing strategies effectively to expand its brand worldwide. Nike implements its pricing strategy based on product understanding and determines which price point will be best for each product. Nike was able to raise its prices while other U.S. apparel companies cut prices and offered deep promotional discounts. In 2014, Nike implemented a new pricing strategy after a market analysis showed that its customers valued the brand's value proposition.

A few of Nike’s pricing strategies are explained below.

Value-Based Pricing Strategy: Nike uses a value-based pricing strategy to set its prices based on consumer perceptions of the value of its products. Nike focuses on delivering the highest-quality products at the right price to ensure the best customer experience, whereas other companies use this idea to sell products at the lowest price to generate more sales. This strategy determines the maximum price consumers are willing to pay for the company’s products, such as sports apparel, shoes, and equipment. This was Nike’s commendable idea: asking people how much they could afford for certain products. This pricing strategy worked for Nike as it came to understand the value of its product to customers, and the company began to turn a profit, and its merchandise prices began to rise.

Price Leadership Strategy: This strategy is suitable for an oligopolistic market environment, and Nike operates in one. Nike is one of the leading players in the oligopolistic market for sports equipment. Therefore, the company can effectively practice the price leadership strategy. With this strategy, the company can determine product prices, use competitive pricing, and set attractive prices for different market segments based on its market dominance.

Premium Pricing Strategy: Nike applies a premium pricing strategy, charging higher prices for its products based on product quality. The company's owners and employees know that these prices will not only reflect the quality of their products but also the image they will portray to consumers who wear the Nike logo. Once Nike develops its exclusive products, it becomes recognizable to consumers in the marketplace. And Nike’s premium pricing strategy elevates its perceived value, especially with limited-edition Air Jordans. Nike sets this pricing strategy for products that foster high brand loyalty and for its leading-edge technology.

Skimming Pricing Strategy: Nike applies a price-skimming strategy whenever it produces expensive products, especially limited-edition items. When the company introduces new design products to the market, Nike uses this strategy to set high initial prices. By implementing this strategy, Nike aims to skim money from customers who want the product and are willing to pay that price. After a newly designed product has been on the market for a while, Nike lowers its price. According to the Principles and Practice of Marketing (David Jobber), Nike employs a rapid skimming pricing strategy, setting high prices for its products and investing heavily in promoting newly designed products. Normally, Nike shoes last 3 to 6 months when the company sells them at peak prices. After that period, there is an activity called closeout, during which Nike gradually reduces prices.

In addition, Nike follows a few other pricing strategies besides these. Such as-

Penetration Pricing
Psychological Pricing
Segmented Pricing, etc.

Nike successfully uses its pricing strategies to both maximize profits and emphasize the high value of its products. From Nike’s pricing strategies, we can understand that Nike upholds its position as the market leader in the athletic footwear market, and it has shown that this company is a true force to be reckoned with.

Appendix:

http://panmore.com/nike-inc-marketing-mix-4ps-product-place-promotion-price-analysis

https://ni-ke.weebly.com/pricing-considerations.html

https://www.bartleby.com/essay/Pricing-Strategy-Of-Nike-P3NSGV9WVAR

https://www.mbaskool.com/marketing-mix/products/16893-nike.html