Strategy

Pricing Strategies of Nike

by The TSW Team

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

Pricing Strategies of Nike

Avoid this type of sentences: directly talk about the data driven statements. There are different pricing strategies that Nike used effectively for expanding its branding all over the world. Nike implements its pricing strategy based on the product’s understanding and determining which price point will be best for their products. Nike was able to raise its price range while other U.S. apparel industries dropped their prices and offered heavy promotional discounts. In 2014, Nike implemented its new pricing strategy after determining from a market analysis that its customers appreciated the value that the brand provided.

Few of Nike’s pricing strategies are being explained below.

Value-Based Pricing Strategy of Nike

Nike uses a value-based pricing strategy in order to set its prices according to the consumer perceptions about the value of the company’s products. Nike focuses on delivering the highest quality products at the right price to ensure the best customer experience whereas the other companies use the idea to sell products at the cheapest rate as it will generate more sales. This strategy ascertains how much maximum price consumers are eager to pay for the company’s products such as sports apparel, sports shoes and equipment. This was Nike’s commendable idea to ask people how much they can pay for certain products. This pricing strategy worked for Nike as it came to know about its product’s value amongst the customers and the company started to get profits and prices of its merchandise started to rise.

Nike Price Leadership Strategy

This strategy is suitable for an oligopolistic market environment and Nike runs its business in the oligopolistic market. Nike is one of the leading players in the oligopolistic market which is related to the sports equipment industry. Therefore, the company can effectively practice the price leadership strategy. With the help of this strategy, the company can determine its product prices, uses competitive prices, and set attractive prices for different market segments according to its market dominance.

Premium Pricing Strategy of Nike

Nike applies the premium pricing strategy to make its products’ prices higher than the prices of the competitors based on product quality. The company owners and employees know that these prices will not only reflect the quality of their company’s products but also the image which will be portrayed by the consumers who wear the Nike logo. Once Nike develops its exclusive products, it becomes recognizable to consumers in the market place. And Nike’s premium pricing strategy drives its perceived value to a higher level especially with the limited editions of the Air Jordan’s. Nike sets this pricing strategy for the products which create a high level of brand loyalty and also for its leading-edge technology.

Nike Skimming Pricing Strategy

Nike applies a price skimming type strategy whenever it produces expensive products especially which are limited editions. When the company brings out new design products into the market, Nike uses this strategy to set high initial prices. By implementing this strategy, Nike tries to skim money from the customers who want the product and are willing to purchase it at that price. After a newly designed product has been out in the market for a while, Nike lowers the price of those products. According to the Principles and Practice of Marketing (David Jobber), Nike executes a rapid skimming pricing strategy of setting high prices in the products and investing heavily in promoting the newly designed products. Normally, Nike shoes last for a period of 3 to 6 months when the company sells those at peak prices. After that period, there comes an activity called closeout where Nike reduces the prices gradually.

In addition, there are few other pricing strategies that Nike follows besides these. Such as,

  • Penetration Pricing
  • Psychological Pricing
  • Segmented Pricing etc.

Nike utilizes its pricing strategies successfully both to maximize its profits and emphasize high value in promoting 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.

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Reference

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