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Analyzing of Pricing Strategy: Nike - Term Paper Example

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The company is one of the leading players in the world’s sports equipment industry, and its business mainly focuses on athletic shoes and apparel. Financial reports indicate that the Nike attained annual revenue in excess of $18.6 billion for the financial year ended in 2008 despite the difficulties associated with the global financial crisis…
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Analyzing of Pricing Strategy: Nike
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Analyzing of Pricing Strategy: Nike

Download file to see previous pages... The well structured marketing mix assists the Nike to create value for its market segments. Firstly, the company has a broader line of products including athletic shoes, apparel, and sports equipments. Since modern consumers are eager to get access to a wide variety of collections, this product strategy would greatly assist the company to effectively meet customer satisfaction. The company mainly practices skimming pricing strategy and product line pricing strategy so as to create value for its different market segments. Skimming pricing is a pricing strategy by which a marketer fixes a relatively higher price for its product or service and eventually lowers the price as the level of market competition increases. Such a pricing strategy allows the Nike to recover its sunk costs immediately after the products are launched into the market. In contrast, the product line pricing strategy is employed to market different products in the same product category at different price rates on the ground of the relative features or benefits. By using this pricing strategy, Nike can effectively meet the tastes and specifications of different classes of people. Finally, the improved promotion strategy also extremely benefits the firm to add value to its various market segments. Nike follows advertising, direct marketing (through e-shop), and public relations as part of its production promotion efforts. For instance, the sponsorship of Manchester United has made the Nike popular across the United Kingdom. 2. Does the company use different price offerings for different market segments? Describe these and evaluate how effective they are. While analyzing the marketing tactics of the Nike, it is evident that the company uses different price offerings for its different market segments. In addition to the above discussed pricing strategies, Nike often follows price leadership strategy and value based pricing. Price leadership strategy is mainly used in an oligopolistic market environment. It is clear that Nike is one of the leading players in an oligopolistic market (sports equipment industry), and therefore it can effectively practice a price leadership strategy. Under this strategy, the company is able to determine prices and the competitors immediately follow the changes. As Porter (1985) points out, such a pricing policy enables the company to set attractive prices for different market segments on the strength of its market dominance (p.115). The price leadership would greatly help the company to reduce the intensity of competitive rivalry and thereby save unnecessary costs associated with product promotion. In the opinion of company analysts, the price leadership would be beneficial for the Nike to avoid severe price wars. The most significant advantage of this policy is that it assists the price leader (here Nike) to prevent any other firm from rapidly and sharply reducing the price. At the same time, under value based pricing, prices are set primarily based on the product’s perceived value to the customer rather than on cost of production, market prices, or competitors pricing strategies. This pricing strategy is extremely beneficial for ...Download file to see next pagesRead More
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