Pricing Strategy
Name
Institution affiliation
Date
Nike’s Lebron X
Pricing strategy is a procedure used to determine the prices for commodities or services in regards to profit maximization putting in mind the market demand and target consumers. Nike’s Lebron X shoes are of high quality as it has a digital chip that measures the athletic performance and selling it at a relatively higher price is reasonably okay. Additionally, Nike company, as compared to other sports companies, has continually priced lower for their products hence receiving lower margins. Thus pricing strategy for Lebron X would have increased their profits.
Other advantages associated with the pricing are that Nike would have a better competitive advantage over their competitors. The reason behind this is that many consumers evaluate and judge product quality on the basis of price. The actual reasoning is that the higher price, the higher the quality of that product. A good example is the iPhone from Apple, which enjoys a competitive advantage over competitors who forms their high pricing. As a result of high pricing, Nike would have promoted the Lebron X shoe brand through people sharing its information on social media. Again, whenever consumers buy the shoe and share it with friends and family, the brand would be advertised, bring more consumers on board.
However, Nike risks harming its sales by this strategy in cases where its competitors develop similar products at a lower price. The competitors could also spread negative information about the product, which would consequently harm the reputation of the company. Another challenge associated with Nike’s pricing is that it would limit its consumer base. The product would only be affordable to affluent consumers and not to low income earners.
Nike would have incurred a high cost of advertising to ensure that the brand is well known and that it reaches the target market. The technology of the performance chip in Lebron X shoe comes at a cost that would make the company go at a loss if, in the future, the shoe is not embraced by the target consumer. Most importantly, when pricing and developing the products, understanding the target customer and the need for the product in the industry is crucial. From the above description, Nike was insensitive as the product could still reach the target customer and make sales.
When introducing a new model, product, or service into the industry, a company can be sensitive to both low- and high-income earners. This works in that; the company produces another product similar to that on most specifications but not an exact copy of the original. This strategy reduces the cost of production, and the corresponding raw materials are, as a result, can be sold consumers at a lower price. With the case of Nike, it is possible to produce the Lebron X shoes and with all its specifications and pricing, and it would still penetrate the market for affluent consumers.
To make sure that the rest of the consumers are satisfied, the company could produce a similar product, not necessarily the same brand title, but ensure it has most of the Lebron X specifications. Eventually, all customers will get satisfied. However, it should be noted that high pricing stays with the product for the rest of its life. This means that in case a product does not do well in the market as expected, and the company decides to reduce the price in order to make more sales; the customers would feel cheated and would think that the company lied about the product being premium. This would result in the company damaging its reputation and consequently harming their future sales.
Whenever backlash emerges, it’s the responsibility of the public relations department to handle the issue professionally and ensure that the angry customer is cooled down. In the case Nike pricy shoe, there are various ways they could have cooled down people without causing more harm to the company. First, acting quickly before the issues elevate to uncontrollable levels would go a long way; however, the public relations officers should be calm and take decisive action to counter the issue. Having in mind that people sometimes get it twisted from the texts, receiving calls instead of replying to texts would also help calm down the situation. Acknowledging the issues would make people feel that their views have heard and finally take responsibility to show them you understand their concern because the major aim is for Nike too, by all means, is to protect the company’s image. Finally, Nike should have made amendments like the one proposed above to ensure all its consumers get a taste of the new product though differently and then cap it with a positive campaign from the company to ensure things get going normally.