Nike pricing strategy

Price and Channel Strategy

Price and Channel Strategy
Nike continues preparing a marketing plan for its new sportswear apparel products with price and place strategies. Nike strategizes its product pricing addressing dynamic and static pricing strategies along with daily, promotion, and list pricing techniques. Nike also completes place strategizing through channel distribution, mass, selective, exclusive, and positioning tactics.

Price and Place/Distribution

Dynamic/Static Pricing Strategies

Nike uses dynamic or discriminatory sportswear product pricing as its primary pricing strategy to support its short-term and long-run objectives. Dynamic pricing is where the product price is established but not set in stone for the life of the product, and the price fluctuates within the stages of the product life-cycle and other mitigating circumstances such as geographical locations economies. Nike’s customers historically support its dynamic pricing strategy and enjoy its products brand value.

Static pricing is when a product price is created and sustained for the product over lengthy time periods. Nike does not use the static pricing strategy because it is not practical to set standard prices for sportswear that has many versions for different product lines. Although, Nike does establish prices that are consistent with new and existing products assuring consumers that there is an average price point to expect.

Daily, Promotion, and List Pricing

Nike sets its sportswear products daily prices at the high, medium and low price points. Nike has a pricing department that is dedicated to establishing product prices. Sportswear prices are elastic and will endure change. Daily pricing supports the company penetrating the market, determining its standing, earning profit and market share, creating competitive advantage, and adjusting prices as necessary to sustain growth.

Nike uses promotion pricing versus the EDLP as other competitors. Promotions allow the company flexibility to maximize its profits and exemplify its high revenue sportswear apparel products. Promotions may be factory direct or retail endorsed for reasoning or seasoning sales. “Three prominent retail pricing strategies are frequency discounting, where retailers offer frequent but small discounts; depth discounting, where retailers offer infrequent large discounts; and everyday low pricing (EDLP), where retailers offer products at a constant low regular price” (Danziger, Hadar & Morwitz, 2014, p. 761).

List price is a skimming technique where Nike sets its newly introduced sportswear products at higher prices and then lowers them over time. Nike has to maximize its revenue from its innovative products before competitors match their technology and flood the market. List pricing along with daily is especially important for its global market pricing aspect.

Distribution Strategies

Nike will use marketing channels of not only the consumer but also the industry to distribute its sportswear apparel. “A marketing channel refers to “a set of interdependent organizations involved in the process of making a product or service available for use or consumption” (Watson, Worm, Palmatier & Ganesan, 2015, p. 547). Nike has a robust marketing channel system in place to distribute at all four levels from the manufacturer directly to the consumer and the manufacturer through various partnerships to customers, (see below fig. 17.3). Nike also uses both the vertical and horizontal marketing systems by embracing different levels of partnerships to maximize its product placement. These partnerships are especially crucial within the global market because Nike does not have the same control abroad as within the domestic market.

Channels, Mass, Selective, and Exclusive

Nike uses exclusive distribution when channeling from manufacturer directly to the consumer. Nike has mastered this channel using digital online to its technological limits. Reducing the middle-man enhances company revenue immensely and provides customer value with limited interruptions.

Selective distribution is used by Nike in full force. Nike has many factory outlet stores and retail stores that are close and trusted partners that sell their sportswear within their terms. Nike supports the aspect of maintaining a manageable number of intermediates for the proper placement and distribution of its product and limiting conflict.

Nike also uses the intensive distribution strategy and places its sportswear apparel products with wholesalers and retailers for sale to consumers. Nike not only uses this intensive placement domestically but also globally. The intensive global distribution is crucial in Nike expanding the global market, gaining market share and expanding its global footprint.

Positioning Within Channels

Nike has different product distribution channels to ensure customers are reached, satisfied and loyal. “By monitoring their environment and harnessing technological advances, retailers can (1) remain more in touch with consumer preferences, (2) take advantage of opportunities created by new consumer preferences, and (3) enhance the value they offer to consumers” (Grewal, Roggeveen, Compeau & Levy, 2012, p. 1). Proper positioning ensures products are where they need to be when they are needed. Nike also positions itself to stay one step ahead of competitors and create competitive advantage. Nike ensures that competent and trusted intermediaries are part of their market channel system and value network.

Conclusion

Nike has planned for its sportswear apparel products pricing and distribution strategies. Nike has a dedicated pricing department that uses dynamic pricing within daily, promotion, and list pricing to accomplish company sales objectives. Nike also has robust distribution strategies using exclusive, selective, and intensive channeling with crucial positioning to meet company strategic plans.

References

Danziger, S., Hadar, L., & Morwitz, V. G. (2014). Retailer pricing strategy and consumer choice under price uncertainty. Journal of Consumer Research, 41(3), 761-774. doi:10.1086/677313. Retrieved from The University of Phoenix MKT571 website.

Grewal, D., Roggeveen, A. L., Compeau, L. D., & Levy, M. (2012). Retail value-based pricing strategies: New times, new technologies, new consumers. Journal of Retailing, 88(1), 1-6. doi:10.1016/j.jretai.2011.12.001. Retrieved from The University of Phoenix MKT571 website.

Kotler, P. & Keller, K. L. (2016). Marketing Management (15th ed.). Retrieved from The University of Phoenix eBook Collection database.

Watson, G. F., Worm, S., Palmatier, R. W., & Ganesan, S. (2015). The evolution of marketing channels: Trends and research directions. Journal of Retailing, 91(4), 546-568. doi:10.1016/j.jretai.2015.04.002. Retrieved from The University of Phoenix MKT571 website.