Company Information
For many years Nike has been the leading global producer of footwear. The company’s reputation is based on producing comfortable and efficient sneakers for different sporting activities. The US forms the leading market for Nike’s products, with at least 40% of the total revenue generated by the company. The high demand for Nike’s products has made the company a monopoly in the US market, with at least 47.7% of the market share. The company growing demand is a result of its wide market segmentation that is diversified to target both the young generation and the older people.
Product Description
Nike’s products have been designed to meet the needs of athletes from different sporting fields. However, the company has diversified into producing products for fashion to create a wider market. They are designed to enhance customer performance by providing comfort and efficiency. Nike designs its products according to trending fashion and consumer preferences to create consumer satisfaction and attract loyalty (Bouredji et al., 2020). The company produces sneakers in different colors to give customers a wide range of choices and enable them to match the sneakers with their preferred attire.
Life Cycle
There are three major life cycles that organizations must experience, including the birth phase, growth phase and decline phase. Nike is in the growth phase, which incorporates the acquisition of additional resources through the development of value-creation skills. Nike has been able to stay competitive in the market and withstand market pressures because of increased specialization and division of labor (Bouredji et al., 2020). Through specialization, the company has increased its product diversification to adequately meet the market demands and customer preferences. Division of Labor has enabled the company to increase innovation and creativity, which has led to the development of unique products that meet consumer needs in different market segments.
Pricing Goals
Nike’s primary objective regarding the pricing of its products is to provide customers with the highest quality products at significantly affordable prices. Many customers want products that are worth the amount they are bought for. Therefore, Nike uses a value-based strategy to determine the price of its products. Offering quality products at affordable prices has given the company a competitive advantage compared to its competitors in the US market (Bouredji et al., 2020). Nike’s diverse market segmentation and growing demand for its product has created a ready market for its products, enabling the company to sell its products at affordable prices without suffering losses.
Key Determinants of Price
There are various factors that Nike uses to determine the price of its products. Firstly, when the cost of production is high, the product is likely to cost high for the company to cushion the company from experiencing losses (Cho et al., 2021). Secondly, when the price of products of the competitors is high, Nike is likely to set the prices of their products slightly low to attract more customers. Thirdly, when the location of the market is closer to the manufacturer, the prices of the goods are likely to be lower than when the market location is far from the manufacturer because of transport expenses (Choo et al., 2021). Fourthly, the supply of the product in the market plays a significant role in determining the product prices. When the supply is in surplus, the prices of the product are likely to fall to allow customers to buy more of the product for the supplier to offload their stock. Fifthly, when the demand for the product increases, the manufacturers are likely to increase the prices of their products due to the availability of a ready market. Lastly, government policies play a significant role in determining prices through taxation or price control. When the government imposes more taxes on the product, its price is likely to increase due to the increased cost of production.
Pricing Methods to Choose a Pricing Strategy
The cost-plus approach is used to determine the pricing strategy when the manufacturer sells the product at retail. This method involves adding a percentage to the cost of producing products to determine the final consumer price (Amalia et al., 2020). The percentage added covers the material costs, direct labor costs and operating expenses. The markup approach is closely related to the cost-plus approach because it involves the addition of a set percentage of the cost to the price of the products to allow the manufacturer to sell the products at wholesale without suffering losses. The demand pricing approach may be referred to as customer-based pricing. It involves setting the price of a product based on consumer demand. This method may be risky, especially when the manufacturer gets a wrong impression of the market demand. Lastly, the competitive approach involves setting the price of the product based on the price of the competitors (Amalia et al., 2020). Manufacturers can set the price of the products slightly above or below their competitors’ prices.
Fine Tuning
The price of the products tends to play a significant role in determining the purchasing power of the customers. When prices are unfavorable, the manufacturer is likely to experience difficulties selling their products due to limited purchasing power by the customers. Therefore, pricing is a significant element in a company’s marketing strategy. The prices of the goods should therefore give the customers value for their money. There are various crucial elements that the manufacturer needs to consider when determining the pricing strategy to develop effective prices according to the nature of the market and consumer needs.
These factors include market competition, the elasticity of the product and the manufacturing cost (Cho et al., 2021). The ideal price of the product should conform to the market price set by the competitors. When the price deviates from the market price greatly, it is likely to cause disrupt the consumer’s purchasing patterns. When the elasticity of the product is high, the demand for the product is likely to be affect by changes in price. Such a product is highly sensitive to market changes and the manufacturer need to consider the nature of the market to determine the ideal price for such products. Additionally, the manufacturer should consider the cost of production to ensure that they do not sell their product at a loss. The prices of the product should cater to the manufacturing cost.
Industry Technologies
There are different marketing technologies that can be employed to reach a wider market and increase sales. Search engine optimization marketing involves using popular search engines such as Google to rank the company’s page high in search results (Bala & Verma, 2018). This strategy can be used to increase brand visibility and expand the size of potential customers. Social media marketing can be used to target young consumers by creating ads that appear on users’ pages. Email marketing involves inviting email users to view the products by seeking their permission to send them product ads (Bala & Verma, 2018). This strategy is cost-efficient and can be used to determine serious and loyal customers.
References
Amalia, M. M., Marviana, R. D., & Sumekar, A. (2020). Analisis perhitungan harga pokok Produksi Dengan Metode Full Costing Dan Penentuan Harga Jual Dengan Pendekatan Cost-Plus Pricing (Studi Kasus Pada Rumah Produksi Wan Tempeh). Jurnal Mutiara Akuntansi, 5(1), 33-45.
Bala, M., & Verma, D. (2018). A critical review of digital marketing. M. Bala, D. Verma (2018). A Critical Review of Digital Marketing. International Journal of Management, IT & Engineering, 8(10), 321-339.
Bouredji, K., Gupta, R., & Jester, G. (2020). EveryWear Marketing Plan.
Cho, S., Brison, N., Brown, K., & Quinn, K. (2021). A theoretical explanation of sport Trademark Litigation: Already v. Nike and Forever 21 v. Adidas. Journal of Global Sport Management, 1-25.