Nike’s Pricing strategy withing the extended marketing mix

When talking about marketing it is important to understand that marketing is not just promoting and selling products or services. Marketing is “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large” (American Marketing Association, 2017). Nike, like many other best-selling companies, to market the brand, uses the technique of the marketing mix, also known as 4Ps or 7Ps. This is “the set of the marketing tools that the firm uses to pursue its marketing objectives in the target market” (Goi, N/A). Price refers to the amount of money a company charges for its product or service and is a key element for a company’s marketing. There are several pricing strategies that companies can use and combine to succeed and that will depend on the market, the product or service and the competitors.

Nike has a wide range and variety of products targeted to a diverse audience, hence the different pricing strategies the company applies to each type product according to the global sports industry., The prices depend entirely on the type of product and country and “being able to charge higher prices for its products is one of the key differentiators for Nike” (Soni, 2014).

When it was founded in 1964, Nike first used penetration strategies to enter the market (UKEssays, 2018). The prices of its products were relatively low, if we compare them with the current prices, in order to attract customer. Once the company established itself in the market as well as got loyal customers, it started to change strategies.

Nike designs its prices to be competitive to other sports firms that operate in the same market such as Adidas, Puma or Under Armour. Due to this competitiveness, Nike applies a premium pricing strategy “which targets the customers who develop a special kind of intimacy with the product that ultimately leads to the development of loyalty” (Madhi et all, 2015). This strategy involves high prices established by a higher quality and value in its products than the competing ones. Nike emphasises the quality of these products by using advertisements involving high-profile athletes, for instance Rafael Nadal or Serena Williams. The sports company has exclusive collections where it applies this best cost provider strategy such as the Jordan collection where the average price of footwear is €120 (Nike, Ireland, 2020).

In 2014, in a moment when competitors were offering deals and lowering their prices, Nike started raising its prices to take a new approach to the pricing strategy. The company began to use the value-based pricing strategy where the price is determined by the maximum price the customer is willing to pay for its products (McLeod, 2015). In this sense we can find products like caps from €7 to football boots at €300 (Nike 2020). Another strategy that Nike puts into practice is the skimming model where the oldest products have lower prices to let the newer ones in. The newest products are on their price peak during 3–6 months and after that the prices start to drop as new models come in. (UKEssays, 2018).

Undoubtedly, Nike’s pricing strategies are effective as Forbes rates it as the most valuable company in The Forbes Fab 40: The World’s Most Valuable Sports Brand with a value of $15,000,000,000 (Forbes, N/A). According to Statista (2020), the brand’s world side value is of 32.4bn USD. Based on the PESTEL analysis of Nike (Rowland 2017), the company enjoys increasing sales revenues even when they increase the prices. The Swoosh firm “successfully uses its pricing strategies to maximize its profits while emphasizing the high value” of its products (Gregory, 2018). The combination of all the pricing strategies the company uses, the revenue and sales make Nike “one of the world’s largest suppliers of athletic shoes and apparel and a major manufacturer of sports equipment” in the world (Madhi et all, 2015).

Pricing strategies are fundamental to any sports company in order to success and be relevant in the market. In this sense, it is needless to say that Nike’s pricing approaches are effective as the company is the number one sports firm in the world. Even if most Nike products are more expensive than its competitors, the premium and value-based pricing strategies work well because most clients are willing to pay the quality of the products and they feel the investment is worth it.

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