Monday, April 13, 2009

Pricing and Distribution Strategies

Pricing:

The Nike Shox is known to be a higher-end running/athletic sneaker and they are not often priced below $100 for the adults. From experience with buying Nike Shox, they seem to use a little bit of psychological pricing. For one, because the shox are a higher priced sneaker, consumers will think they are of better quality than other sneakers and this is one of the psychological effects this pricing strategy has. If consumers are not that knowledgeable in the sneaker market, they are not going to be able to make comparisons between different sneakers other than based on the price and that is why the price can have such an impact on the buying process. In this case, higher price equates to higher quality and Nike definitely takes advantage and makes use of the psychological pricing strategy (Armstrong and Kotler). Another type of pricing Nike utilizes is segmented pricing. Nike often adjusts their products' prices based on differences in the type of customer they are targeting, the specific product they are trying to market, and the location their products are found. Nike makes Shox for adults and children and the prices are different for each. Although the cost to make an adult sneaker versus a children's sneaker does not vary significantly, the difference in price in which they are sold at can be around thirty dollars. Another example of how Nike utilizes segmented pricing is through the location of their products. Often times, the Nike Shox are priced differently in a Lady Foot Locker versus a regular Foot Locker. I know this from experience because I work in a Lady Foot Locker. Sometimes we have customers approach us saying that they saw the same shoe priced either higher or lower over at the regular Foot Locker. So based on whether the Shox is found in a Lady Foot Locker or a regular Foot Locker, the price can vary. Another strategy I've witnessed from experience is that the Shox have a price ending in zeros, at least in Lady Foot Locker. For example, $115.00. Then, when a particular style goes on sale, you will see the format of the price change to $99.99 as an example. This falls under the psychological strategy of pricing because in consumer's mind, anything ending in ".99" is cheaper than ".00" Overall, Nike uses a price skimming technique for the shox in that it initially sets the price high for these shoes because they are always coming out with something new with different and innovative designs. Eventually, the consumer will see the price decline gradually as the shoe has been on the market for awhile and the next design is getting ready to be released. These strategies seem to be working well for Nike, especially the higher pricing strategy. There is just something about the high price that makes customers feel they are purchasing higher quality and prestige when they buy a Nike Shox.

Distribution:

Nike distributes most of its sneaker products to large chain retailers like Foot Locker. Nike, the shoe company, has to deliver its products to the retailers like Foot Locker. This is major task for Nike because a large majority of their sales is made at these retail locations, so getting product to them is vital to their survival as a company. In order to accomplish this, Nike makes sure it has several distribution centers and computer systems that track inventory, deliveries, and orders in their respected retail stores. From experience, Nike makes use of a POS computer program (point-of-sale) that is integrated into the cash registers and this allows sales to be monitored at the various retail locations. Retailers like Foot Locker and Lady Foot Locker can also order particular products from another retail location for a customer if they are out of their size in a certain product and have it sent directly to their home. Retailers place orders with the shoe companies in order to receive products to sell in the retail stores, usually found in malls (http://premium.hoovers.com.library.cedarcrest.edu:2048/subscribe/ind/fr/profile/basic.xhtml?ID=130). Most often, the type of channel Nike uses is a producer (Nike), then the producer sells to the retailer (Foot Locker), then the retailer sells to the consumer. Nike Shox can also be classified as utilizing selective distribution because they are found in places that match their target markets and positioning. They are found in retail stores that cater to athletic wear, including clothing and shoes. These retail stores are found in shopping malls or freestanding stores where consumers in this market can obtain them when they want to purchase a Nike Shox athletic shoe. It is selective distribution because the Nike Shox are not available everywhere, but they are not exclusive either. They can be found at major retailers catering to the target market of consumers needing athletic footwear but are not exclusive by any means(Armstrong and Kotler). They meet in the middle as far as distribution goes.

4 comments:

  1. These articles are greatly appreciated; very useful and informative blog and every body must visit this blog.Thanks for the information.Keep blogging.

    nike shox

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  2. The Nike Shox is known to be a higher-end running/athletic .
    the nick shoes is really perfect shoes , i have many pairs of the shoes.
    vibram fivefingers

    ReplyDelete
  3. every compony want to based on the market, the man in the wheel should make some strategies.Nike shoes is very perfect.

    ReplyDelete