Is Nike's pricing strategy for Lebron X basketball shoes smart?
Nike has announced its most expensive shoe ever -- the LeBron X basketball shoes, expected to sell for $315 -- pushing the upper limit of consumer dedication to the brand. (see ESPN news video below.) The sneaker feature built-in electronics that measure athletic performance. The president of the National Urban League urged Nike to abandon the pricy shoe saying, "It's the consumer's choice, but it's insensitive to market a $300 shoe to kids going back to school and struggling to buy school supplies." The price on most of its other shoes are also rising 5-10% due to material cost increases. Nike's gross margins are lower than most of its competitors.
- Is this pricing strategy smart? The shoes are unique, and the price will raise Nike's margins, but is it insensitive to the mass market that can't really afford them?
- Is there a way to be sensitive to cash-strapped buyers while, at the same time, introduce an expensive new model?
- How would you handle the public relations backlash to these pricy sneakers?
Note: the original news report about the introduction of the Nike LeBron X shoes is no longer available on YouTube, so I have substituted this video blog about the introduction of the shoes. The blogger reveals that Nike has discounted the originally-priced shoe from $315 to $180, and then says the original shoe will be also available. In reality, the $180 shoe does not include the chip technology of the $315 version, so the $180 shoe is different and is NOT a discount from the original. Rather, it is a lower-priced substitute that doesn't include the chip to measure performance. With that in mind, what do you think about Nike's pricing strategy?