Reference no: EM131403065

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.

1. 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?
2. Is there a way to be sensitive to cash-strapped buyers while, at the same time, introduce an expensive new model?
3. 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?