The firm I have chosen is Nike so I decided to examine some key details in determining the market demand for my company. Some of the factors I will be using to show how Nike's popularity affects their demand are populations and demographics, price of related goods, and taste. Nike's mission is 'to bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete' (Nike.com). When looking at Nike’s target audience as well as consumers they are between the ages of 15 - 40 years old (marketrealist.com). The population of consumers consist of preteens, teens,young adults, athletes, and the everyday working person. Nike also targets 3 kinds of consumers which are women, runners, and young athletes (businessinsider.com. According to businessinsider.com the sale of woman running and training apparel has started to outpace the men’s business. Women in their 20s and 30s are largely driving the ‘athleisure trend’. This trend is primarily women wearing leggings to different occasions such as gym, brunch and to run errands.
Now that we understand what nikes population and demographic looks like we can begin to examine some of the other key factors. I will explain how income, price and taste tie into the market demand of the NIKE Brand. Nike pricing consideration plays a huge factor in their success. They utilize value based pricing and segmented pricing to determine their products cost. Value based pricing is when a company set their prices according to the value the customer places on the product. Nike is focused on bringing quality to their customers which means that the price will also reflect the quality of the product. This may increase the price of some products but because of how Nike promotes their products with the use of ads. Ads which claim that their products are the top of the range, this persuades consumers to still buy even if slightly higher price. Another pricing strategy used is segmented pricing which is simply adjusted pricing for their target audience. For example, the cost of shoe difference between kids versus mens size. Pricing is important because it directly affects the demand for the product. The higher the cost the lower the demand, but when the cost is reduced the demand will increase. Nike understands how to entice their consumers at any price point.
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Income plays an important factor because that is the determining factor of how these consumers spend their money. The availability of funds will impact the demand of Nike. An increase in income means an increase in demand but also vice versa a decrease in income means demand also drops. Nikes popularity and also the use of professional athletes to promote their products keeps Nike in demand. The taste for NIke is high and people are willing to spend their money on it.
When looking at Nike over the years, we can see that they continue to increase sales. Nike is a global brand and they have become extremely popular. Footwear and apparel are their largest areas of growth. The demand for nike is rapidly growing and people are willing to spend regardless of the price. Nike has advertised their products as the top of line and the consumers have responded positively and embraced their mission.
Nike has the demand but now we must discuss the supply to cover the demands of the consumers. Nike has over 1000 locations worldwide which allows them to meet the demand of the consumers. In the US Nike has 384 retails and 750 internationally according to the SEC filings. The amounts of retails stores show how much of a demand Nike has which is also reflected in the supply needed.
Price elasticity of demand is the measure of change in the quantity demanded or purchased of a product based on its price change over time (Investopedia.com). Expressed mathematically, it is: Price Elasticity of Demand = % Change in Quantity Demanded/ % Change in Price (Investopedia.com). Price elasticity shows us the change in supply and demand when the price of a product changes. There are 2 ways to categorize the change in price. Some products are elastic which means change in price affects the demand for the product and some products are inelastic which means the change in price does not affect the demand for the product.
In regards to Nike footwear such as the Jordans or AirMax would be considered an inelastic product. The reason why is simple, regardless of the high price the demand for this product never changes. The popularity of Nikes are unmatched, over the years they have gained so much attraction with consumers. The advertising of Nike’s and also the endorsements by professional sports athletes have made them a very sought out product. Consumers wait on lines awaiting the release of a new pair of jordans that are quickly sold out upon release. A generic pair of nikes would most likely be an elastic product because the demand is not as strong and change in price also affects the demand. One thing that shows how consumers react to footwear such as Jordans is the act of buying and reselling. Consumers will purchase limited editions or popular shoes only to resell at a high marked up price. This causes some products to be very sought out because the demand is very high while the supply is low.
Nikes are still regarded as the most popular footwear even compared to its competitors. A pair of men's or women's Nike shoes can cost anywhere from around $60 to over $200 (usually limited editions or collaborations with high-end fashion designers) are priced typically around $400 (Snipesusa.com). While the price may be high the consumers still go out there to purchase and the demand remains high. Nike still outpace its competitors even at a higher cost.
Nikes are priced at the value the consumer places on the product and Nike understands the strength of its brand. The changing of price does not have an effect on the demand of Nike products. The market for Nike footwear is a growing business and is still on top of all the competitors. Over the years it has proven that it can withstand the test of time and consumers have shown their loyalty to the company.
References
- https://www.investopedia.com/terms/p/priceelasticity.asp
- https://www.investopedia.com/ask/answers/012915/what-difference-between-inelasticity-and-elasticity-demand.asp
- https://www.businessinsider.com/nike-is-going-after-3-kinds-of-customers-2015-4
- https://www.nike.com/help/a/nikeinc-mission
- https://marketrealist.com/2019/10/nikes-target-markets-everything-you-need-to-know/#:~:text=Nike's%20target%20market%20is%20largely,collaboration%20with%20Apple%20(AAPL)
- https://www.snipesusa.com/nike.html#:~:text=A%20pair%20of%20men's%20or,is%20dependent%20on%20the%20shoe.
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