This article also appeared in Finweek Magazine in their 27-June-2013 issue
As consumers, we need to take responsibility for our choices. What we as consumers can learn from the Nike LeBron X pricing controversy.
Picture the scene. It’s a Sunday night. In the bedroom, the wife is getting dressed for their evening out at a nearby restaurant, while her husband is on the bed engrossed in the newspaper. She pulls up her jeans – they somehow always seem to get a little smaller each time she puts them on – and then asks her husband that dreaded question that leaves most men speechless: “Darling, do these jeans make my bum look fat?”
The husband hesitates for a moment, then says innocently: “No darling, it’s the chocolates that do.”
Why am I telling you this joke? My message is this: Her husband may be insensitive, but the wife cannot blame him for her love of chocolates, nor can she blame Cadbury’s for making delicious chocolates that she battles to resist. Life is about choices. As adults, we are intelligent enough to understand the consequences of our choices. If you don’t like those consequences, then change your behaviour. But don’t blame businesses for putting temptation in your way when you don’t have the willpower to resist what they are selling. If you keep on buying the chocolates, they will keep on selling them. Don’t blame capitalism for going for the gap, it’s what any good entrepreneur would do.
As consumers, we need to take responsibility for our choices.
In 2012, clothing, footwear, sportswear and equipment giant Nike, faced a lot of criticism for its LeBron X product line. Why? Because of the price. At a hefty $315, the LeBron X was the priciest shoe that Nike had ever marketed. Some advocacy groups and consumers felt that Nike’s outrageous pricing was callous, especially at a time when the US was grappling with an unemployment crunch and economic uncertainty.
But let’s take a step back. Nike isn’t some evil power out to take advantage of consumers. They are simply a for-profit business – and a very successful one at that – experimenting to find the right price point where their high-end customers will be willing to buy a prestige product.
It all comes down to supply vs. demand and willing buyer, willing seller. At the end of the day, a company’s pricing strategies and their resultant sales are determined by what the market can bear. If you cannot “bear it”, don’t buy it. But don’t blame the company for charging what the market is willing to pay. Don’t buy what you cannot afford and then blame the company for selling it to you.
Just like other premium brands like Tag Heuer and Louis Vuitton, Nike chose a higher price point to position the LeBron X as a premium, high-quality product. It’s not easy to hit the correct balance between price and sales volumes. But Nike must have done something right. Based on recent data from research company Sports OneSource, Nike earned $300m in US retail sales in 2012 for the LeBron X. These signature shoes of LeBron James, basketball’s most dominant player currently, are outselling their closest competitor’s signature shoes by a staggering 6-to-1. So despite the hefty price tag, customers are buying the LeBron X in droves.
In 2010 in Brazil, a judge found McDonald’s liable after one of their former franchise managers sued the fast food chain for making him fat. Absurd but true. The ex-manager blamed the free lunches that McDonald’s provided for staff. Granted, McDonald’s may not be the healthiest food choice, but nobody forced him to eat there. McDonald’s certainly didn’t pin him down and force-feed him Big Mac’s. It was his decision to eat there repeatedly that made him gain weight, and he needs to take responsibility for that.
Likewise, don’t blame Nike for pricing their LeBron X shoes at $315 if we as consumers are willing to pay that price. As consumers, we need to take responsibility for our choices. And you have the choice not to buy that Big Mac or not to eat that chocolate.
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