Under Armour was founded in 1995 by Kevin Blank with the view to making the athletic experience better. The company makes athletic wear such as a moisture-wicking shirt that keeps the athlete dry during training sessions and during the games. Under Armour also produces footwear, clothing and other accessories to enhance the athletic experience. Despite having an annual sales stream of approximately $ 2.2 billion, the company faces stiff competition from other established companies such as Adidas and Nike. Under Armour chose to focus on the footwear, and as a result, the company has seen double-digit sales streams. The company uses strategic pricing as well as the innovative development of the products targeting the female market in athletic apparel. The company is always conducting tests in a bid to produce high-quality products that will satisfy all customers.
Key Marketing Issues
Return on Investment– (ROI) refers to a pricing strategy employed by businesses to gain a certain return on the investment made by the business. However, it is usually to estimate the ROI of a company, and as a result, most companies use the trial and error method to determine the ROI. Under Armour, footwear products range from $70- $100. This attracts new customers as well as encourages frequent purchases of shoes priced highly the next time the customers make a purchase.
Pricing Objectives- Under Armour’s goal of becoming the third leading producer of athletic footwear for athletes has a great impact on the pricing strategies and objectives of the company. A company’s pricing objectives are the end goals that the company desires to attain through the pricing efforts that have been implemented. The pricing objectives must be aligned with marketing and organizational objectives. The pricing objectives of a company have an effect in the production, finance and accounting departments. Under Armour has unique pricing objectives that will ensure that its organizational goals are attained.
Product Quality- The products produced at Under Armour are perceived to be of high quality, e.g. the moisture-wicking shirts worn by athletes during games and training sessions to ensure that they remain comfortable as well as dry. Having high quality a product in the market ensures that the product remains competitive while at the same time is highly-priced to cover for the costs incurred in the production process of the high-quality product. A higher price for high-quality products, in turn, translates into higher profit margins for the company.
Selection of Pricing Strategy- It is important for the firm to have an excellent pricing strategy to help the marketers set reasonable prices for the products in the market. Under Armour utilizes several pricing strategies against its competitors such as Adidas and Nike. Penetration pricing refers to a situation where the price is set lower than the price of other major brands in the market. Under Armour uses this strategy to enter new markets and achieve a significant share of the market. The firm also uses price skimming where it sets the highest price that the customers are willing to pay to purchase the products, especially in the new and innovative products such as LED fitted backpacks.
Demand-Based Pricing- Under Armour charges the highest price that the customers are willing to pay for innovative products such as backpacks and jackets that have been fitted with LED lights. The firm is optimistic that the customers will see and understand the value of products as well as the high prices of the goods. The products can cost anything from $250.
Personal Case Analysis
Despite having limited resources, Under Armour has excellent pricing strategies as well as the innovative development of its products. By penetrating the female market, the company will be able to compete on the same level as its competitors. The firm is also producing a wide range of products from clothing, accessories to footwear, and this helps in capturing a greater market share.
Questions
- Of the various pricing objectives, which one does Under Armour appear to be pursuing in its marketing of running shoes, and why?
Under Armour is selling premium-priced shoes in an effort to increase its market share as well as its sales revenue streams. The company is also producing different products to suit the different needs of the customers. Under Armour is targeting the $7 billion market of running shoes for both men and women.
- When Under Armour prepares to set the price for a new shirt equipped with LED lights, how much emphasis should it place on its evaluation of competitors’ prices?
The company should not put too much emphasis on the evaluation of other company’s prices because the Under Armour products are very innovative and are therefore unique. Innovations such as having LED lights in clothing enhance the image of the brand. Even though other companies take up the innovation, Under Armour will be uniquely positioned in the market as a product leader.
- Would you recommend that Under Armour use cost-based pricing, demand-based pricing, or competition-based pricing for a new shirt equipped with LED lights? Explain your answer.
I would recommend that Under Armour utilizes the demand-based pricing technique. The firm would have to first estimate the demand for the shirts and then make a decision on the price to be charged—the price shifts depending on whether the demand increases or decreases.
Conclusion
Under Armour should use different pricing strategies in order to effectively compete in the market with other major brands such as Adidas and Nike. Under Armour products are of high quality, and that is what attracts new customers as well as encourage frequent purchases. Pricing decisions can be made based on cost-based pricing, demand-based pricing and competition-based pricing objectives.
References
Mirabella, L. (2014, May 13). Under Armour looks to female consumers, running to propel brand in race with rivals. Retrieved October 10, 2015, from http://articles.baltimoresun.com/2014-05-13/business/bs-bz-under-armour-shareholder-meeting-20140513_1_armour-ceo-kevin-plank-footwear-brand
Pride, W. and Ferrell, O., Marketing. 18ed. South-Western Cengage Learning, 2016. Print.
Welcome to Market Realist. (n.d.). Retrieved October 10, 2015, from http://marketrealist.com/2014/12/understanding-armour-growth-story/
Welcome to Market Realist. (n.d.). Retrieved October 10, 2015, from http://marketrealist.com/2015/01/expanding-product-platforms-drive-armours-revenue-gains/
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