Subscription services can be a great business model. It gives businesses a monthly recurring revenue stream that is steady and predictable – at least until the consumer ends it. Many subscription services have had initial success, only to lose subscribers as time goes on and subscribers no longer see the value of the service.
The meal subscriptions have been particularly hard hit as customers try various plans, only to eventually stop. There are also a great number of clothing subscription services, including subscriptions for fashion clothing, business apparel, and athletic wear. Now, Nike is launching a new subscription service aimed directly at the kids’ shoes market. It’s an important market space and is valued at roughly $10 billion annually.
Nike will offer three levels of subscriptions: $20, $30, or $50. At $20/month, customers get four new pairs of shoes and play activities; $30/month gets 6 pairs; $50/month gets 12 pairs. Named ‘Nike Adventure Club’, the service is aimed at 2-10 year olds and supplies Nike and Converse shoes. Is it money saving for consumers? Perhaps. It depends on the level of shoe selected. The main goal of the service is to build relationships and maintain brand loyalty for Nike and Converse.
As for correct shoe sizing, Nike includes a sizing chart to help parents measure their child’s feet. In a pilot program run with 10,000 members, only a small percentage of parents had the wrong size. The service includes free shipping and returns along with free size and style exchanges.
Ready to play?
Group Activities and Discussion Questions:
- Discuss the advantages and disadvantages of subscription-based services.
- Pricing is usually a complex topic. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
- Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
- For Nike Adventure Club, divide students into groups and have each group work on any/all of the six steps.
- When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
- Is the Nike program correctly priced for the target market?
Source: TechCrunch, CNN, USA Today, Reuters, other news sources
