Loved

Chapter 17The Pricing Lever: It's About Perceived Value

Nike used to host a women's marathon in my hometown of San Francisco that brought 10,000 women together for a running love-fest. From Olympians to hairstyling stations at registration to tents with the latest Nike gear, the festival atmosphere celebrated women and running. The race also served a valuable secondary purpose: it was a living, breathing market research petri dish for Nike.

It's how I found myself in a focus group for Nike sunglasses. Athletic and energetic to a person, we free ranged around a room that was like a sunglasses counter without the glass: we could see, touch, and try on everything.

After a period of time, we sat down and filled out a stack ranking of our top choices using whatever mattered most to us personally—sportiness, trendiness, feel, color.

And then they revealed the prices.

I'm a very pragmatic person and don't buy sunglasses often. When I saw the pair I'd ranked as number one cost $300, it immediately dropped to my lowest choice. That was more than I was willing to pay for fashion sunglasses from Nike. But I was willing to pay $125 for a performance pair designed for racing. Those formerly-ranked-number-four sunglasses were now my number one pick. The perceived value matched my desired use case.

This is the simple calculus for everyone with pricing: if I like this product, is it worth it to me at this price from this company? Obviously brand plays an enormous role in this equation. It's ...