Marketing’s Seat at the Pricing Table: How can we bring customer centricity back into pricing decisions?
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Last month, we sat down to chat with senior marketers from Russell & Bromley, Missoma, Accor, Ralph Lauren and Singulier, moderated by the brilliant Robin Mellery-Pratt, Head of Content Strategy, The Business of Fashion, to discuss the topic ‘Marketing’s Seat at the Pricing Table: How can we bring customer centricity back into pricing decisions?’.
In this article, we sum up the conversation, outlining the challenges and potential solutions to put Pricing firmly back at the centre of both customers and marketing.
Economic Pressures are Reshaping Pricing Strategies
External factors such as inflation, materials costs, shipping, and fluctuating currency values are forcing businesses to rethink their pricing decisions.
However, with many brands struggling to identify the right metrics to measure the long-term impact of pricing decisions, how can they understand what price changes are doing to their customer base and long-term value?
With risks to long-term value from reactionary or poorly-informed price increases, it’s essential to understand that fundamentally, Pricing is an ecosystem process. Yet the Product, Merchandising and Finance teams often dominate pricing decisions, leading to frustrations when these don’t align with customer expectations or competitive positioning. Blanket increases post-Brexit, for example, have neglected nuanced customer reactions and failed to understand price elasticity effectively.
Of course, it is essential and right that Finance should be interested in the margin overall, but at a product-by-product level, there are many complex and inter-linked decisions that influence how the consumer behaves or views the brand. For example, understanding how loss leaders or minimal margin pricing drives other purchases within key customer segments is critical to understanding how pricing impacts customer lifetime value (CLV).
There are many complex paths to purchase and different consumer behaviours that mean it’s necessary to dig deeper into the data and apply a customer lens to expose how pricing functions beyond acquisition and in the context of a lifetime of purchases, as well as its influence on brand, and the brand’s influence on price.
That in turn ought to impact how pricing decisions are made. What information goes into pricing and how those decisions tie into broader operational strategies and customer price elasticity. Yet marketing, despite Pricing being one of the four Ps of the marketing mix, is often concerned primarily with Promotion.
Data Silos Block Holistic Pricing Decisions
So if we agree that pricing is broader than product and finance, and that there are brand and customer lifetime considerations, what else is stopping brands from shifting their approach to pricing?
For many, fragmented data, as well as team misalignment, are significant barriers to understanding customer behaviour and creating customer-centric pricing strategies. Pricing and data silos hinder a cohesive strategy and this lack of end-to-end data visibility creates blind spots.
As one attendee put it, “No one shops in a silo. Without connecting in-store and digital behaviour, we lose critical insights.” Another agreed: “The biggest challenge is implementing something end-to-end and well-networked. Teams tend to optimize in silos.” Which misses the opportunity to identify potential pockets of growth.
Transforming pricing into an ecosystem creates shared KPIs and considerable efficiency, which fosters cross-department collaboration and creates a unified view of pricing performance and customer impact.
Ultimately, aligning stakeholders on common KPIs and moving towards unified systems is essential for creating efficient, customer-informed pricing strategies.
Balancing Brand Perception and Price Elasticity
Brands must strike a careful balance between competitive pricing and maintaining their perceived value.
Increasingly, supply chain and sustainability transparency is important to consumers. While explaining what goes into a product and potentially exposing the margin can be challenging, emphasizing sustainability measures such as carbon offsets can justify premium pricing. However, attendees noted that despite increased demand in this space, customers rarely engage deeply with these details, signalling the need to balance authenticity and marketing impact. But investing in ethical transparency can be a useful differentiator to build trust and ensure alignment with customer expectations.
As another attendee explained, “Pricing isn’t just about production cost + distribution cost + margin. It’s about reflecting craftsmanship or technological value, and brand positioning.”, though they added, “For D2C and e-commerce brands, dynamic markets often make short-term ROI a more actionable metric than lagging CLV data.” Another suggested that “Seasonal pricing increases can create mismatched value expectations, leading to customer dissatisfaction.”
All of which emphasizes the need for a balanced approach and an understanding of the role and consistency of brand in price elasticity.
Especially as missteps in pricing can alienate core customers. Prompting an attendee to say that when considering pricing changes, “we looked at whether it was important to be lowest cost or if you can go too far the opposite way.” Essentially, it’s important to have signals in place so you don’t damage the brand in the eyes of your core customer. Or if a shift in the core is needed, you must make sure new customer value outweighs any losses.
Getting this across can be a challenge for marketers, but as a case in point, McCain and adam&eveDDB took home the 2024 IPA Effectiveness GrandPrix award, having demonstrated that a decade of brand consistency has reduced price elasticity by 47%. You can hear a clip of Mark Hodge, Vice President of Marketing at McCain on Fergus O’Carroll‘s On Strategy Showcase podcast, talking about how they raised base sales by 44% and delivered £26 million of net profit by shifting to brand rather than product advertising.
Leveraging Data for Pricing Insights
All agreed that using data strategically can improve pricing decisions.
From customer segmentation and first-purchase signals of what customers buy and when, to competitive intelligence, such as web scraping reviews, you can derive insights into long-term customer value and preferences, and actionable insights into pricing perception.
For example, we benchmarked a beauty brand against competitors and created valuable insights in just two weeks. This approach can answer key questions, such as whether price increases align with customer expectations and who customers are defecting to and why. When triangulated with internal data, it provides a clearer picture of pricing acceptance.
Customer segmentation models incorporating retention, activation, and upselling opportunities focus on the propensity to buy and optimize for lifetime value (CLV).
Plus where currency fluctuates or supply chain costs are volatile, for example, clear customer segmentation is essential to maintain focus on those target profiles that will deliver the most value.
With the context of defined acquisition costs based on CLV for specific segments and the opportunity to use initial purchase behaviours(e.g. higher-value items) to provide early signals for segmenting high-potential customers, CLV becomes a powerful north star metric for pricing as well as promotion, and indeed the 4Ps as a whole.
A triangulated, data-supported approach enables brands to consider customer behaviour and value, competitive benchmarks, and internal pricing models in one fell swoop. And to balance and adapt to emerging trends, ensuring responsiveness, short-term acquisition efforts and long-term brand equity work in harmony.
Seven Actionable Takeaways:
Ensure Pricing is an Ecosystem Process: From the board room to the operation, across finance, product, merchandising and marketing.
Consider the Role of Pricing in Brand and Vice Versa: price elasticity
Break Data Silos: Establish centralized, connected databases to enable holistic decision-making.
Prioritize Valuable Segments: Focus acquisition and retention efforts on high-LTV or high-value segments.
Leverage Customer Insights: Evolve maturity to use reviews, triangulated data, and first-purchase signals to refine pricing and product strategies.
Transparency as a Differentiator: Invest in ethical transparency to build trust and align with consumer expectations.
Adapt to Emerging Trends: Balance short-term acquisition efforts with long-term brand equity by staying agile and responsive to trends.
We also extend our thanks to the attendees for making it such an interesting and lively discussion.
For a deeper exploration of strategies to enhance long-term performance through customer lifetime value, check out our whitepaper:
