Price is the only element of the marketing mix that generates revenue. Product development costs money. Distribution costs money. Promotion costs money. Price is the one variable that, when moved correctly, improves both the top line and the margin simultaneously.
Warren Buffett has called pricing power the most important indicator of a business's quality. Not customer satisfaction. Not brand awareness. Not market share. Pricing power — the ability to raise prices without proportional volume loss — because it is the single variable that reveals whether the business has built something that buyers genuinely value at a premium.
Most CMOs do not own the pricing decision. It sits with finance, with revenue management, with a co-founder who set the price at launch and has never revisited it, or with a commercial director whose primary metric is volume. Marketing gets consulted, occasionally. It is not in the room for the decision.
This is a mistake — not politically, but commercially. Because the thing that most directly determines a brand's pricing power is marketing. Not the price itself. The brand equity that sits behind the price.
What pricing power actually is
Pricing power is not about charging more. It is about charging more without losing the buyers you need to make the revenue model work. The distinction matters because a price increase that holds 90% of volume while increasing revenue by 10% looks very different from a price increase that holds 60% of volume and produces a flat revenue result with collapsed margins.
What determines how much volume you lose when you raise the price is price elasticity. Elasticity is the ratio of percentage volume change to percentage price change. An elasticity of 1.0 means a 10% price rise produces a 10% volume decline — revenue is flat, and costs have increased with the volume you did sell. An elasticity of 0.5 means a 10% price rise produces a 5% volume decline — revenue increases, margins improve significantly. The difference between the two elasticities is the difference between a pricing strategy that works and one that destroys profit.
What Binet and Field's analysis shows — across hundreds of cases in the IPA effectiveness databank — is that at elasticity 2.0, a 10% price increase leaves profit unchanged. At elasticity 1.0, the same price increase produces a 50% profit improvement. At elasticity 0.5, it produces a 75% improvement. The profit sensitivity to elasticity is enormous.
At elasticity 2.0: a 10% price rise produces ≈ 0% profit change (revenue gain offset by volume loss). At elasticity 1.0: the same price rise produces a ~50% profit improvement. At elasticity 0.5: ~75% improvement. The elasticity of your brand determines the commercial value of any pricing decision you make.
Brand investment is a pricing strategy
The insight that changes the CMO's relationship with pricing is this: brand investment is one of the most reliable mechanisms for reducing price elasticity.
A buyer who does not strongly associate your brand with specific, valued category outcomes is price-sensitive by default. They have no particular reason to pay a premium when a cheaper alternative exists. The price difference is visible. The reason to accept it is not.
A buyer who strongly associates your brand with specific, valued outcomes — who has well-built memory structures around the brand, consistent with the mental availability framework from Ehrenberg-Bass — is less sensitive to price. Not immune to it. Less sensitive. The brand association gives them a reason to pay the difference that competing products cannot easily replicate.
This is not about luxury positioning or premium branding as a concept. It is about the structural relationship between brand equity and elasticity. The stronger the brand equity — the more clearly a buyer associates your brand with outcomes they value — the lower the price elasticity, and the more pricing power the business has.
The McCain case
The most compelling documented proof of this relationship comes from McCain, the UK's market-leading frozen chip brand, which won the IPA Effectiveness Awards Grand Prix in 2024 for a ten-year brand investment programme.
In 2014, McCain was in a structurally difficult position. Own-label was gaining equity. Discount retailers — Aldi and Lidl — were taking share and did not stock McCain products. The business's initial response was to increase promotion depth and frequency. The result: average price paid per unit fell, and revenue declined.
An econometric analysis of the situation measured McCain's price elasticity at exactly 1.0 — the point at which cutting price increases volume but not revenue, while increasing costs. More promotion meant lower prices, flat revenue, and rising costs. The arithmetic was clear: promotion-led growth was destroying profit.
The decision that followed was commercially unusual: McCain committed to a long-term emotional brand-building strategy, explicitly reduced promotion depth and frequency, and maintained that commitment across eight years and multiple budget cycles.
The results, measured by 2023:
| Metric | 2014 | 2023 | Change |
|---|---|---|---|
| Price elasticity | 1.0 | 0.53 | −47% |
| Base sales (non-promotional) | £252m | £363m | +44% |
| Profit ROI on brand investment | — | £1.48 per £1 | — |
Source: McCain / Circana / IPA Effectiveness Awards 2024
Elasticity fell from 1.0 to 0.53. That shift does not mean the brand can raise prices arbitrarily. It means that for any given price increase the business chooses to make, the volume response is structurally less damaging than it was before. The pricing freedom that creates is commercially material — and it arrived through brand investment, not through a pricing strategy in the conventional sense.
Base sales — the volume sold at full price, without promotional support — grew by 44% over the period. This is the clearest possible signal of reduced elasticity: buyers who previously required a promotion to purchase are now purchasing at full price. The brand investment did not just protect current buyers. It changed their behaviour.
Why the CMO needs to own this argument
Most CMOs present brand investment as a brand argument. It builds equity. It builds awareness. It makes the brand stronger. These claims are true and commercially insufficient, because they do not connect to the metric the CFO is responsible for.
The pricing power argument connects brand investment to the P&L in a way the CFO can evaluate without translation. Brand investment reduces price elasticity. Lower price elasticity means the business can sustain higher prices, or the same price against more promotional pressure from competitors, or the same price with fewer promotional discounts of its own. Every one of these outcomes improves EBITDA margin directly.
The McCain case provides the empirical basis. Elasticity 1.0 to 0.53 over ten years. Base sales up 44%. Profit ROI of 1.48. That is a capital allocation argument, not a marketing argument. £1 in brand investment produced £1.48 in profit. The CFO can evaluate that against any other use of capital.
When the CMO can make this case — not as a rough principle but with the specific mechanism, specific evidence, and specific instruments to track it — the budget conversation changes. It is no longer "we need brand investment because brand is important." It is "brand investment is a pricing strategy, this is the evidence that it works, and here is how we will track the elasticity impact over the next three years."
What this requires from the CMO
Making this argument credibly requires knowledge the marketing function does not naturally develop.
A working understanding of price elasticity and its commercial mechanics — not a textbook definition, but the ability to state it precisely in a board meeting, apply it to your category, and connect it to your brand's current promotional strategy.
An understanding of what your brand's current elasticity is, or a credible estimate. Econometric modelling through a media agency or specialist firm can measure this. Category benchmarks can provide a starting estimate. The specific number matters less than the direction and the trend — the CMO who is tracking it quarterly is in a different conversation than the one who is not.
The ability to translate elasticity into EBITDA impact at your specific revenue and cost structure. Finance can build that model once the CMO provides the elasticity premise. The premise has to be specific enough that finance can work with it — that is the CMO's job, not the financial model itself.
This is the commercial vocabulary the CMO role requires. Not additional marketing skill. The financial logic that connects what marketing does to what the business is worth.
The CMO Course
Lesson 7 covers pricing strategy as a CMO competency — price elasticity, what determines it, how brand investment changes it, the McCain case in detail, and how to make the EBITDA case for elasticity reduction in a board setting. Part of a thirteen-lesson course on the commercial vocabulary the CMO role requires.
See the Course →The promotion trap
The McCain case illustrates a pattern that plays out across categories with depressing regularity: a business under pressure reaches for promotional discounting as the fastest available lever for volume. The lever works in the short term. Revenue stabilises. The board or investment committee accepts the logic.
What promotional discounting does over time is train buyers. It establishes a new reference price — the promotional price — as the baseline against which all future prices are evaluated. A buyer who has purchased the brand consistently at a 20% promotional discount experiences the full price as a 25% premium above what they expect to pay. The full price becomes the exception. The promotional price becomes normal.
Once that reference price shift has happened, it is extremely difficult and costly to reverse. The business now needs deeper or more frequent promotions to maintain volume, which further reinforces the promotional reference price. Price elasticity increases. The structural flexibility to raise prices or reduce promotion shrinks. The commercial position of the brand deteriorates, often invisibly, until the business is trapped in a promotional cycle it cannot escape without significant volume risk.
This is not an argument against all promotional activity. Short-term promotion has legitimate commercial uses: trial generation, shelf space negotiation, seasonal clearing, competitive response. The question is whether promotion is a tool or a strategy. When it becomes the primary mechanism for volume management, it is almost always destroying pricing power faster than it is building revenue.
The CMO who understands elasticity can see this trap coming before it closes. That is the point. Not to be anti-promotion, but to know what promotional activity does to the price elasticity of the brand over time — and to make decisions that keep that elasticity within the range where the business retains meaningful pricing power.