🎙 EPISODE 308 — How to Build a Pricing & Promotion Architecture That Creates Sustainable Growth

Promotions Don’t Grow Brands. Pricing Strategy Does. And If You Get Pricing Wrong, No Amount of Promotion Can Save You.

This is the question I get asked the most, what should I price my products at. There is a lot more to this than picking a number. Let’s dig in.

If you’re like most emerging CPG founders, pricing feels like a moving target:
Distributor margin here
Retailer markup there
Freight increases
Promo depth pressure
Competitor pricing shifts
Inflation
Slotting fees
Admin fees
Promotional creep

It feels like you're constantly chasing the “right” price rather than leading with a pricing strategy that:
protects your margin,
drives trial,
supports retail partners,
and grows the category.

And here’s the part most founders don’t realize:

👉 You don’t control promotions until you control pricing.
And you don’t control pricing until you control architecture.

Promotions should sit ON a pricing strategy —
not be a replacement of one.

Promotions are event based, they happen at scheduled intervals whereas pricing happens every day. Your pricing plan is what drives velocity and, when done properly, your contribution - what the retailer takes to the bank. Think of contribution as the profitable growth in a category. When contribution is predictable and profitable, retailers love your brand. Most promotions erode contribution so setting up the right pricing architecture is critically important. Remember that the primary goal of each promotion is to boost base sale after the promotion ends. Base sales are your sales in the absence of a promotion.

Today, I’m going to show you how to build a pricing & promotion architecture that:
scales profitably,
strengthens trade partner trust,
eliminates unnecessary deductions,
improves promotion ROI,
protects your velocity,
and removes the chaos from your retail engine.

But first, I want to tell you the story that taught me this lesson the hard way.

THE STORY — The Brand Who Lowered Price to “Grow Faster”… and Nearly Bankrupted Themselves

A founder once came to me frustrated because growth had slowed.

Velocity was still healthy, but competitors were running increasingly aggressive promotions. Their broker kept saying:
“You need deeper discounts.
More promos.
More frequency.”

So they did.

They widened their price gap.
They deepened their discounts.
They ran more promotions.
They trained the buyer to expect constant deals meaning that customer would only buy their brand when it was promoted.

Sales went up — briefly.
Then everything collapsed:
margins evaporated
promotions no longer lifted
retailers expected deeper discounts
This caused mis-forecasted everyday sales
deductions skyrocketed
cashflow dried up
the product couldn’t command premium price perception anymore

The founder thought the solution was “better promotions.”
But the real issue?

👉 They never had a pricing architecture.
They only had a price.

Pricing is a strategy.
Promotions are a tactic.

And when you apply tactics without strategy, you create a financial death spiral.
Once we rebuilt their pricing architecture — top-down, shopper-first, retailer-aligned — their margin recovered, velocity stabilized, and they no longer had to “race to the bottom” to compete.

This episode will ensure you never fall into that trap.

Let me back up a moment and dig into the strategy some brands use, why this matters, and how those strategies overlook what matters most - your customer.

Big brands invest heavily in pricing elasticity projects. Those are their go-to frameworks for determining their optimum pricing. While that sounds super complicated and scary, pricing elasticity is just a fancy way of finding the sweet spot for your pricing. Too low and you erode margins. Too high and shoppers ignore you.

Now, this does require a lot of sophisticated modeling and advanced analysis and it can be very expensive for each project. This is an expense small brands can avoid. I’ve personally done a lot of these projects and I’ve even built the tools and models to do this. I share this because I know first hand that even the most sophisticated tools and pricing models don’t accurately predict customer behavior. Funny thing, shoppers do what they want because of what they want. No algorithm will ever accurately predict shopper behavior - period. That includes AI.

The quote unquote experts will lead you to believe that price is the only variable that drives sales and velocity. It does not. Personally, I hate this argument because it assumes customers are stupid and that they do not have any other considerations when choosing a product. We all know that is not true. If it was then premium and decadent items would be deciding in sales and the exact opposite is true. This is also true in trying economies. We’ll dig into this more as we move through this episode. For now, I just wanted you to have that additional context.

WHY PRICING ARCHITECTURE MATTERS
This is part of the Retail Operating System

Pricing architecture sits at the intersection of:
brand health
trade spend
KPIs
contribution
promotions
retailer expectations
your competitive framework
your shopper mindset
category dynamics
margin preservation

In the New Retail Operating System, pricing is foundational because:
Your distributor modeling depends on it.
Your retailer markup depends on it.
Your promotion ROI depends on it.
Your perceived value depends on it.
Your ability to scale depends on it.

And most importantly:
👉 Pricing—not product—is what determines whether you survive retail long-term.

Let’s break down the five pillars of a pricing & promotion architecture that creates sustainable growth.

⭐STRATEGY #1: Price for Your Core Shopper — Not for Your Competition

“Your Price Isn’t the Problem. Your Pricing Architecture Is.”
“Promotions can’t fix bad pricing — they make it worse.”

That was really important. Let me repeat that again. “Promotions can’t fix bad pricing — they make it worse.”

When you have the wrong pricing coupled with poor retail execution and ineffective strategies, your promotions will make them worse. They will shine an unflattering light on the problems - something you want to avoid at all costs.

Most brands price themselves based on:
competitor pricing
category norms
retail feedback
“What seems right?”
cost-plus formulas

This is the fastest way to destroy your margin.

Your pricing must reflect:
your brand value
your attribute strategy
your problem-solving role
your trade-up logic
your category contribution
your product experience
your shopper’s willingness to pay

Premium shoppers are:
less price-sensitive
more loyal
more values-driven
more profitable
Price for them — not the bargain hunter.

Consider the problem your customers are trying to solve when they purchase your brand. This includes your mission. If they want clean label mission based products then they know those come with a premium price. Your price highlights your commitment to provide consistent quality and value every time they reach for your brand. Remember that your pricing sets the standard customers can expect with your brand.

Action Step This Week

Identify your value anchor:

What comparable premium product sets the price “context” your shopper already accepts? They can be in different categories.

This becomes your pricing guardrail.

⭐ STRATEGY #2: Build a Pricing Ladder — The Foundation of All Margin Protection

“Stop Pricing for Competitors.”
“Premium shoppers aren’t comparing you the way you think.”

Most brands use competitive products as a benchmark for their products. While this is a quick easy way to measure your daily pricing. It overlooks the value your products deliver. Your pricing comparisons need to take that into account. Build that into your KPI’s.

Your pricing ladder must include:
1. COGS (Fully Loaded)
Ingredients, labor, packaging, overhead allocation.
2. Distributor Cost
COGS + outbound freight + distributor margin.
3. Wholesale / Retailer Cost
Distributor cost + markup.
4. Retail Price Range
What shoppers will see on the shelf.
5. Sale Price Range
Your promotion windows.
6. Everyday Margin and Promoted Margin
Both need to be healthy. A lot of brands erode margin during a promotion. This is a mistake.

Why This Matters
If you skip this architecture:
retailers will choose their own Suggested Retail Price
distributors will create their own pricing
your promotion margins will disappear
deductions will explode
inconsistent pricing will confuse shoppers

Consider this. Are there any categories that you only purchase when they are on deal? You know their exact promotion cadence and you plan your purchases ahead. I know I do. One of my favorite brands goes on sale every 12 weeks. I always stock up then it goes on sale. Your customers will do the same thing IF you train them to only purchase your brand when it is discounted.

Conversely, you need to know when your competitors promote. What is their promotion cadence? we’ll talk about how to use this to your advantage in future episodes. For now, realize that their promotions might cannibalize your sales if your pricing signals to shoppers that your brand is comparable, that it is a good substitute for your brand.

Action Step This Week
Build your pricing ladder for all SKUs.
You will immediately see where you’re leaking margin.

⭐ STRATEGY #3: Build a Promotion Architecture — Not Random Deals

“The Ladder That Protects Your Margin.”
“One diagram can eliminate 80% of pricing chaos.”

Trade spend is your second-largest expense behind your COGS.
Most brands treat promotions like events.
You must treat them like a system.

Your promotion architecture must define:
Frequency — How often you run promotions.
Depth — How much you discount.
Mechanics — TPRs, BOGO, multipacks, loyalty offers, secondary displays.
Objectives — increase Trial? Build Awareness? Boost Velocity? Increase Basket size or lift? - what is the purpose of the promotion? What are you trying to accomplish
Seasonality — When promotions matter most. What time of the year influences your sales. For example, soup demand increases in the cold months.
Retention Targets — What % of buyers to your want to repeat purchase

Why This Works
Promotion discipline:
Prevents dependency. Makes you less dependent on competitor pricing
Protects your premium positioning. Your pricing signals your value
Improves ROI. Protects margin
Makes forecasting easier. Predictable sales are easier to plan and forecast
Reduces deduction exposure. Most deductions are based on pricing discrepancies
Aligns retailer expectations. Retailers want predictable profitable brands
Trains shoppers appropriately. Rewards shoppers, invites new customers, and increases shopper foot traffic when done right.

Action Step This Week
Map your next 12 months of promotions on one page.
Include:
dates
depth
objectives
expected lift
retention target

This instantly improves retailer confidence.

⭐ STRATEGY #4: Use Contribution — Not Velocity — to Justify Pricing and Promotions
“Contribution drives Velocity.”
“Retailers don’t care who sells the most units — they care who makes them the most money.”

Velocity is NOT the most important KPI.
Contribution is.

Contribution asks:
How many profitable dollars are you bringing into the category?
Are you adding or subtracting from the retailer’s margin?
What is your dollars-per-point-of-distribution relative to others?

Here’s the truth:
👉 Premium brands can win pricing arguments even with lower velocity — because their contribution is higher.

A high-contribution brand:
needs fewer promotions
protects more margin
is more valuable to retailers
is less likely to be discontinued
commands better placement
They attract premium shoppers
And they have higher market baskets

Action Step This Week
Run contribution for:
your best SKU
your weakest SKU
your top competitor
your category average

This will clarify your pricing strategy instantly.

⭐ STRATEGY #5: Build Guardrails That Prevent Margin Erosion
“Your Promotion Calendar Needs Guardrails.”
“Discipline is what protects your premium positioning.”

Your pricing & promotion architecture must include non-negotiables:
1. Minimum Margins
Never run a promotion that drops you below your acceptable margin.
2. Pricing Floors
Never discount below your premium positioning threshold.
3. Suggested Retail Pricing Guidance
Retailers need clarity — otherwise they’ll price you incorrectly.
4. Promo Caps
Limit how deep and how frequent your promotions can be.
5. Pricing Integrity Audits

Quarterly checks for:
regional drift
distributor inconsistencies
competitor-driven pressure
margin creep

Why This Works
Guardrails create discipline.
Discipline protects runway.

Action Step This Week
Document your guardrails on one page and share them with:
your broker
your distributor
your internal team
Everyone must be aligned.

🔁 RECAP — HOW TO BUILD A PRICING & PROMOTION ARCHITECTURE THAT CREATES SUSTAINABLE GROWTH
Price for your core shopper, not your competitor.
Build a pricing ladder that protects margin at every step.
Create a promotion architecture with discipline — not randomness.
Use contribution to guide decisions — not velocity.
Establish guardrails that prevent margin erosion.

When you integrate all five, you create:
predictable profitability
retailer trust
consistent promo performance
clean invoices
fewer deductions
protected margin
scalable pricing logic
AND a stronger brand story

This is how premium brands scale —
not by racing to the bottom,
but by controlling the architecture that supports their value.

If you have additional questions about pricing and promotions, reach out to me. I built a really cool to to help evaluate the impact of your pricing. It does require access to syndicated data.

Until then:
subscribe and follow the show
visit RetailSolved.com for brand building tips and strategies
connect with me on LinkedIn
share this with a founder struggling with pricing

Promotions don’t create growth.
Pricing architecture does.
I’m Dan Lohman, and this is the Bulletproof Your CPG Brand podcast.