Introduction
The retail landscape is transforming faster than ever, challenging retailers to move beyond traditional, siloed approaches. Success today demands a unified strategy, one that aligns pricing and promotion to where the industry is heading, builds the right capabilities, and ensures both levers work seamlessly together across strategy, planning, and execution.
In this guide, we’ll explore why market dynamics are forcing retailers to modernize their approach to pricing and promotions, the challenges that make alignment complex, and how Cognira helps retailers navigate this fast-evolving landscape.
To fully understand how pricing and promotion work together, it’s helpful to clarify what each term means:
What is retail promotion?
Retail promotion refers to the temporary strategies and tactics retailers use to boost sales, attract customers, and drive traffic, such as discounts, special offers, loyalty rewards, and advertising campaigns. Promotions create a sense of urgency and influence buying decisions to support both short-term sales and long-term customer engagement.
What is retail pricing?
Retail pricing is the ongoing process of setting the regular prices for products and services. It balances competitive positioning, pricing rules, cost recovery, and perceived value to customers. Effective pricing strategies help retailers deliver consistent value while protecting margins over time.
Why aligning price and promotion matters now
Several shifts in the market are increasing the need for more coordinated pricing and promotion strategies:
1. Price sensitivity is rising:
Economic pressure and changing habits are increasing customer focus on value. In North America, 61% of shoppers said better pricing would prompt them to switch brands, even over quality.
Learn more about price sensitivity in action.
What is price sensitivity?
Price sensitivity measures how much a customer’s buying behavior shifts when a product’s price changes. Highly sensitive customers may switch brands, delay purchases, or buy in bulk. Low sensitivity usually reflects brand loyalty or a perception of added value.
A practical example:
After a 10% price increase:
- Sales of a generic dish soap drop by 25% (PSI = 2.5, highly sensitive)
- Sales of a luxury skincare serum drop by 5% (PSI = 0.5, low sensitivity)
Product A (dish soap) is more price-sensitive, meaning customers switch easily. Product B’s buyers are less reactive due to brand loyalty or perceived value.
2. Competitive pressure is intensifying:
Digital tools make it easier for shoppers to compare prices, while discount and mass merchants continue to shape expectations around value and convenience.
3. Personalization and retail media are expanding:
These channels are becoming an increasingly important part of retailers’ marketing mix. In fact, global retail media is projected to hit $176 billion in ad spend in 2025, representing ~15% of all digital ad spending.
Our blog takes a closer look at this growing opportunity, exploring how retail media networks are helping retailers bridge the gap to true omnichannel success.
4. Vendor funding is more fragmented:
Vendors now have more options for how they allocate funding—such as mass promotions, digital offers, and retail media – making it more difficult for retailers to guide investment toward their pricing and promotion strategy.
This shift adds new complexity to deal management, something we unpack further in our blog on the evolving challenges retailers face in the age of automation.
But most retailers struggle to align their pricing and promotion
Retailers struggle to align pricing and promotions due to operational and strategic hurdles.
In practice, these challenges show up in several common, and often costly, ways for retailers:
1. Manual & siloed systems
Promotional planning and execution often depend on spreadsheets and manual workflows, which can be slow, error-prone, and hard to scale. On top of that, pricing, promotion, and funding are frequently managed in separate or limited tools, making coordination difficult and forcing teams to work outside the system.
2. Challenges in collaboration
Merchandising, marketing, and vendor teams often work in isolation, lacking shared systems or processes. This disconnected decision-making can result in inconsistent execution, misaligned strategies, and suboptimal outcomes for both margins and customer experience.
3. Fragmented pre- and in-season planning
Retailers frequently separate long-range planning from weekly execution, resulting in misalignment between strategy and in-market decisions.
4. Limited insights
Retailers often struggle to measure the true impact of pricing and promotion decisions. Relying on manual analysis creates gaps in understanding and limits the ability to optimize strategies for maximum impact.
5. Ineffective trade fund management
Vendors often use analytics to steer decisions toward their own goals, while trade funds remain underutilized due to limited visibility and weak alignment with retailer objectives.
6. Limited use of AI
AI is not widely embedded across pricing and promotion workflows. As a result, strategic and operational decisions are often based on rules or gut feel rather than intelligent recommendations.
Our vision for smarter Pricing and Promotion strategies
Based on our experience with leading retailers, Cognira has developed a clear perspective on how pricing and promotion should evolve to better align customer value and margin goals.
To put strategy into action, retailers need foundational capabilities that enable better decisions, stronger collaboration, and more efficient execution:
1. Build on unified, trusted data
Data should fuel every decision. A unified view across pricing, promotions, funding, and performance enables consistent insight, smarter optimization, and reliable measurement. Rich, structured promotional data is especially critical.
2. Align Merchandising, Marketing, and Vendors
Establish shared goals and integrated planning processes across all stakeholders. True alignment between merchandising, marketing, and vendors isn’t easy—we dive deeper into how to make it work in our blog on retail collaboration.
3. Choose best-of-breed through strategic partnerships
Best-of-breed solutions offer deeper expertise, stronger ROI, and superior functionality than broad-suite vendors. When built on strong partnerships, they simplify integration—providing advanced capabilities without added complexity. They should also support the full breadth of a retailer’s assortment, including center store, fresh, and other key departments.
4. Define governance and planning cadence
Formalize how strategy translates into action. Centralized calendars, clear ownership, and structured timelines keep planning focused, strategic, and consistent across teams.
5. Embed AI across planning and execution
AI should power decisions throughout the lifecycle—from strategic planning to in-market changes. Embedding intelligence directly into workflows accelerates decision-making, increases consistency, and reduces reliance on gut feel.
6. Standardize and scale workflows
Replace ad hoc processes with scalable, repeatable workflows. Standardization reduces manual effort, improves agility, and ensures operational decisions reflect strategic goals.
Does and Don’ts for smarter Pricing & Promotion
- Do's:
- Align price & promotion strategies with overall business goals (margin, growth..)
- Test & measure ROI for every promo ( focus on profitability )
- Segment customers by price sensitivity and tailor offers accordingly.
- Optimize promotion timing & cadence ( focus on peak demand windows)
- Collaborate across teams ( Marketing, finance, vendors, merchandising)
- Implement AI & automation to avoid manual, error-prone workflows.
- Dont's:
- Rely fully on discounts –> they impact margins.
- Run promotions in siloes without synching with pricing.
- Stick to manual spreadsheets.
- Apply “one-size-fits-all” approach –> different segments respond differently.
- Move past consistency –> random promos cause confusion and reduce value perception
- Ignore long-term effects, a promo that enhances sales today but impacts brand value negatively tomorrow is a loss.
Conclusion
Retailers face increasing pressure to deliver compelling value while protecting margin. Meeting this challenge requires a coordinated approach to pricing and promotion – one that aligns strategy, planning, and execution across teams and tools. This guide outlines how pricing and promotion must evolve to meet those demands: by aligning decisions across functions, using analytics and AI to support every stage of planning, and strengthening foundational capabilities. Retailers that embrace this direction will be better positioned to improve performance, enhance customer value perception, and achieve their financial goals.
For more on how Cognira is addressing today’s pricing and promotion challenges, check out our latest partnership with Eversight. Together, we’re combining advanced AI with real-time experimentation to help retailers optimize promotions, markdowns, and pricing strategies for stronger performance and growth.
