Perfect Price Points: How Brands Like PepsiCo and Estée Lauder Are Rewriting Value

This short but informative WSJ article highlights how brands across industries—from cosmetics to snacks to household goods—are rethinking their pricing strategies in response to falling U.S. sales and increasing consumer sensitivity to value. Notably, companies like PepsiCo, Clorox, Estée Lauder, and Reynolds are expanding their product ranges with innovative packaging sizes and price points to appeal to budget-conscious shoppers. But the strategy isn’t just about cutting costs; it’s about offering “value,” which increasingly includes convenience, innovation, and effectiveness. Estée Lauder’s approach ranges from high-end luxury to accessible entry-tier prestige products, while PepsiCo introduces smaller chip multipacks and sub-$1 offerings. The emphasis is on dynamic pricing, segmentation by income level, and innovation-driven value—all of which align with strategic pricing concepts in marketing.

The first draft of this blog post and the accompanying image were generated by ChatGPT.

Relevant Textbook Chapters

• Chapter 17: Pricing Objectives and Policies — This article reflects how pricing can help achieve different objectives like market penetration, sales growth, or customer retention​.
• Chapter 18: Price Setting in the Business World — Firms are adapting cost-based and value-based pricing strategies by offering a broader mix of SKUs and price points​.
• Chapter 9: Product Management and New Product Development — Product innovation is central to delivering enhanced value, especially at different pricing tiers​.

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Class Discussion Ideas

In-Class Activities:

1. Price Point Breakdown: Students analyze different package sizes of Doritos or Cheetos and calculate cost-per-unit to see how pricing matches consumer needs.
2. Innovation vs. Price: Compare two products—one marketed as low-price and one marketed for its innovation (e.g., Clorox Pine-Sol)—and assess perceived value.
3. Customer Persona Pricing: Create buyer personas (e.g., budget-conscious mom, luxury skincare enthusiast) and assign appropriate product tiers.

Discussion Questions & Answer Ideas:

1. What is meant by “value” in the article?(Ch. 17)
   • Answer: Value includes not just price, but also performance, convenience, size options, and innovation.
2. How does Estée Lauder’s strategy demonstrate price segmentation?(Ch. 17)
   • Answer: It introduces both luxury and entry-tier products to serve distinct market segments based on income and preference.
3. What pricing objective is PepsiCo pursuing by offering sub-$1 chip bags?(Ch. 17)
   • Answer: Market penetration or sales growth—targeting shoppers who may be cash-strapped or looking for affordable indulgences.
4. Why might Clorox offer both concentrated and larger product sizes?(Ch. 18)
   • Answer: To meet varying consumer cash flow patterns and shopping habits—value per use vs. upfront cost.
5. How are companies using packaging and pricing innovation to retain customers?(Ch. 9 & 18)
   • Answer: By providing more choice and matching products with customer lifestyles and spending ability.
6. How might these strategies differ in B2B vs. B2C markets?(Ch. 6 & 17)
   • Answer: B2B markets often prioritize cost-efficiency and reliability, whereas B2C strategies may lean more on emotion, convenience, and impulse factors.
7. What role does economic uncertainty play in pricing decisions?(Ch. 3 & 17)
   • Answer: Economic pessimism drives more consumers to scrutinize prices, forcing companies to adjust to perceived affordability without undermining brand equity.
8. Why might smaller package sizes actually increase profitability?(Ch. 18)
   • Answer: They create new usage occasions, reduce barrier to purchase, and offer higher margins per unit sold in some cases.