Pricing Power: Marketing's CFO Currency

Drew: Hello, Renegade Marketers! If this is your first time listening, welcome and if you're a regular listener, welcome back. Before I present today's episode, I am beyond thrilled to announce that our second in-person CMO Super Huddle is happening November 6 and 7th, 2025. In Palo Alto last year, we brought together 101 marketing leaders for a day of sharing, caring and daring each other to greatness, and we're doing it again! Same venue, same energy, same ambition, to challenge convention with an added half-day strategy lab, exclusively for marketing leaders. We're also excited to have TrustRadius and Boomerang as founding sponsors for this event. Early Bird tickets are now available at cmohuddles.com. You can even see a video there of what we did last year. Grab yours before they're gone. I promise you we will sell out and it's going to be flocking awesomer!

You're about to listen to a Career Huddle where our flocking awesome community, CMO Huddles, gets exclusive access to the authors of some of the world's best business books. At this particular huddle, we're joined by author and marketing expert Chris Burggraeve. Chris makes a bold case for pricing power as the ultimate proof of marketing's impact, and he shares how fluency in finance can help CMOs earn trust, budget, and a bigger seat at the table. If you like what you hear, please subscribe to the podcast and leave a review. You'll be supporting our quest to be the number one B2B marketing podcast. All right, let's dive in.

Narrator: Welcome to Renegade Marketers Unite, possibly the best weekly podcast for CMOs and everyone else looking for innovative ways to transform their brand, drive demand, and just plain cut through. Proving that B2B does not mean boring to business. Here's your host and Chief Marketing Renegade, Drew Neisser.

Drew: Hello Huddlers! Today we are tackling a topic that could fundamentally change how you communicate the value of marketing to your CFO and C-suite. Let me just repeat that—that could fundamentally change how you communicate the value of marketing to your CFO and C-suite. And we're joined by Chris Burggraeve, a marketing expert who's going to help us understand why pricing power might be, or is, the most powerful way to explain brand—or as I'm increasingly using, reputation building—to financial leaders. So hello, Chris. How are you, and where are you this fine day?

Chris: I'm back in New York, happy to be stateside after three weeks in Europe.

Drew: Three weeks in Europe, and you know, we had a conversation, and I think this is relevant, so let's just get that on the table. So lots of changes globally in the financial market—finance equals pricing and challenging. And what was your sense of things in Europe as you were there?

Chris: Well, I was there for—I go there quarterly for board meetings and catching up with a number of people. In this case, I also did, at the request of Google, a big presentation—opening keynote for Google Think '25 in Amsterdam—to about 500 CMOs and invitees. I do it again next week in Stockholm for them, and the anxiety is palpable. So what I mean by that is the whole tariff debate is really hitting boardrooms in a big way in Europe. It was a big part of the conversation in the boards that I sat in, and it was also a clear topic of conversation across the CMOs and CEOs and the various agencies that were represented at this Google event. So we can come back to it after, but there's a sense that tariffs will impact a company's ability to protect their margins, and it will have an impact on the budgets that will be requested, not only for the budgets for '25 and then moving forward to '26. So we can come back to it during the podcast.

Drew: And I think it's important—the first moment is, you know, a lot of the folks listening work with companies that do business in Europe, have brands that sell in Europe. And there's just a sense that things have changed, and you better have some empathy. You better have an understanding—this is not business as usual. And so you're just—and I'm just putting a punctuation point on that—it will come back and sort of connect the dots.

Chris: It is actually—I think a number of people use the word—this is a historic week for Europe in terms of waking up. And for companies I sit on the boards of, for example, Cartamundi, which is a worldwide player in playing cards—Bicycle brand—anybody who's playing cards in casinos, we supply them. But we have operations in Mexico, in Canada, in India, in China, Macau. I mean, we're really in this geopolitical sphere, and so I can imagine, as a board, when tariffs hit, it is multidimensional because you win in some, you lose in the other. What the net effect of that is is unpredictable. And as we were talking before, Drew, unpredictability for a board leads to discussions, leads to anxiety, leads to "Okay, how do we carefully thread moving forward?" Right? Anxiety and unpredictability is not good for an environment in which marketers are asking for budgets.

Drew: Right. It's not the moment where you're going to invest, invest, invest. It might be the moment where you're going to pull back because you're just—because of the uncertainty. All right, so what...

Chris: Could be. Again, there's always opportunity and threats. Let's unpack it as we go.

Drew: Exactly. All right, so let's get back to the basics. So let's talk about what pricing power—in your—what it means, and why CMOs need to really think about it and care about it.

Chris: Yeah, but first, pricing power is not a new idea, right? There's zero news about this. This is back from the '60s and '70s. It was part and parcel—if you go back to Kotler's four Ps, the word, the P of price, has always been there for people who do remember the four Ps. Marketing is not just that one P of promotion and digital marketing; it is four Ps. The P of price has, because of 40 years of lack of inflation in many countries, tended to become snowed under and not looked at. But then, if you take Kotler as one stereotype to represent marketing, there is this other gentleman called Warren Buffett. And Buffett made it very clear after the crisis in 2009 that his number one criteria to invest in any company—arguably one of the best long-term investors—his personal thing is pricing power, a dynamic concept of price. He defines it as the ability to raise your prices at or above your inflation—your company inflation, not just CPI. So number one, you can raise the price, but without losing volume or value to a competitor. So pricing power has two components—a necessary and a sufficient condition. The necessary condition is you can raise your net price at or above your inflation. The sufficient condition that he looks at is without losing volume or value to your competition. That's his dynamic definition of pricing power and his number one criteria to invest or not in any decision.

Drew: So one simple way I've been explaining this—and maybe I'm wrong, so let's clarify—but if, and we'll put it in consumer hands, you're going into the grocery store and you're looking for some aluminum foil, and you see the generic store brand, and you see Reynolds, and Reynolds is 30, 40, 50% higher. Each time I ask someone, "Which one are you going to buy?" and I want everybody who's listening to think about it, like 99% say Reynolds. And at that moment, you sort of say, "Okay, that's pricing power," right? And so that's, in my mind, an easy way of illustrating it. Is that a fair illustration?

Chris: It is actually the dynamic part. So that's, yes, it's a snapshot. But what Buffett is looking at is the dynamic part of it. It is, "Can brands increase their price the next year and keep that going?"

Drew: Which they have, frankly, for a long time.

Chris: Yes. And so the question is—look at another consumer example that everybody can relate to. I ask usually people, "Do people know how much they pay for Netflix?" And most people say, "Well, it may be 10, 12, 13." I mean, you get a plethora of prices. People actually don't look at it. Now, if I ask you, "How many streamers are you buying?" then people may say 2, 3, 4. The question is, if you have to cut back, which one will you cut back first? And Netflix tends to be the last one you will cut. Even if they increase prices year on year, you may not even know how much they increase. So that's good—you're less elastic. They will be the last man standing. That's the company in the streaming business with the most pricing power at the moment.

Drew: Yeah, as I'm thinking about it, it's like, see ya Peacock, see ya Disney. Gotta do a little belt tightening, sorry.

Chris: And if you allow me, Drew, if you bring it back to a B2B context—I mean, B2B, the difference between B2B and B2C, I've done both. I've done 23 years of B2C, and then the last 13, 14, I mean, deeply embedded in B2B. There you have fewer buyers. And so there it's by buyer. Can you, year after year, for your solution that you're selling—is your price to this buyer, can you increase it year after year? I mean, typically year after year can be a different rhythm. But can you increase it at or above your company inflation? And is that buyer willing to pay that price? Are you adding brand equity enough to be able to do it despite the context?

Drew: Yeah, I think it hits home when I say, "Okay, so it's the fourth quarter, you got to hit your numbers. How much discounting are you doing to hit your numbers?" That's another way I sort of see it. The leader in a category tends not to have to do as much discounting as the secondary brand does.

Chris: And if you take it to retail, for example, typically in the U.S. and in many companies, after summer is when retail discussions are happening. Let's say Procter & Gamble talks to Walmart and says, "Our new prices are this and that" on a spreadsheet. So from a CFO—I always reason from the CFO or board perspective—if you make a spreadsheet and you calculate in there that next year you plan to take X price increase and then you announce it, you are able to... which is not an easy thing to do, so it requires a sales force, everybody, to make an effort to sell a price increase to somebody, to your clients, whether it's B2B or B2C. But say, in the example of P&G and Walmart, Walmart accepts it to raise the prices after summer at some point in time to the consumer. But if for whatever product, you have to start discounting again to make things move, that means that you didn't have the pricing power you thought you had.

Drew: I remember that really well from my package goods days working on Listerine, which was the number one in the category, and they'd do a price increase every year based on inflation, and then they'd give it all back with coupons and discounts. So interesting. But I want to get to this. Let's sort of make this real. For CMOs, you have this statement: "Marketing equals finance equals business." Unpack that equation for us and help us sort of understand the connection here—marketing equals finance equals business.

Chris: I know the pain of selling a budget, right? I mean, I've been in the shoes of many people at local, regional, global level, to sell a budget to somebody—to CEO, to CFO, to boards—and then I'm sitting on the other side of the equation. So what I've realized is when you sell budgets, you need to speak the language of money. Marketers think in their own voodoo language of inputs and outputs. Let's say I want money to invest in X social media or X TV. I express it in so many impressions and so many hits and clicks and this and that. Essentially, what I learned is the CFO is utterly uninterested, because this is an input-output relation, not an outcome that they can take to the bank. My advice to people that I gave also last week at the Google conference is essentially threefold. That expresses "marketing is finance is business"—you need to: A) To whom are we selling a budget internally? Who is your internal stakeholder? It's ultimately the CFO, the CEO, or the board. Do you know that internal stakeholder as well as you should? And the answer is, most people don't. Second, you don't speak their language. You can't express the budget in the language that they care to understand, which is the language of finance and money. And then pricing power is then the way to get there, which we can come back to. Know your audience is the very first thing you need to start from. The realization that you heard me say—this number is quoted from academic research by Kimberly Wheeler and others—less than one out of 10 CEOs really has a marketing mindset to begin with. And even more concerning, less than one out of 40 board members of the S&P, which is a good proxy for everybody, has a true marketing mindset. They, as marketers, they understand the business. Who does? Who sits on the board? It's people with a financial profile, risk management profile, operations profile, and marketing is all the way at the bottom when you select for skills. So the people you talk to, they don't know your voodoo. They are not interested in your voodoo. They're only interested in outcome. And if you don't realize that, your budgets will fall flat.

Drew: I know, and I think our community really understands that. I think the problem has been—I think they really do, and they want it, they're using the language of revenue and so forth. The challenge that we have is that a nickel in doesn't equal 50 cents out, because marketing isn't a gumball machine, because pricing power isn't a gumball machine. You can't flip a switch and have pricing power. You can't flip a switch and have marketing that drives revenue. But it feels like the CFO wants to be able to pull a lever and say, "I put a million dollars here, I get 10 million of marketing out this year, this quarter, right now." So I think the language they get—the language part—but I think the thing that you're offering is a different way of talking about revenue. And so let's get into that.

Chris: The first thing I normally share is the idea of what a strong brand means. On the balance sheet, you have assets and liabilities. You have two types of assets. You have tangible and intangible assets. Finance loves tangible assets—things they can touch and feel and depreciate. And accountants have learned over the years how to handle this: land, factories, this and that. That's clear. Marketers live in the world of intangible assets: brands, goodwill, technology, code, relationships. Intangible assets come in two forms. If tangible assets is what we own, on the intangible assets, you have intellectual capital—brands, technology, etc.—and you have relationship capital, which is the partnerships, the collaborations, the this and that, that you do. Let me give an example: say, Booking.com. Booking.com's value is driven not by the plants it owns, because it doesn't—it's really a technology play. It's intellectual capital in its technology and its relationship capital with all the partnerships with the hospitality business, with hotels that they've built over the years. I mean, this is a 30-year-young brand, born in Amsterdam in 1996, but it's driven by intangible capital. And so Jonathan Knowles, marketing finance expert, friend of mine, has shown very clearly, when he did an analysis over 30 years of S&P, that two-thirds of the value—so intangible capital—finance doesn't like it because they don't know how to value it. They don't know how to depreciate it. It's ephemeral, it's complex, but investors love it. Two-thirds of the value over the last 30 years of global companies is driven by intangible capital. In the U.S., it's over 80%—and slightly different by sector, but driven by big tech, even though they get a hit today. 80% is intangible capital.

Drew: Okay, so I get that, and I understand that. And there's a famous case going around right now about how Nike drove their intangible assets through the ground. One being they thought they could sort of cut out retailers, which was the partner and relationship capital. They thought they could sort of forget about their customer. They dropped like $40 billion in value. The problem I'm still having is CFOs, in theory, understand assets, and they've been around long enough to understand tangible and intangible, and investors sort of are these people pulling this thing and saying, "Intangible assets matter." But yet we're still having this conversation of...

Chris: And then let's come to pricing, right? And so then that's—so you go from speaking their language, understanding tangible, intangible, okay. So what I'm recommending to marketers who are fighting for their budget is to start the conversation from the point of view of whether your brand has pricing power or not, to develop great intangible assets or not. So the ladder that I'm recommending is: strong intangible assets is driven by strong pricing power is driven by equity. And as you rightly pointed out, this has a time lag. But the pricing power discussion—you have it or you don't. And what I find in the companies where we've started the debate of budget, not from last year's budget plus and trying to find about input, output, and ROI discussions, but instead shifting it to "Okay, dear CFO, let's start from the perspective of whether we have or we don't have pricing power. Here's the data. Do we have it or don't we have it? Because you think like Wall Street. Wall Street during the supply shock post-COVID separated the boys from the men, the girls from the women, by saying, 'There's two kinds of companies: those with pricing power and those without.' I can show you—you can show the indexes." So Wall Street has already gone to that level of "with or without." So what you can say in your company is, "Dear CFO, I've done my analysis over the last whatever years in my company, and we either have pricing power—this is how we will continue to solidify it and build it, and this is what the budget is for—or in most cases, we don't have it. What do we need to do to reinvest in our company, to build the equity, to build it over time?" And that's a hard fight. You will face somebody that may not want to see this discussion, but it's the right fight to have with your CFO.

Drew: So if investors get it and Wall Street gets it, do you think PE firms get it?

Chris: In a different way. They, again, they're driven by the same financial incentives like everybody, but on a different time frame. It's five or 10 years. So many of them know it, but they only care—they only have a five-year or maximum 10-year window, or 10-plus-something window. And so they may say, "Okay, now good enough for us is to—we have a pig. Let's dress up the pig and sell it to the next guy as soon as possible." That may be an attitude. Now most PE, when you explain to them that they can sell a better intangible asset for a higher multiple thanks to the investment, it may open a different conversation if they're open to it. There's no guarantee, though. Again, it goes back to how much basic marketing understanding does my board and CEO have? What's the mandate? And the mandate question on the PE is, if I work for a company with 100-year window, for a family company like Carta Mundi, they take the long view. They are interested in building pricing power because they think in generations. PE thinks in five years, and in five years, building pricing power depends on the industry you're in, but it's a much steeper challenge to do so. Flip it around, and if you say you guys are not investing in it, the chance is very high that you're gonna not sell for a higher multiple, and that you're gonna sell a distressed asset in five years from now, or an asset that has not built a lot more intangible value, and the goodwill that you have on your balance sheet will not have increased. It will have decreased because you mark to market and have to take air out of the balance sheet.

Drew: So I think there's two things that I want to really make sure that we cover. One, you've talked about demonstrating and measuring pricing power, and then I think we need to get into how do you build it, and where does marketing fit into that. But let's talk about the measurement part of it—measuring it in a way that a CFO would sort of be able to get it or not. So what does that look like?

Chris: I'll give you an example of what I've done at Cartamundi. Five years ago, we had the idea, but it was not known, so I spent time. Let me take you through the steps I did with that particular board. We went through, literally, training the concepts of intangible assets, pricing power, and four Ps. I mean, training sessions with the board about what good marketing looks like and what the best marketing companies do in the world. So they gave me the chance to do that. Number two, we did analysis on whether, indeed, on our brands and on our business—both on the B2C side and on the B2B, because this company has both divisions—whether we had pricing power or not. What is the reality? And so we calculated and came back with: here is where we have it, here's where we don't. So these are clinical facts. You have it or you don't. If you don't have it and you come up with Excel sheets projecting into the future that you're going to raise prices as part of your growth strategy, then I could easily say, and the board sees, that it has no merit to put in price increases on the basis of lack of pricing power. You need to rebuild. How do you then rebuild? Again, it depends by company, by business, how you do that.

Drew: But let me stop you for a second, because I got—do we have it? And so is that as simple an exercise as we took a...

Chris: Data crunching.

Drew: What data are we looking at specifically? Because, again, if a CFO doesn't understand this, you have to bring the math to them and work with them on it.

Chris: Work with them. Ideally, you work with them, which indicates that I worked with them, and we went through contracts, we went through history. So we spent time and energy with some people from finance and marketing working together, literally sitting together and saying, "Okay, on an Excel sheet over the last three years, Warren Buffett's definition, were we able to raise the price over the last three years to these B2B clients? Yes or no." In net wholesale, were we able, on a net basis, to increase? Number one condition: number two condition, did volume at least hold? So not decline, at least hold. For this client, we did that client by client, and then you aggregate. You do an 80/20 by country or by geography. So we did the analysis, and you come out with an Excel sheet with red, orange, green, saying, "For these clients, we have it. For these clients, we don't." Why not? And then understand what we can do. And then you start to have discussions. For those where you have it, how can you nurture and protect it? For those where you don't, what do you need to do to get it back?

Drew: And I'm imagining in this calculation of red, orange, green, there's this notion of sort of how dependent are they on your product or service to do their business, how entrenched, how many employees are actually touching it? There's a lot of probably variables that go into the strength of—when you think about it, low-value products and services that if somebody came along and said, "I'll give you exactly what they have for 80% less," you go, "Yeah, it feels like a commodity trade. I can do that."

Chris: Essentially, it forces people to question. For those where you go to orange or red, you go back to this core concept of value proposition. Is our value proposition right for this particular customer? Are we able to do more for more in comparison to the reference to our competition? Are we able to do that, or what's the issue? Is our issue product and offering? Is our issue service? Where is the pain point to be able to deliver more for more? And for them to see that they're willing to pay for it? Because in the end, pricing power is in the mind of your buyer. It's not in your mind. It's in their mind. We go back to the core principle of willingness to pay.

Drew: The mind of the buyer. Okay, now we're talking in marketing language, because we're talking about mind share and how they think about it and perception. These are, again, this is sort of in the voodoo territory.

Chris: Now you have your CFO with you, because for them, the outcome problem, which is, "Can I, yes or no, plan for next year to increase the price?" right now translates into, "Okay, is our buyer willing to pay that price?" And if they are not, or if we see that historically they weren't, why not? And you attack that problem from an outcome perspective, as opposed to isolated and say, there's a difference in coming with a budget to CFO and saying, "I need more of this, less of that. Here's my shift, here's my attribution allocation, here's my lead gen strategies." My learning has been if you started from the data of having or not having pricing power, the click in their mind happens. That's the difference.

Drew: Then this may answer the PE question. So in the best case scenario, when you've worked with a company and you've said you don't have pricing power, you need to get pricing power. In order to get pricing power, you're going to take these steps, and we should talk about them. What is the shortest sort of time frame you've seen a brand gain pricing power?

Chris: It tends to not be overnight. So that's an illusion that CFOs, indeed, they believe: the $1 in, $1.50 out. And this happens overnight. This is where you have to train them with examples in your industry and outside of the industry to see what works in a B2B environment like Cartamundi, for example, where you deal with—this is the playing card—the Monopolies, the Pokémons, the this and that. You're building trust with your clients. That is not done in one week or one month. It is something that is six months to one year. Six months to years is a typical minimum to see the next level where they're going to come back with another quote. If you make a year or multi-year contract, it's that next time—are you able to increase the price? There's very few examples where overnight you may have a hit product, but they typically come in and go out where you may have pricing power. If you are Supreme—you know, Supreme the youth brand—if they come out with a new something, you may have lines for that newest Supreme skateboard, and they may sell it for a very short term on the internet and sell it on, and then it disappears again. Taylor Swift tickets may have a very short-lived super premium and then get out. But those are exceptions to the rule where the rule is going to be more six months to a year to multiple years to see pricing power happen, which is exactly going back to Warren Buffett's thing. It is why he makes it such an important criteria, because it's the companies that do it right that he wants to invest in—the companies with the mindset of over multiple years, year after year, do this. He had the second quote, Drew, which is very relevant for the times we're in: "It's only when the tide goes out that you can see who was swimming naked." And people have seen that quote appear everywhere. What he meant with it is, if you don't invest in brand health during the good times, you will be in trouble when the bad times are hitting. And the bad times, as we started the conversation with tariffs, made the supply shocks, inflation, now tariffs hitting, inflation again—inflation will keep hitting most people's offerings, whether products, solutions, or services. So you start the year, every CFO starts the year with a bottom line impact of X percent in their input costs right there. Inflation eats from the bottom on your margin. And the first thing they will do in their Excel sheets and with the CEO is, "Okay, we need a minimum of 6% inflation of price just to stay where we are in margin, just to stay where we are." Now we haven't built anything additional. The question to the market here becomes, can we get away with that? And this is the third or fourth year already of this type of pressure. So only the people with pricing power can do it again. The ones without will have to go back to the drawing board and say, "I need reinvestment in my thing." That's the reality.

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In terms of sort of building to this goal of, do we have pricing power? And talking about what's interesting to me is brands that have pricing power are doing a lot of different things right. It's not just marketing. It's their—you know, their customer service is as good or better all the way through the experience. There's sort of a customer centricity that permeates the organization. Their partners believe in them more than they do some of the others that they've built up over time, and there's a clear understanding of what the brand stands for and delivers among the sort of the buyers in there. So what I like about pricing power is that it forces the marketers to say, "I don't live in isolation. I can't build pricing power alone. I need to have sales to do it," because how we go to market and how we talk about the product is—we'll do it. But I'm curious how you see because it's—it's now our go-to market, and basically it's everything impacts pricing power. And so as a marketer, with a bunch of folks listening, let's try to outline a process. So they've explained this to the CFO, and the CFO says, "Okay, I get it. I don't know if I have the three years it's going to take for us to get this. I see how you're going to measure it. What are the steps here? We've analyzed that we don't have as much pricing power as we want. We're not the leader in the category. The category leader does have pricing power. We don't, so we need to get there.”

Chris: So I think there are two questions I will come back to. One is in the case of you don't have pricing power. My learning is in the go-to-market, which starts—a go-to-market strategy is really going from insights and value prop all the way to your marketing and sales funnel, and the steps in between, and pricing is the end of that step. Pricing is how much I can charge. So if you go to market, it's a multi-modular component that starts with value prop and ends with pricing. And marketing and sales funnels are towards the end of that pricing block. If you feel that you can't ask the price you want, my lesson is you need to go back to the drawing board on the value proposition. That's usually where something is wrong and needs to be re-architected. That's the product solution as a whole. Look at it and say, are we offering the right thing? Is the reference that our client buyer—whether it's B2B or B2C—has the reference shifted so that they don't look at it with the same level of eyes as we thought they did? Because what is a value prop? It's a combination of relative benefits versus relative price, but versus a reference. And very often it's references that have shifted in the mind of buyers. And once you understand, based on insights, how the reference has shifted, you can re-architect the relative benefit communication versus relative price that is being communicated. That's the real hard, typical marketing work we're good at. We know how to re-architect these things, but we need to know its outcome. We need to know why we are making the change. So if we have pricing power, we have a value prop that resonates. How can you make it stronger? If you don't have pricing power, look in your value prop—relative benefits, relative price, and reference—what is not working in that equation, and work with R&D, or with your product people, or with this and that. Again, marketing is 4P. Not one. It's not social media. Marketing has the P of product as the number one to start with, followed by the P of place, which is number two, followed by the P of promotion, number three, and prior P of price is number four in that order. But there is a short-term answer for your CFO as well that I wanted to come back to, which is what we're good at as marketers is willingness to pay. That's what we are focused on. We build willingness to pay in the mind based on a value prop. We then price in a P&L. We price segment-wise, as close as possible to that willingness to pay. That's the top line. That's the hardest, longer-term part to build, but strong brands with strong pricing power have an appeal to the CFO on the bottom line with much shorter impact. Let me explain. There is a concept called willingness to sell. Not my invention. It's an invention of Felix Oberholzer-Gee, who is a Harvard professor that coined this term, willingness to sell. That's the bottom line part. A strong brand has multiple immediate impacts on the P&L that are beneficial to the CFO, starting with a lower cost of hiring. Strong brands—if you invest in your brands, your cost of hiring goes down. You don't have to sell. Buy people sold to come and work for you. The stronger your brand, the more loyal people will stay with you. So the cost of hiring goes down, the loyalty will be higher, and people will stay for less money with you. So that's an HR benefit. Secondly, if you have pricing power and you have bank—you talk to the banks. Banks like brands with strong pricing power. Immediately the cost of your interest will go down. You're a more bankable bet because you have pricing power. Your payback capability is higher. You have lower interest rates to pay back on a loan you have. If you have equity, you typically will have a higher share, because people mean—the stronger the brand, the higher the equity price will be. So that's the capital market effect. Third, in terms of buyers and suppliers, you typically have better credit terms if you're buying things from people. The stronger the brand, the better terms you can negotiate right there. And again, I've lived through it when we had pricing power. We forced upon our suppliers inflation terms—this terms, that terms—terms to protect ourselves for tougher times. So what you can see is, on the bottom line, with immediate impact, a brand with strong pricing power has also much more leverage to protect themselves on the bottom line part, with much more immediacy than the growth you need on the top line part. Does that make sense?

Drew: It does. It's funny. I'm thinking about—I'm wondering about share of market in certain cases. And of course, this is retail, but I'm thinking about Walmart. And you know, 25 to 40% of category sales for B2B—if they change the terms of the deal, you kind of suck it up, because you want that. That's 25 to 40%. So I guess you could call that product. I mean, it's just sheer mass share of...

Chris: They have pricing power. And again, a Walmart—if you are a retailer, and a retailer where you have to be, you have pricing power because your listing fees may be higher. You have much more margin power in the negotiation with the suppliers, etc. If you have a retail concept that people want to come and shop at, you have pricing power towards your suppliers.

Drew: So I feel like we should be able to create a GPT of your brain, Chris, and we could create a pricing power GPT that would enable our community to input some data, of course, in a very protected way, in order to sort of get at this and start to create some formulas to get there, because this—there's math here somewhere.

Chris: It's math. It's pure, simple Excel sheets.

Drew: All right. Well, note to self, we'll get working on that after the show.

Chris: Maybe an AI agent that can do it for you, if you can have the data to be inputted.

Drew: Yeah, exactly. Let's create an agent that will sort of get at—do we, you know, answer one question: do we have pricing power? That's part one. If we do, how do we maintain it? Because there is—it's always a risk. It's, you know, the markets are dynamic. You get pricing power today. You know, it's like Google had pricing power because they had 90% of the market, but now they're disrupted by ChatGPT and all the other LLMs, and you know, maybe their pricing power is going to go down a little bit.

Chris: So what you see Google do, for example, to make that exact—what are they doing? They're adding Gemini in the Google products for free. You don't pay for Gemini. So they're adding their value proposition is now more for same or more for less. They moved. So the reference is shifting, because this is a perfect example of reference shifting. We used to compare only in search, in the Google discussions of AdWords. Now it's search plus whatever an AI solution can give you. So Google is re-architecting its product experience towards us and determining, how can I protect my pricing power, given this shifting and unpredictable AI component? Will I ask people to pay more for Google? Will it be for free now? Right now, it's free for us. We are the product. Will that change? They don't change that, but they are changing the AdWords equation, providing more value—a different value to their clients in an AI, dynamic AI context.

Drew: We used to talk about, as marketers, we would talk about things like brand health, and, you know, we'd find a different number of ways to do it, and some would measure it on an annual basis. Some had other more dynamic tools that they could measure it. Is there a way for marketers to create a pricing power—we'll just call it dynamic index—that would show as a marketplace that would help? Because, in theory, marketing, once we got all the four Ps right, and we're pumping equity into the marketplace, we're gaining market share, we're seeing that—there should be a way of tracking that so that while that's a lagging effect, the CFO can see, oh, we moved the needle. Because again, if we have to wait three years for this, there's no hope for the CMOs listening to this here.

Chris: And I understand. And so there are various proxies to—again, if you accept the laddering, so if you think like a CFO, you have the intangible asset that it's predicated upon having, or not, pricing power. Pricing power is predicated on having brand equity grow. So how do we measure progress in brand equity, and how fast can you get it? And brand equity, to be specific to the audience—brand equity, brand health comes in two kinds of parameters, typically, which is the perceptual, attitudinal component of your brand. How much do people know me? All the way to how much are they an ambassador of my brand? That's one pyramid, and the other pyramid that you can track in mind is behavior, because, and ultimately, it's only behavior you can take to the bank. Paid behavior. Behavior means you've tried my products. You repurchase, you repeat purchase, and you pay for it. So not just the sampling. Paid behavior is what the CFO wants to see. So the question in—brand health today is top line tomorrow. Brand health today is really pricing power tomorrow. If you don't have in your metrics of brand health any indication that you've built WTP at all, the chance that you can on an Excel sheet say, "We're going to raise the price to cover inflation 6%" is almost non-existent. You're going to fool yourself.

Drew: Okay. Just in case, WTP is willingness to pay, just in case anybody forgot.

Chris: So we go, brand health is—or you make the connection: brand health, WTP, pricing power, intangible assets. That's the ladder of outcome that finance would—you need to train your finance to look at, and you train your own marketing organization to think about. Now, NPS scores, for example, is an imperfect—depending by—is it? But could be a short-term proxy to give you an indication. We know how to gain NPS. In the meantime, people have learned how to gain this metric. So if you fool yourself, you say our NPS scores in six months have, you know, doubled, tripled, and that's a proxy for brand health. And therefore, yes, no problem to raise the price 10%—as long as you're truthful to your metrics in brand health. If you're going to game it, because your incentive structure is linked like it, you're not going to do your company a service.

Drew: So here's one thing that I think almost every CMO in B2B that I talk to has a challenge with: close rates, and they're going down. I mean, it's like 20% feels good right now, which is one out of five, which feels bad to me, but I feel like close rate is another possible proxy for pricing power, or at least for brand health, because the stronger the brand, the more likely you are to close and win.

Chris: If you give an offer they can't refuse at half the price and you've closed, it's a bit like ROAS discussions. So if you're in a panic, and you say, "Go close at whatever price," sales may close, but they may close at a level that is really detrimental to your P&L. So I would say close at a certain price level. That's the second condition. It's close at a certain level. That's the elasticity test that you're doing. Because de facto closing is a test of elasticity of pricing, economically speaking.

Drew: Right? And so it is. Why in the fourth quarter, or whatever, you know, the fourth quarter of someone's fiscal year, there's discounting going on like crazy, because they're trying to get to the numbers.

Chris: I understand. Again, I've been there. Let the pressure live through and then people say, "We can live through another day." But this is where the whole discussion all the time of long-term, short-term and living for the next quarter. Whether you're PE or a publicly quoted company or a family company, slightly different, but depends. Even the pressure is everywhere to say, "Okay, just for this quarter." How many times have you heard it? "Just for this quarter." But you do this a few times, and you need to cycle it. Because if you do it for this quarter, guess what? In 12 months, that quarter needs to be cycled. How do you cycle it? So I think there's a different... that's why I go back to the board marketing mindset all the time. If you're sitting with people who only think very, very short-term as a marketer, you have three choices, right? You can complain about them. You can, yeah, love it, leave it or change it, right? You can either say, "Okay, I don't care. I draw a salary here. I have a mortgage to pay, and I understand this." I'm not judging. I need to live. I'm gonna do what I'm told, and that's fine. The second option is I can go so I complain, I love it. Complain, do nothing. I love it. I do nothing. Or I can leave. I can go to another company. That's the choice you have. I'm suggesting before you do that, fight the honest fight, and I know how tough that fight is. I fought it many times and got frustrated many times when you try to convince somebody to say, "Okay, guys, see this effect?" If you're ultimately hitting a board that says, "You know what our mandate is? Two years and that's it. Pricing power? Don't talk to me about it. It's about short-term optimization, essentially dressing up the pig. Put a nice ribbon about it. Sell it and it's for somebody else after us." If that's the reality you live in, then you can optimize within that reality if you want. What I'm saying here: pricing power is a notion for people who are serious about building an intangible asset. If you're not serious about it, it's a concept that you need to park aside. That's the harsh reality of business. If you work for a PE with a two-year window only, and they don't want to talk about it, you have a choice as a marketer to either stay there, work with it, draw a salary and do your short-term optimization and ROAS discussions. You can do that. You give them what they want, which is short-term leads. And then, in two years from now, you know, you need another job.

Drew: So let me ask you one last question before we sort of wrap up. I have heard this is a relatively recent discussion where a CMO had worked for multiple PE firms, had been successful building a demand, or we'll call it a growth engine, such that the PE firm put it as an asset of the sale. And I thought, "Okay, that's really interesting when marketing becomes an asset of the sale." Now the finance people get it. Do you see that? And that basically means that they have a really, really solid target audience, lead management program, nurture stream program, ability to convert at a decent level and at a predictable level.

Chris: The value is in the eyes of the buyer. You know, remember the old Oscar Wilde quote: "Beauty is in the eye of the beholder." If you can sell me this growth engine that's part of your assets, this is intellectual capital on your balance sheet that you're trying to sell me and say, "Look, Chris, this has multiple. This has an incredible value. Aren't you willing to pay? We value it as X, and you need to pay a multiple on it." As a buyer, if I believe in that growth engine and its value, hey, yeah, or I don't, and I discard it. I give you an example. There's many within PE as well. If PE sells off from two PE, the number one question when I sat in many due diligences is on the buyer side. So I've been on the sales side, but also on the buying side. The number one thing I ask is: "Show me proof of pricing power" is the number one question. And guess what? Those people who can show it, you go back and say, "Okay, this multiple may be deserved." Those people who can't show it, the multiple is going down, because what is the number one thing you want to avoid as a buyer is buyer's remorse. You buy something that is empty, and then you bought it for too much of a price, too much goodwill on your balance sheet. And on top of that, you have to inject money to build what they haven't built.

Drew: Yeah. So I hope at the end of this that the folks listening have a sense of how the math works on pricing power, how to, at least, determine whether or not they have pricing power, and it may be by product or category or industry, and if they don't know, we'll figure out how to help you get there. And that'll be an interesting outcome. But that feels like a good exercise for and a good takeaway for any listener here is to do that, because the exercise of doing it will help you understand how the business makes money. You'll understand a lot more. And it's probably a question that you haven't asked. All right, Chris, we're running out of time. But one piece of advice that you would give to B2B CMOs, who are about to get at this, doing this pricing power journey and, you know, they're going to set up a call with their CFO next week and say, "Okay, let's talk about pricing power." What's one piece of advice for them?

Chris: Well, I would say, prepare for that call. So have that coffee, have that discussion, prepare for it. What I find is that many marketers lack some of the corporate finance speak. So I would say, read up whatever you want, around your category, your area of business. And when you reach out for that coffee and say, "Let's talk about it. Do we have it or not?" with an idea, be as prepared as you can be, and say, "I'm willing to walk that path with you. And here is why I want to walk that path with you. Let's get out of the discussion of Mars versus Venus and finance versus marketing. We are working for the same company here. We have one same goal that is building that strongest balance sheet possible, that strong intangible assets. I want you to explain to me..." very often, to show your vulnerability and say, "Can I have a session to understand how strong our brand is from your perspective, from a balance sheet perspective, and understand this?" A number of CFOs, I mean, marketers that I've advised to do this, they found they came back and say, "This was refreshing." And most CFOs have been very open to and say, "Okay, this is where we stand." And one thing leads to another.

Drew: I love it. Well, we covered a lot of ground, you know, thinking about, you know, put brand aside, put reputation aside for a moment, putting your focus on pricing power, I do think, elevates you in the eyes of the board and so you can't go wrong getting an understanding of this. This will help you get closer to your CFO, and it will help you think about building long-term value. Now, if you work at a company that is looking to build long-term, you'll find that out too, and then that'll be your new reality. Okay. Well, thank you, Chris. How can people engage with you?

Chris: I'm easy to find on LinkedIn. You can find me there, and I'll respond to you. I have a website called www.vicomte.com. Vicomte is my last name in French, means Viscount in English. There's the books I wrote about it. There is free stuff that you can download. Actually, there is a third book that is fully a small book that is "The Ultimate Guide for CMO Guide for Scarce Board Seats," which you can download for free, and it shows you the intricate workings of a board and CMO's experience on those boards to help drive cognitive diversity on boards. So my pet peeve, if you will, I'm wishing to have more CMOs that make it to the room where it happens, so we can influence this whole pricing power debate straight from that room.

Drew: I love it. Well together, we are championing the role. Yeah, less than 17% of public boards have a marketer in that role. So all right, thank you, Chris, thank you Huddlers for staying with us. 

 

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Show Credits

Renegade Marketers Unite is written and directed by Drew Neisser. Hey, that's me! This show is produced by Melissa Caffrey, Laura Parkyn, and Ishar Cuevas. The music is by the amazing Burns Twins and the intro Voice Over is Linda Cornelius. To find the transcripts of all episodes, suggest future guests, or learn more about B2B branding, CMO Huddles, or my CMO coaching service, check out renegade.com. I'm your host, Drew Neisser. And until next time, keep those Renegade thinking caps on and strong!