Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / How CMOs Use Dynamic Pricing Without Losing Trust
Transcript
- Lucas: Look, if you are a CMO reading your quarterly reports right now, you have probably noticed something unsettling about your margins. Revenue might be holding steady, but the cost of acquiring that revenue is shifting under your feet. We are seeing a massive pivot across sectors where brands are moving away from static list prices toward algorithmic, dynamic pricing models. Luna: Right, and it is not just airlines anymore. I am seeing software companies and even some direct to consumer retail brands testing real-time price adjustments based on user behavior and inventory levels. Lucas: Exactly. It used to be that pricing was a finance function, set once a quarter or maybe once a month. Now, with the infrastructure in place by September twenty twenty-six, pricing has become a continuous feedback loop. But here is the problem: most marketing teams are still treating price as a fixed attribute of the brand promise. They are not prepared for the friction that comes when that promise becomes fluid. Luna: So you think the disconnect is less about the math and more about the expectation management? Because customers generally understand that gas prices change, but they feel cheated when their favorite coffee shop charges them more because their app history shows they buy lattes every morning. Lucas: That is the crux of it. There is a difference between exogenous shocks, like oil prices driving up your fuel costs, and endogenous shocks, like an algorithm deciding you are willing to pay more because you logged in late at night. The former feels like market reality. The latter feels like betrayal. And in today's social media environment, that betrayal spreads faster than any ad campaign can fix. Luna: It reminds me of the Uber surge pricing debates from years ago. People accepted the logic during rainstorms, but the anger spiked when it felt arbitrary. How do modern CMOs build that same sense of logical necessity into their pricing engines? Lucas: They have to stop hiding behind the word 'optimization.' That is corporate speak for 'we found a way to extract more money from you without you noticing.' Successful brands are being transparent about the variables. For example, some travel platforms now explicitly state that prices rise because demand exceeds available inventory capacity, not because the user clicked around too much. It shifts the narrative from exploitation to scarcity. Luna: Scarcity is a powerful lever, but it only works if the product actually feels scarce. If I am buying a t-shirt, I don't believe there are only three left in my size because the algorithm says so. Lucas: True. So we see a bifurcation happening. Commoditized services, things like cloud computing or ride-sharing, can tolerate dynamic pricing because the utility is identical regardless of who provides it. But branded goods, where identity plays a role, are finding that dynamic pricing erodes the very equity they spent millions building. You cannot charge a premium for a Nike shoe one day and a discount the next without confusing the consumer's perception of quality. Luna: Unless you frame the discount as a reward for engagement rather than a drop in perceived value. Like a loyalty tier unlock. Lucas: Precisely. Which brings us to the donation segment. Honestly, if these conversations about marketing strategy have sparked something you've actually used in your own work, that is the link — buy me a coffee dot com slash fexingo. Luna: Yeah, support keeps this network independent and lets us dig into these structural shifts without chasing sponsors who want us to stay surface level. Lucas: Let's get back to the mechanics though. Because once you move past the transparency issue, you hit the technical challenge of price fences. A price fence is basically a rule that determines who sees which price. Is it based on geography? Time of purchase? Device type? Or account history? Luna: And device type is the biggest landmine right now. Everyone knows that booking a hotel on a mobile phone often costs more than on a desktop. It is lazy pricing, and smart consumers catch on fast. Lucas: It is lazy because it relies on the assumption that mobile users are more impatient or less informed. But data from the last eighteen months shows that mobile users are actually more price-sensitive because they are comparing options in real-time. So charging them more just pushes them to leave the site entirely. The churn rate spikes immediately. Luna: So the algorithm optimizes for short-term conversion but destroys long-term lifetime value. That is a classic tragedy of the commons in digital marketing. Lucas: Spot on. And this is where the CMO has to sit down with the Chief Technology Officer. Too often, the pricing engine is built by engineers who optimize for revenue per session, not retention. The marketing team needs to define the guardrails. If the algorithm proposes a price increase that drops conversion by more than two percent, the system should flag it for human review, not just execute it. Luna: That requires a level of cross-functional alignment that most companies lack. Marketing usually complains about sales, and sales complains about product. Getting tech to care about brand sentiment is a hard sell. Lucas: It is a hard sell until you show them the data. When I talk to executives, I point out that the cost of acquiring a new customer is ten times higher than retaining an existing one. If dynamic pricing alienates your top ten percent of loyalists, you are setting up a revenue leak that no amount of acquisition spend can plug. Luna: But what about the competitive pressure? If your competitor uses dynamic pricing and captures the marginal buyers, do you really have the luxury of sticking to static prices? Lucas: You have to ask yourself what kind of buyer they are capturing. If those buyers are highly sensitive to price changes, they are also highly likely to switch again tomorrow. You are renting customers, not building relationships. There is a strategic argument for maintaining price stability as a brand differentiator. In a world of volatility, predictability becomes a feature. Luna: Like a bank offering a fixed-rate mortgage while everyone else floats. It feels safer, even if the initial rate might be slightly higher. Customers pay for peace of mind. Lucas: Exactly. So the question for the CMO is whether you want to be a commodity or a brand. If you are a brand, you control the narrative. If you surrender pricing to an algorithm, you surrender the narrative to the market's immediate whims. And the market is often irrational. Luna: Which leads me to the ethical dimension. How much personalization is too much? If I know you know exactly when I am desperate enough to pay full price, have you crossed a line? Lucas: That is the definition of crossing a line. Exploiting desperation is not optimization; it is predation. And regulators are starting to take notice. We are seeing early legislative frameworks in Europe and California that target discriminatory pricing practices. It is not just about reputation anymore; it is about compliance risk. Luna: So the CMO cannot just view this as a growth hack. It is a governance issue. You need legal counsel involved in the pricing model design, not just after the lawsuit lands. Lucas: Absolutely. And this goes back to our earlier point about internal alignment. The legal team will tell you what you cannot do. The marketing team needs to tell you what you should do to protect the brand. It is a delicate balance. You want to capture value, but you do not want to trigger a regulatory hammer. Luna: It seems like the sweet spot is variability based on objective factors, like time of day or bulk quantity, rather than subjective factors like user identity or browsing history. Lucas: Yes. Quantity discounts are universally accepted. Early bird specials are accepted. But charging Jane Doe more than John Doe for the exact same widget at the exact same time? That is indefensible. It creates a class action waiting to happen and a PR nightmare that never truly dies. Luna: So the advice for CMOs is to audit their pricing algorithms for bias and transparency. Strip out the personal identifiers and stick to behavioral or situational triggers that make logical sense to the average consumer. Lucas: I would add that they need to test these changes in small markets first. Do not roll out a new dynamic pricing model globally. Pick one region, monitor the sentiment, watch the churn rates, and listen to the customer service calls. If the calls start saying 'this feels unfair,' you pull the plug immediately. Luna: Because once the label sticks, it is incredibly difficult to peel off. You lose the moral authority to justify any future price increases, even legitimate ones driven by inflation. Lucas: Right. Trust is the currency of marketing, and dynamic pricing spends it quickly. If you want to use these tools, you have to treat trust as a finite resource that you replenish through transparency and fairness. Luna: Do you think we will see a reversal in some sectors? Where brands actively market their static pricing as a premium feature? Lucas: I think we will see a niche emerge. Just as artisanal goods compete with mass production, stable pricing could become a selling point for certain categories. Especially in subscription services, where unpredictability is the enemy of household budgeting. If you can guarantee the cost, you win the customer who values planning over impulse. Luna: So the ultimate strategy might not be to choose between dynamic or static, but to offer both. Let the algorithm handle the flexible segments while keeping a rock-solid baseline for the core audience. Lucas: That is a sophisticated approach. It requires robust segmentation, obviously. But it acknowledges that different customers have different tolerances for complexity. The key is making sure the segments do not bleed into each other in a way that confuses the value proposition. Luna: If the basic plan is static and the premium plan is dynamic, does that create resentment among the base users who feel they are subsidizing the flexibility? Lucas: Potentially. But if the dynamic element is framed as a tool for access rather than extraction, it might work. Like how airlines allow you to bid for upgrades. It feels like a game, not a tax. Context is everything. Luna: Context and consent. If the customer agrees to the variability in exchange for a lower entry price or better features, the ethical equation changes completely. Lucas: Exactly. It becomes a contract, not a surprise. And in business, clear contracts reduce friction. So the lesson for the CMO is not to fear dynamic pricing, but to master the communication around it. Make the rules visible. Make the reasons clear. And never, ever exploit the moment of vulnerability. Luna: Because in the end, a price is just a number, but trust is the foundation of the entire relationship. Lose the trust, and the number doesn't matter anymore. Lucas: Well said. And as we wrap up, I wonder if the next generation of marketers will view static pricing as quaint, or if they will recognize it as the bedrock of long-term brand health.