Pricing should not be a tactic. Pricing is a strategy.
Raising prices, lowering prices, then raising prices again may make sense when the end goal is growing margins and, hopefully, profitability. But these can become knee-jerk reactions. From a brand standpoint, the consequences of fluctuating prices are huge. Raising, lowering and then raising prices again may indicate that there is an organic, inherent problem with the brand’s management.
PepsiCo, owner of Frito-Lay, is in this vicious vortex right now.
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You may recall that in February 2026, after the prices of some Frito-Lay snack foods topped $7 a bag, PepsiCo decided to lower prices on many of its salty snacks. PepsiCo announced price reductions of up to nearly 15% on brands including Lay’s, Doritos, Cheetos and Tostitos.
As Bloomberg Businessweek pointed out in a headline, “Doritos At $7 A Bag Cost PepsiCo Billions.” Retail operators such as Walmart had pressed PepsiCo to lower prices. Bloomberg reported that even when Walmart cut Frito-Lay’s shelf space and gave it to its own less expensive brands and competitors such as Takis, prices did not immediately come down.
In a prescient section of the PepsiCo story, Bloomberg pointed to the problem PepsiCo faced. Lower prices might not be enough to lure customers back, especially amid rising food, packaging, and other operating costs.
This is where PepsiCo is today: raising some prices again. The latest news is that PepsiCo plans to raise prices on selected chips, dips and sodas. The increases are expected to affect brands including Doritos, Ruffles and SunChips and begin late this year or early 2027. PepsiCo says the increases reflect inflation and that prices will remain below where they were before February’s reductions.
The Real Issue Is Not Price. It Is Loyalty.
Yes, the economic landscape is changing. Brands are wrestling with the conundrum of absorbing operational costs or passing them along to consumers. PepsiCo is not alone. But PepsiCo’s panoply of brands across the snack aisle spotlights something bigger than declining snack-food sales. Serious brand issues may be at play.
If these issues are not identified and addressed, all the price increases and price reductions in the world will not generate quality revenue growth. The lower prices may not have grown sales because customers were buying less frequently. And it is possible that some of those customers were loyal customers who had already begun reconsidering what the brands were worth.
Customer loyalty is critical for a brand. Loyal customers are more profitable. Loyal customers are generally less price-sensitive and are willing to spend more for their preferred brand. Nurturing an existing loyal customer also tends to cost less than continually acquiring replacements.
Customer loyalty was a huge topic in the 1990s. It should still be.
In The Service Profit Chain, James Heskett, W. Earl Sasser, and Leonard Schlesinger highlighted research demonstrating the financial power of customer retention. Frederick Reichheld and Earl Sasser’s earlier Harvard Business Review research found that reducing customer defections by 5% could increase profits by 25% to 85% in the service businesses studied.
The exact economics differ by category, of course. But the principle remains important: brand loyalty changes the economics of growth.
Loyal customers are often willing to tolerate higher prices, but only up to a point. Strong brands create pricing power, but pricing power is not unlimited. Taking loyal customers for granted and treating them as cash cows is death-wish marketing. As we have seen before, overpricing can become a self-inflicted brand problem.
Did the enormous post-COVID price increases across PepsiCo’s Frito-Lay brands move loyal customers toward the indifference point?
The indifference point is the threshold at which a customer no longer has a meaningful preference between two alternative brands because the perceived benefits, rewards and features have become similar enough. Did loyal Frito-Lay customers switch to competitive snack brands and discover that those brands were a better value?
Preference is key.
Moving Down The Brand Preference Ladder
Customers for brands array on a ladder of commitment: The Brand Preference Ladder.
The Brand Preference Ladder is a staircase leading from non-usage to true brand loyalty. It reflects the strength of the commitment a customer has to a brand relative to competitive brands. Moving customers up the ladder from commodity consideration to true brand loyalty can have a significant impact on revenues and profitability.
There are six rungs on The Brand Preference Ladder: Awareness, Familiarity, Commodity Consideration, Short-List, Preference and Enthusiast.
Awareness is yes or no: Yes, I am aware of this brand. No, I am not aware of this brand.
Of those who are aware, what is their familiarity with the brand? Familiarity is a continuum. To be familiar with a brand, customers must know enough about the brand to have an opinion. Just how familiar are you with a specific brand?
Commodity consideration means that customers view a set of brands as basically the same. The differentiators are often convenience and/or price. “Willing to consider” is not the same as, “I would put this brand on my short list of brands that I prefer.” Being willing to consider is one thing, but moving up the ladder to being on the short list is a definite competitive brand advantage.
Short-listed brands are the small set of brands that are among a customer’s top choices. Being on the short list is good, but it is not good enough to be a truly strong brand. It is better to be the preferred alternative within the short list.
Preference means that of the brands on the short list, your brand is the one the customer prefers. This is the customer’s favorite. Preference is a much stronger concept than satisfaction.
For example, a customer can be satisfied with a particular brand of detergent. But that customer may also be satisfied with two or three alternatives. The customer buys whichever one is on sale that week. Satisfaction is necessary, but it is not sufficient.
Be the preferred brand.
Did Frito-Lay brands become less preferred?
The ultimate goal is to move a customer from preference to true brand loyalty: Enthusiast. The true brand loyalty of Enthusiasts is based on the customer’s commitment that this brand is the best value. True brand loyalty is the highest level of commitment on the Brand Preference Ladder. Brands at this level remain preferred even when there is a price premium.
Did the high prices for Frito-Lay snacks test the loyalty of Enthusiasts and Preferers, pushing them to try the second favorite on their short lists? Remember, Frito-Lay makes Doritos. It also makes Santitas, which can be found for around $2.99 a bag.
Was the brand power of the individual Frito-Lay brands diminished enough to shift the brand value differential?
When Brand Power Weakens, Price Works Harder
Brand value differential is a financial way of thinking about the additional worth generated by the brand itself relative to an otherwise similar alternative.
Decades ago, Toyota and General Motors shared the NUMMI factory in California. GM sold the Geo Prizm while Toyota sold the Corolla. The vehicles were closely related, yet the Toyota commanded stronger demand and substantially better resale value. The tangible differences between the vehicles did not fully explain the economic difference. The brand did.
Similarly, Nissan research in the 1990s showed that a Nissan vehicle would need a significant financial advantage to persuade some Toyota buyers to switch. And in the late 2000s, KFC discovered that a family-bucket price promotion that had worked in the past no longer generated the same customer response. Price could not compensate for weakened brand power.
Did the brand power of Frito-Lay brands decline because prices became intolerably high?
Brand should strengthen competitive position, pricing power, and enterprise value. The Blake Project helps make that happen.
This brings us to another question. What about the Trustworthy Brand Value of each Frito-Lay brand? What about the Trustworthy Brand Value of Frito-Lay itself?
The Trustworthy Brand Value Equation
A customer-perceived value equation is what you get, the functional, emotional and social benefits, relative to what you pay, the costs to the customer in money, time and effort. This creates brand value.
But there is another element: trust.
Trust acts as a multiplier when customers make mental assessments of a brand’s worth. Without trust, brands have little value.
This is the Trustworthy Brand Value Equation: what you get for what you pay, multiplied by trust.
Understanding customer-perceived value must be a critical part of any pricing strategy. Trustworthy Brand Value becomes particularly important when customers begin questioning whether the price they are being asked to pay is fair.
Another question: did the high prices affect perceptions of Frito-Lay and its brands as a fair value? And does a high prices, lower prices, higher prices strategy affect the trustworthiness of those brands?
Frito-Lay promised customers lower prices. Now, only months later, some prices are going back up.
PepsiCo has legitimate cost pressures. But customers do not calculate value from the company’s income statement. They calculate value from their experience.
To generate Trustworthy Brand Value, the brand’s inherent value must be perceived as a fair value. Fairness is more than mere price. Fairness contains justice.
Justice means that the benefits-per-costs equation is perceived as equitable, dependable, and trustworthy. Fair.
Building brand value is an ongoing challenge. Living off the inherited momentum of a brand’s past success hurts a brand. To increase shareholder value, a brand must be the most efficient and productive provider of a branded offer that customers value.
Customers need to perceive the brand as great value, not merely appreciate its price point.
When PepsiCo reduced prices on some of its snacks after years of increasing prices, what happened to customer perceptions? Price reductions can affect brand equity, particularly when customers begin reconsidering what the original price said about the brand’s value. Did customers believe that PepsiCo and Frito-Lay knew all along that prices had become too high? Did the lowered prices tell customers that these were the prices the products should have been all along?
What about now?
PepsiCo is turning around on pricing for some chips, soda, and dips only months after pledging to make its snacks more affordable. The company is expected to increase prices on grocery-store-sized bags of chips, including Doritos and Ruffles, along with other brands such as SunChips. The increases are expected late this year or early 2027.
PepsiCo says it is balancing affordability with inflationary cost pressures and its long-term financial needs.
Price Cannot Substitute For Brand Value
And that is precisely the challenge.
Raising, lowering, and raising prices primarily to manage margins is not, by itself, a route to enduring profitable growth. There may be growth, but will it be enduring? Will it be profitable?
Growth that is not profitable is a hobby.
Enduring profitable growth is not a horse race. There is no win, place, or show. A brand needs all three: enduring, profitable and growth.
And while the brand owner is changing prices, customers are learning. They may already have discovered alternative brands offering a very similar experience. Or they may have discovered a different experience that has now become acceptable.
To be fair, PepsiCo is not alone. Campbell’s and Conagra Brands are also raising prices as food companies contend with higher costs. Campbell’s and Conagra should be asking themselves the same questions about loyal customers, price sensitivity, brand indifference, brand value differential and their Trustworthy Brand Value Equations.
Every brand should.
Brand value is the eye of the current affordability storm. Getting the pricing strategy right helps keep a brand on course.
It is not a cliché: The best value wins.
Value refers to the whole brand. Value isn’t a subset of the brand. Value does not mean price alone.
Creating brand value that excites at prices that entice is the way to get through these volatile, challenging times.
At The Blake Project, we help leaders turn brand into a disciplined driver of financial performance, strengthening pricing power, competitive position, and enterprise value. Email us to start a conversation about enduring profitable growth. For The EBITDA.
Branding Strategy Insider is a service of The Blake Project, a strategic brand consultancy focused on turning brand into pricing power, growth, and enterprise value.
