Pricing power in a value-sensitive economy
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How CEOs can defend margin without losing customers
South African CEOs are entering a more unforgiving pricing era. The old margin playbook — raise prices, protect percentage gross margin, explain it as inflation recovery — is losing power. Consumers have become sharper, more mobile and more willing to trade down, while customers in B2B markets are challenging increases with better data and more procurement discipline.
The local context matters. Stats SA reported that consumer inflation jumped to 4.0% in April 2026 from 3.1% in March, driven mainly by sharp fuel price increases, the highest print since August 2024. At the same time, South Africa has moved to a new 3% inflation target with a 1 percentage point tolerance band, intended over time to lower inflation expectations and create room for lower interest rates. For CEOs, this means pricing can no longer rely on a broad inflation narrative. The market is moving into a lower-inflation, higher-scrutiny environment.
The consumer signals are equally clear. NielsenIQ reports that South African private-label sales exceeded R98 billion in 2024, growing 7.5% and accounting for around 18% of FMCG sales value. More importantly, 53% of South African consumers say they only have enough money to cover the basics, while 95% say affordability and value for money are top considerations in brand choices.
This is not a temporary “cash-strapped consumer” story. It is a structural shift in how value is judged.
BCG’s research captures the change succinctly: “Price is the kingpin of switching behavior.” In its consumer survey, 30% of shoppers who switched from their preferred retailer cited price increases as the main reason, while 44% were spending more time comparing prices online or using deal-hunting apps.
For CEOs, the question is no longer: Can we increase prices?
It is: Where do we still have legitimate pricing power — and where are we merely testing customer patience?
The margin trap: defending price while destroying perceived value
Many companies are under shareholder pressure to restore margin after years of input-cost volatility. But blunt pricing creates a dangerous illusion: the P&L may look better for a quarter while the customer franchise weakens.
EY’s Future Consumer Index found that 77% of consumers globally are actively changing purchase behaviour in response to price increases, and 67% say private label satisfies their needs just as well as branded products. EY warns that brands are being forced to prove their worth as consumers reassess price, value and pack size.
This is the heart of the CEO challenge: customers are not rejecting premium prices; they are rejecting unjustified premiums.
McKinsey makes the same point from a commercial-execution perspective. It argues that pricing teams must move beyond annual or semi-annual price updates and adopt monthly or quarterly pricing reviews supported by better data, faster feedback loops and cross-functional decision-making. Its research also shows that companies using a broader set of margin levers across pricing, portfolio, mix, supply chain, media and promotions outperformed peers on gross and EBITDA margins by up to 50%.
The implication is uncomfortable but liberating: margin defence is not a pricing exercise. It is an enterprise discipline.
Six moves for CEOs
1. Replace blanket price increases with pricision pricing
The strongest companies are becoming more surgical. They know which products are traffic builders, which are margin engines, which customers are least elastic, which segments are promotion-dependent, and which price gaps trigger switching.
Bain’s 2025 Commercial Excellence research found that 55% of companies matched or exceeded input cost increases with price increases, but the barriers were competitive pressure, customer resistance and insufficient analytics. Companies confident they could push through price increases expected materially stronger margin performance than their peers.
For CEOs, the practical question is: do we know elasticity by segment, product, channel and occasion — or are we still pricing by average?
Precision pricing means protecting value-entry products, taking price where differentiation is real, redesigning packs or bundles where affordability matters, and reducing leakage from uncontrolled discounting.
2. Rebuild the value story before the next price increase
Price increases fail when the sales force cannot explain why the customer should pay more. McKinsey is blunt that “value-selling skills” and tactful timing are critical, and that telling sales teams to improve pricing without equipping them with convincing narratives is unlikely to succeed.
In a South African context, this matters across industries: banks, insurers, retailers, telcos, manufacturers, logistics providers and professional services firms are all selling into customers who are under pressure.
The CEO should ask for the value story behind every major price move. What cost, risk, reliability, convenience, outcome, productivity, sustainability or experience benefit justifies the premium? If the answer is vague, the increase is fragile.
3. Redesign the portfolio around affordability and aspiration
Value-sensitive does not mean cheap. McKinsey’s consumer research shows that consumers often trade down in some categories to enable splurging in others, and that many preserve behaviour by buying smaller sizes or lower quantities rather than abandoning the category entirely.
That creates a portfolio opportunity. Companies need “good-better-best” architectures that let customers stay inside the brand ecosystem even when budgets tighten. This might mean smaller pack sizes, subscription tiers, value bundles, refurbished or pre-owned offers, service-lite options, or premium experiences that justify an upgrade.
PwC’s South African Voice of the Consumer 2025 findings make the same point in food: consumers want products that are affordable, healthy and accessible, creating opportunities for brands that offer better value without compromising quality.
The strategic mistake is to cut quality in the name of affordability. The better answer is to engineer choice.
4. Make promotions smarter, not louder
Promotions are seductive because they move volume quickly. But excessive discounting trains customers to wait, damages brand equity, pulls demand forward and destroys price integrity.
BCG found that nearly 40% of consumers had made more sale-driven purchases in the previous six months, while 65% of supermarket shoppers used promotional deals on their most recent trip. Without discounts, 35% would have delayed or cancelled purchases.
That does not mean CEOs should promote more. It means they should promote with discipline.
The board-level question is whether promotions are creating incremental profit or merely subsidising purchases that would have happened anyway. The best companies use personalised offers, loyalty data, regional elasticity and basket analytics to target promotions where they defend share or grow lifetime value.
5. Use AI and analytics to protect trust, not just extract price
Almost every company is now “investing in AI for pricing.” Bain notes that virtually all surveyed firms are investing in technology and data to accelerate AI-powered strategic pricing, but leaders also train the frontline to articulate a credible value proposition.
This distinction matters. AI can optimise price, but it can also accelerate customer distrust if it feels opaque, unfair or opportunistic.
Accenture’s consumer research found that 74% of consumers abandoned purchases because they felt overwhelmed, while 75% wanted to identify options that meet their needs more quickly and easily. The opportunity is not just algorithmic pricing; it is decision simplification.
CEOs should therefore frame AI pricing around three outcomes: better affordability architecture, clearer customer choices and faster margin decision-making. The aim is not to charge every customer the most they will bear. It is to match price, value and willingness to pay in a way customers still regard as fair.
6. Govern margin as an enterprise system
Deloitte’s Fall 2025 CEO Survey found CEOs focused on cutting costs, “strategically addressing pricing” and strengthening supply chains while maintaining investment plans. It also found that 80% were likely to implement cost-cutting measures.
That creates a risk: cost cutting without pricing discipline weakens growth; pricing without cost discipline weakens trust.
The CEO should create a margin war room that integrates commercial, finance, operations, procurement, supply chain, marketing and digital. Its mandate should be to manage margin at product, customer and channel level — not merely to approve price increases.
The dashboard should include price realisation, discount leakage, volume response, churn, private-label or competitor switching, cost-to-serve, customer complaints, promotion ROI, sales-force compliance and margin by segment. Without these metrics, pricing power is a belief system. With them, it becomes a management system.
The CEO agenda
Pricing power in a value-sensitive economy is not the power to raise prices. It is the power to keep customers convinced that the value they receive is worth the money they part with.
South African CEOs should act on five questions:
1. Where do we have true differentiation that customers will pay for?
2. Where are we vulnerable to private label, substitutes or digital comparison?
3. Which customers or products are margin-destructive after discounts and cost-to-serve?
4. Are promotions building loyalty or buying short-term volume?
5. Do our people have the data and language to defend price with credibility?
The next phase of margin leadership will belong to companies that combine affordability with aspiration, analytics with empathy, and price discipline with operational reinvention.