Mastering the price tag: How beauty brands can win with smarter pricing strategies

Beauty is booming. The global beauty and personal care market is set to reach $756 billion by 2029, growing at a 3.1% CAGR, according to Statista Market Insights. With so much at stake, brands are competing fiercely, pushing the boundaries with innovative formulations, inclusive ranges, and sustainability pledges. Yet, despite this boom, Beauty brands face a range of headwinds: intense competition, rising costs, shrinking margins, and rapidly changing consumer preferences.

Rather than relying solely on cost-cutting—which can alienate today’s discerning consumers who are quick to recognize compromises in formulation, packaging, or supply chain integrity—the key to long-term success lies in smarter, strategic pricing. By leveraging various options, brands can protect their market share and profit margins while delivering value to consumers and trade partners.

Pricing in the beauty sector reflects much more than just cost; it signals quality, efficacy, and brand positioning, which makes it an intricate challenge for beauty executives. From our discussions with industry leaders, Beauty brands report some specific pricing and proposition challenges:

• “Managing omnichannel and retail partner pricing is overwhelming.”
  Maintaining consistent pricing across owned retail, third-party e-commerce, and wholesale partners is challenging. Each channel faces unique pressures, from promotions to differing consumer expectations, with e-commerce increasingly pushing brands into discounting wars.
• “D2C is not as profitable as we hoped.”
  Despite the appeal of direct-to-consumer (D2C) channels, most legacy beauty brands struggle to scale them profitably. Rising customer acquisition costs (CAC) through digital demand creation eat deeply into margins, leading many to step back from D2C, especially when compared to more stable wholesale channels.
• “We’re stuck between budget and luxury—where do we fit?”
  The market has polarized between low-cost private labels and high-end luxury brands. However, mid-tier “masstige” brands (e.g., LaRoche Posay, Rituals, Kiko Milano) are filling the gap, offering a balance of affordability and luxury. Legacy brands find it challenging to compete in this squeezed middle segment while still justifying premium pricing.
• “Promotions drive sales but are damaging in the long run.”
  While promotions offer short-term sales boosts, they can backfire. Overuse leads to a Pavlovian effect, conditioning consumers to expect discounts, resetting their willingness to pay and devaluing brand equity in the long run. Once consumers adjust to lower price expectations, it becomes incredibly difficult, if not impossible, to recover full-price perception.
  
  

To address these multifaceted pricing challenges, our Beauty and pricing team have expertise and experience to help drive 4 key strategies:

1. Tailored, granular and dynamic pricing through deployment of AI and advanced analytics 

In today’s data-rich environment, AI-driven pricing gives beauty brands a competitive edge by analyzing granular historical data, consumer behavior, and market trends to set optimal prices in real time. Whether responding to seasonal trends or competitive pressures, AI helps prevent under-pricing and over-discounting. This includes:

• Predictive price, volume and profit modelling: AI-powered tools continuously model pricing elasticity based on the real-time, granular, retailer-level transactional data, informing tailored (product/customer/store format/location) and dynamic pricing recommendations, in turn delivering short and long-term profitability objectives.
• Strategic and dynamic promotional planning, execution and monitoring: By using promotional-effectiveness modeling tools, brands can build holistic promotional plans by customer delivering incremental profits for retailers, manufacturers whilst supporting long-term brand positioning and equity.
• Price compliance: Machine-learning models can spot pricing inconsistencies across channels, customer segments, and geographies to flag areas where revenue is being lost due to customer and consumer price gaps. Utilizing advanced visualization tools, such as opportunity heatmaps, allows brands to quickly identify underpriced SKUs in relation to market demand.

2. Integrate price pack architecture with brand strategy

For large multi-brand players managing multiple product lines, the challenge goes beyond pricing to building a cohesive brand portfolio that serves distinct consumer segments. Price Pack Architecture (PPA) becomes a crucial tool for aligning brand offerings, helping brands configure the right price points, pack sizes, and promotions in the following ways:

• Aligning brand and price tiers and informing product innovation:
  Brands must align their product portfolio with specific channels, customer segments, and price bands to reflect their positioning—whether luxury, mass-market, or "masstige." The PPA facilitates this alignment by enabling brands to evaluate product value, adjust pack sizes, and introduce innovative offerings like bundles and discovery kits, capturing a range of price points that meet customer expectations. By leveraging PPA, brands can also explore packaging sizes, seasonal offerings, and formula variations, driving brand engagement through increased product offerings while mitigating associated risks.
• Optimizing SKU management for profitability and channel effectiveness
  Beauty brands must regularly evaluate their product portfolios using the PPA framework to identify which SKUs to retain, innovate, or discontinue. This assessment should be grounded in consumer metrics, profit margins, and end-to-end profitability at the product-customer level.

3. Utilise consumer insights to optimize customer lifetime value

Beauty brands can leverage CLV insights to optimise trade spend, avoiding blanket promotions and low-value initiatives. These insights balance marketing efforts, focusing on brand-building for core customers while using targeted promotions to enhance engagement. For example, a premium brand may invest in high-end shelf placements and product sampling to appeal to consumers seeking immersive experiences, while mass-market players could prioritize e-commerce promotions, digital incentives and bundle offers.

4. Back the right retail partners and help them win big

Effective revenue growth management (RGM) hinges on an in-depth understanding of shopper and retail dynamics, so as to identify current strategic partners and future winners. Beauty brands must carefully assess which trade partners align with their long-term strategies and adjust their offerings and investments accordingly. This requires a thorough review of their channel and customer strategies, including assortment, pricing, and trade investment allocation. Brands should establish transparent account prioritization frameworks based on strategic intent and market positioning. Specifically, beauty brands should:

• Create retailer specific profit pool models to establish tailored net invoice prices that ensure acceptable retail margins while supporting recommended consumer prices.
• Understand each retailer's strategic objectives and KPIs
• Collaborate closely with selected retailers to understand category growth drivers and shopper buying patterns.
• Leverage gained insights into co-creating value-creation commercial plans through tailored assortment as well as pricing and promotion strategies.
• Collectively review commercial plan execution and performance to course-correct

Beauty brands can swiftly initiate these efforts by critically evaluating their internal pricing strategies and capabilities to address identified gaps, laying the groundwork for a robust pricing strategy that enhances value for customers and retailers while strengthening long-term profitability. In this fast paced and competitive market, it is imperative for beauty brands to cut through the noise; the winners will be those that align compelling brand narratives with strategic pricing.

From our work with a range of Beauty, personal care and wellness clients we see a number of symptoms that indicate performance improvement potential

Get in touch with our experienced team to discuss.