As tariffs and trade negotiations continue to dominate headlines, middle-market businesses are among those most deeply impacted, given their narrower margins and limited pricing power.
Many are reassessing sourcing strategies, evaluating changes to their supply chains, and taking other steps to protect and position themselves for long-term resilience. Still, the short-term impact on pricing can be significant.
Even highly agile businesses may struggle to determine the best course of action. With consumers burdened by record-level household debt, continuing elevated inflation, and confidence levels nearing historic lows, many companies are asking a critical question: “How much can we charge before we erode demand?” While there is no simple answer, engaging an experienced advisor is a smart place to start.
React, But Don’t Overreact
The answer to the question above will naturally vary by industry and business model. In today’s globalized supply chain environment, standing still amid tariff uncertainty is rarely a viable option. However, leaders should resist the urge to overhaul operations or radically shift pricing strategies based solely on headlines.
To respond effectively, companies must understand not only their own operational flexibility and competitive landscape, but also how customers perceive the value they provide. In highly commoditized sectors, small price changes can prompt customers to switch providers. In contrast, businesses operating in niche markets or with strong brand loyalty may have more leeway to pass through cost increases without significantly affecting demand or profitability.
One Size Does Not Fit All
For example, consider premium pet food brands. If a pet only eats a specific type or brand, the owner often sees it as a non-negotiable expense. In these cases, pricing power is strong— everyone in the supply chain can preserve margin. At the other end of the spectrum, take a company importing hangers or dry-cleaning supplies—highly commoditized goods. With little differentiation, the company typically applies a flat margin (e.g., 30%) on top of cost, and revenue rises or falls based on demand elasticity.
Not all businesses, however, benefit from loyal, locked-in customers or operate in markets with clear pricing power. In lower-priced categories, consumers may have no cheaper alternative—so the decision becomes whether to absorb the increase or forego the purchase altogether. This is where understanding customer psychology and purchase motivation becomes critical.
Ultimately, the success of any price increase depends on whether customers feel they’re receiving enough value to justify the cost. Being transparent about the reasons behind a price hike—and its expected duration—can go a long way toward maintaining trust and minimizing churn.
Seize the Moment
In today’s environment, the companies that emerge from ongoing tariff pressures as winners will be those that look beyond just pricing models and take a broader view of how to adapt procurement and inventory strategies to mitigate future risks. This period may also present an opportunity to optimize the product mix and prioritize lines that are driving the most revenue.
In the near term, however—particularly for middle-market companies grappling with inflation, high interest rates, and broader market volatility—there is no one-size-fits-all approach to pricing. Decisions should be made thoughtfully, grounded on analyses of demand elasticity, supply chain structure and geography, competitive dynamics, and long-term strategic impact. Depending on the complexity of the business and its offerings, these evaluations can range from straightforward to highly intricate.