Economic headwinds are nothing new in retail, and like past crises, they’re pushing retailers and brands to recalibrate pricing strategies. Today’s market shifts, driven by imposed tariffs, go beyond cost absorption, signaling deeper changes in consumer psychology and calling for strategic pricing that protects both margins and market share.
Tariffs are changing how consumers spend, but not in the same way across the board. While some delay non-essential purchases, others continue investing in small luxuries and wellness. Consumer behavior is shifting, brand loyalty is under pressure, and the key for retailers lies in understanding these nuances and responding with transparency and pricing precision.
While tariffs shift price points, they also reshape how consumers perceive value, necessity, and brand loyalty. This shift goes beyond basic price sensitivity, it reflects changing priorities across customer segments.
Current market research provides interesting shifts in spending behavior:
These statistics show that tariff-induced behavior changes aren’t uniform across your customer base. And the question “How will a price increase impact our customers?” has a complex answer that varies by industry, product category, and market position. While economic theory suggests that tariff consumer surplus decreases as prices rise, actual consumer responses are more nuanced than models predict.
Perhaps the most significant consequence of tariff disruptions is the fundamental shift in how consumers relate to brands during economic pressure.
Brand loyalty during an uncertain period faces complex challenges. While there is a large number of consumers willing to switch brands with any price increase or delay purchases of non-essential items, 72% of shoppers say they would stay loyal to brands they love and trust, even if it meant paying more.
But that loyalty has limits. Especially among younger consumers like Gen Z, cost-consciousness often wins out. A growing number actively hunt for discounts and promotions, particularly on non-essential items.
The saying “Once trust is broken, it can take a long time to heal” is also true for your customers. Trust erosion can be softened by more transparent pricing communications
It is worth noting that a third of shoppers say price increases aren’t communicated clearly enough, and trust is fragile. And with over 60% of consumers unsure how tariffs actually affect pricing, the bar for transparency has been raised.
Because of these factors, effective communication of price changes should be a non-negotiable. Communicating how and why prices rise can help brands and retailers offset loyalty disruption, retain trust, and strengthen the brand.
The tariff impact on supply chain operations creates secondary effects that influence consumer behavior beyond direct price increases. When tariffs disrupt established supply chains, consumers experience availability issues and quality variations that amplify their reactions to price changes.
For pricing teams, this means price increases may trigger more severe loyalty challenges when accompanied by product inconsistency. In this case, transparency about supply chain disruptions can, again, help strengthen your brand and cultivate loyalty.
Yes, price sensitivity is growing, but so is intentional spending. Despite many consumers changing spending behaviors due to economic uncertainties, premium segments continue showing remarkable resilience in certain categories.
Personal health and wellness, for example, have been more important to customers than ever, as recent data from McKinsey shows. And despite macroeconomic volatility in the first half of 2025 due to tariffs, the wellness category has been resilient. Over 80% of consumers state that wellness is a “top” or “important” priority to them, and with steady yearly growth, the global wellness industry is expected to hit $8.9 trillion by 2028.
Besides health and well-being, other products like apparel, beauty, and footwear were among the top “splurge-worthy” categories of consumer goods. However, there are clear generational differences in what European consumers consider worth spending their money on.
Demonstrating that even during tariff disruptions, some consumer segments maintain or even increase spending on products they value highly.
For pricing specialists, this means you cannot implement flat pricing strategies across your entire product range. Instead, you need to develop segment-specific approaches that recognize the different price sensitivities and value perceptions across your customer spectrum.
As we saw in the above data, consumer reactions vary dramatically by industry, location, and age group. This requires developing segment-specific pricing architectures rather than uniform approaches.
Here is an example of how customers can be segmented:
|
Consumer Segment |
Behavioral Indicators |
Pricing Strategy |
|
Value Hunters |
Highly price sensitive, will switch with any increase |
Anchor key SKUs, offer bundles, message savings, and list on price comparison platforms. |
|
Selective Spenders |
Buy fewer items, but prioritize quality |
Maintain premium pricing on emotional purchases, develop “affordable luxury” options at key price points, and add small-value upgrades. |
|
Premium Persistent |
Continuing high-end purchases |
Maintain or selectively increase prices, enhance exclusivity messaging, and develop premium service add-ons |
|
Brand Agnostic |
Actively seeking better value |
Implement competitive price monitoring, develop strong price-to-value messaging, and create switching incentives |
A segmented approach can allow you to maintain overall margin targets while strategically protecting market share in key segments.
An effective implementation requires:
By the time most teams buy pricing software, they’ve already spent a long, long time just getting to the starting line. The internal alignment, data prep, the back-and-forth, and the vendor research. It all adds up.
But the buyers who move through this process with the most clarity usually share one thing: they’re not chasing the perfect tool, but looking for the right fit.
That means aligning internally before evaluating externally. Asking sharper questions instead of longer ones and seeing the vendor relationship as part of the product, not just the contract that wraps around it.
Pricing software plays a central role in how you operate, compete, and grow. The buying journey should reflect that, but it doesn’t have to drag. With the right structure and a clear sense of what matters most to your team, the process gets easier. And the decisions get better.
As we discussed, consumers are more likely to forgive price hikes when brands are clear, honest, and empathetic about the reasons. Developing a structured approach to price increase communication significantly improves customer retention during tariff periods.
Effective price communication becomes a competitive advantage during times of uncertainty, allowing for better customer retention even when price increases are necessary.
If the post-pandemic era taught retailers anything, it is that adaptability becomes table stakes.
With frequent macroeconomic shifts throughout the first half of 2025, it has been challenging for companies to stay ahead, let alone keep up. However, unpredictable and unprecedented market changes are nothing new, and looking to historical data to strengthen your pricing strategies can help you build a more actionable plan.
Rigid pricing models tend to break under pressure. In volatile environments, brands that succeed are those that respond quickly to changes in demand, supply chain constraints, or competitor pricing. Flexibility allows pricing teams to protect margins while staying aligned with shifting consumer expectations.
Lead with a strong value proposition
Even during uncertainty, many consumers are willing to pay more if the value is clear. This means pricing must reflect more than cost; it needs to reinforce what sets your brand apart, whether it’s product quality, customer service, sustainability, or innovation. A well-communicated value proposition builds pricing power.
Price hikes are more palatable when customers understand the “why” behind them. Transparency around cost drivers like tariffs or supply chain disruption reduces friction and supports brand trust. Clear messaging, across customer service, marketing, and digital touchpoints, helps retain loyalty even in tough times.
Dynamic pricing enables real-time responsiveness to demand shifts, supply-chain disruptions, and competitive movements, factors that become even more volatile during tariff-driven disruption. By leveraging automation, machine learning, and real-time competitor monitoring, pricing teams can move beyond reactive decision-making and implement proactive, high-frequency adjustments at scale.
During periods of rapid change or supply chain uncertainty, complexity can become a liability. Cost-plus pricing offers a straightforward, reliable approach, adding a consistent margin to cost, that can stabilize pricing decisions internally, especially when inputs fluctuate or data is incomplete.
Effective pricing during market challenges requires real-time insight and data you can rely on. By continuously tracking competitor prices, segment-level demand signals, and evolving consumer sensitivities, pricing teams can stay ahead of market shifts and respond with confidence rather than react in crisis.
When consumer spending tightens, aggressive pricing in select categories can attract price-conscious shoppers and convert them into long-term customers. Penetration pricing is especially effective for challenger brands or new product lines aiming to break through loyalty barriers and gain visibility.
The impact of tariffs reaches far beyond short-term price sensitivity, it’s accelerating deeper changes in how consumers perceive value and engage with brands. For pricing and category managers, this creates not only challenges but also strategic openings.
The opportunity now is to go beyond reactive pricing. By segmenting their strategies, clearly communicating price changes, and utilizing dynamic pricing systems, teams can protect their margins and even grow, despite market volatility.
Tariffs aren’t just a cost to manage; they’re a catalyst to evolve how you price, position, and retain your customers.
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