The End of Easy Price Hikes: Why Businesses Must Shift to Value-Driven

Over the past several years, supply chain disruptions accompanied by rising labor costs and inflationary pressures just happened to make a terrific environment for surging prices without too much pushback from customers. This led to an increase in revenues, often giving the illusion of growth, even if operational efficiency or market share hadn't improved.  However, since those external cost pressures are dwindling, companies must face a new landscape where customers are raising their defenses and direct price escalation is not sustainable.

As the economic environment stabilizes, customer expectations have shifted and pricing teams and leaders have their work cut out for them to recalibrate their strategies and rely less on costs and more on value creation to justify prices.  While consumers may have accepted price increases before, they now demand that businesses demonstrate clear value in return for higher costs.  They want to know why they may be paying more. 

This pushback is serving as a catalyst for pricing teams to go from reactive to strategic and forcing them to be more data-driven. If businesses want to defend their established price points or increase them, they’ll have to prove value of their products and services and moving pricing teams from cost-plus to value-based is a big mind-shift. They will have to focus on what type of uplift premium customers are willing to pay for the value that they perceive. This involves deeper customer segmentation and a better understanding of market dynamics, all while honing in on the unique value propositions of their offerings. At the end of the day businesses who stop pricing their offerings on what it costs them and focus on how much value the product offers, will win.

Not only are pricing teams struggling to price on value, but sales teams are finding themselves in a more challenging competitive space.  In a market conscious of price, sales reps need to be equipped with stronger negotiation skills.  This requires more than just salesmanship—it requires data and insights that can justify the value behind the price.  If you give your sales teams the right tools they can make more informed decisions.  Giving your sales team access to competitor data, market trends, and customer behavior allows them to push back against discounts or other price-cutting strategies.

But this is easier said than done. In today’s evolving marketplace, achieving a competitive edge is complex. Companies are increasingly turning to AI-driven tools not just as a choice, but as a necessity to stay relevant and stand out from the crowd.  AI technologies empower businesses to analyze vast amounts of data with accuracy.  For instance, machine learning algorithms can predict consumer behavior and preferences based on historical data, enabling companies to adjust their offerings and optimize pricing in real time. This capability is becoming increasingly important as businesses strive to harness every piece of data available, turning it into actionable insights that inform their decision-making processes. 

The future belongs to those who can leverage technology to not only meet customer needs but anticipate them.  As AI continues to evolve, its influence on the marketplace will undoubtedly redefine how companies approach their strategies, ensuring they remain competitive in an increasingly crowded field.

Despite our best efforts to take on the challenges of 2025, we know all of the pressures of toady are cyclical.  It is simply a reality that we go through cycles in life and in business, and the environment we find ourselves in today is just another of these phases. It will be the companies that can pivot and put in place mechanisms to monitor and adjust to changes who will thrive.

While short-term gains are tempting for businesses to increase prices, the fact is effective pricing in the long term must be sustainable. And being sustainable may mean deploying better pricing tools, improving customer relationships, and ensuring the pricing is in line with value provided.

Looking ahead, several key trends are shaping the landscape. Increased competition will force businesses to find creative ways to structure deals and offering discounts, bundling products, or improving payment terms will become more common as companies try to retain market share without eroding margins.

Additionally, economic forecasts suggest moderate but steady growth in the U.S. wholesale sector. According to MDM’s 2024 Mid-year Economic Outlook, led by Brian Lewandowski of the University of Colorado Boulder’s Leeds School of Business, wholesale trade revenues in the U.S. are expected to reach $8.147 trillion in 2024, with an increase to a new all-time high of $8.538 trillion in 2025. This projected growth means that pricing teams will need to sell value because they will not be able to rely on widely accepted price increases to generate revenue.

Finally, data-driven pricing will continue to be a critical advantage. Companies that invest in advanced analytics and AI-driven tools will be better positioned to react quickly to market changes and customer needs.

As the cost-increase era draws to a close, pricing teams must adapt to a new reality. By shifting to value-based pricing, embracing AI-driven tools, and equipping sales teams with better negotiation skills, businesses can successfully navigate the challenging road ahead. While the market may be more competitive, companies that are agile and strategic in their approach will find opportunities to thrive as we move through 2024 and into 2025.