The Number One Mistake Companies Will Make in Managing Tariffs in 2025
The Number One Mistake Companies Will Make in Managing Tariffs in 2025
When faced with new tariffs or cost increases—especially in light of the latest policies being rolled out by the Trump administration in 2025—many companies instinctively apply a uniform price hike to recover the cost impact, often as a simple percentage increase across their customer base. While this might seem like a fair and efficient way to pass on costs, it can lead to some serious headaches. You risk frustrating your best customers and losing them to competitors, all while continuing to undercharge those who should be paying more. Let’s talk about why this happens—and how to fix it.
The Pricing Legacy Problem
Most companies don’t have perfectly harmonized pricing across their customer base. Instead, prices have evolved over time based on factors like:
- When a customer started doing business with the company
- How well the account was managed in terms of pricing discipline
- The effectiveness of past negotiations
- Volume commitments and contract structures
This means that some customers are paying premium rates, while others—who may have negotiated better deals early on—are getting bargain pricing.
The $ Impact of a Flat Percentage Increase
Applying a flat percentage increase makes these pricing gaps even worse. If all customers receive a 10% price hike:
- A customer already paying premium rates of $100 per unit will see a $10 per unit increase, which could push them to shop around.
- A historically underpriced customer paying $50 per unit will see only a $5 per unit increase, letting them continue to enjoy their advantage.
See the problem? Your most profitable customers—the ones you should be keeping the happiest—end up bearing the biggest brunt of the increase. Meanwhile, your most underpriced customers keep coasting along at unfairly low rates.
The Real Risk: Ticking Off Your Best Customers
Your highest-paying customers have options. A sudden, large price increase might push them over their perceived value threshold, prompting them to:
- Shop around for alternatives
- Demand price negotiations (eroding your margin gains)
- Leave for a competitor who offers a better deal
Meanwhile, the customers who were already underpriced get to maintain their competitive edge at your expense. This is not a good look!
A Smarter Approach to Pricing Adjustments
Rather than applying a blanket percentage increase, companies should take a more strategic, data-driven approach:
-
Segment Customers Based on Pricing History – Identify different pricing tiers within your customer base.
-
Evaluate Price Sensitivity – Determine which customers are most likely to push back or leave based on past behaviors.
-
Apply Variable Increases – Implement higher increases for underpriced customers and more moderate increases for those already paying premium rates.
-
Monitor Competitive Pressures – Stay aware of how competitors are responding to cost pressures so you don’t price yourself out of the market.
-
Communicate Transparently – Be upfront with customers about why price adjustments are necessary and show them how they are being handled fairly.
The Bottom Line: Happy Customers, Stronger Profits
Simply passing on tariffs or cost increases with a flat percentage adjustment is an easy but risky strategy. It disproportionately affects your best customers while letting the most underpriced ones off the hook. Instead, a smarter, segmented approach ensures you’re protecting your key relationships, keeping customers happy, and optimizing your long-term profitability.
In 2025, eliminate the risk of pushing premium-paying customers straight into a competitor’s arms. Instead, take a step back, analyze your pricing structure, and make targeted adjustments that keep your best customers on board while closing the gap on underpriced accounts.
Before making any broad pricing changes, consider the following: The right pricing strategy means fewer unhappy customers, stronger relationships, and a healthier bottom line.