With Potentially Precarious Pricing Decisions, Lean on ‘Dividing and Conquering’ and Staying Human
Key Highlights
- Many companies are raising prices but often fall short of inflation, highlighting the challenge of passing on costs without damaging customer relationships.
- Organizations are increasingly focusing on transparency and honest communication with customers and suppliers to manage tough pricing decisions.
- Leaders are balancing cost control, efficiency and strategic pricing, often employing detailed analytics and careful timing to navigate economic uncertainties.
- The role of algorithms in pricing is growing, but maintaining the human element and strategic clarity remains crucial to avoid miscommunication and customer dissatisfaction.
- In a complex environment, companies must be flexible yet deliberate, ensuring their pricing strategies align with long-term brand and customer trust.
Pushing through price increases has, unfortunately, become old hat for many leadership teams. Having faced the post-COVID inflation shock early this decade, then endured another after Russia invaded Ukraine, C-suites have in the past year needed to face up to tariff-induced cost pressures and now another energy shock from the war in and near Iran.
The leaders of many public companies who just reported first-quarter earnings discussed how they’ve learned from those experiences and become more agile at reacting and raising their prices. But most of them also noted that their price hikes are falling short of inflation, and the latest U.S. Bank CFO Insights report showed that nearly half of respondents said it is “increasingly challenging” to pass on cost pressures.
At the same time, many companies have squeezed costs about as much as they can: A recent report from Netstock said that nearly half of small- and midsized businesses were absorbing tariff costs last summer to avoid running out of stock or losing customers. This spring, 92% of SMB leadership teams are passing on costs via price increases.
Leaning on efficiency measures during times like these is a given. As Kraft Heinz Co. CEO Steven Cahillane put it to analysts recently, “the first line of defense is always going to be productivity.” Where that becomes tricky is that many organizations have been pulling those levers for years — see "More With Less Still Reigns Supreme" in the sidebar below — and that, beyond gas station pumps, cost pressures from the Iran war are still making their way through the pipes of the global economic system.
“It could be that the whole environment moves towards needing to take more price. We can’t predict what the outcome will be in the Middle East and how that will affect,” Cahillane said. “But it’s going to be something that affects the entire environment. And we would be looking to go with that.”
That means having a lot of potentially tricky conversations, even if nearly all your customers will understand the rationale for price hikes because they, too, are seeing their input costs climbing. It also means that pricing actions are becoming a reputational risk management exercise as well as a financial one.
Below are two pieces of thoughtful commentary from recent earnings conference calls on the dynamics of taking price actions in 2026. They’re followed by some academic perspectives on how you can more smoothly maneuver your way through this prickly process.
“Here’s where you have some flexibility. And, frankly, here’s where we don’t.”
Dan Florness has run industrial supplies distributor Fastenal since 2016 and is preparing to hand the CEO baton to Jeff Watts. On his team’s recent earnings call, Florness emphasized Fastenal’s role as a conduit in the manufacturing and construction sectors and how it can guide customers through their decisions even if those decisions are no fun at all.
Here are segments of his comments, lightly edited for brevity and clarity.
Branded suppliers have a unique market power in that if a customer wants brand X, that supplier can push pretty hard and say, “Hey, here’s where the cost is.” And we will share that with the end customer to really allow them to make the decision. “Do you want brand X at this price? Or do you want brand Y at maybe a different price?” […]
One of the conversations we had with our team early this morning is [that] I really challenged them from the standpoint of what I’ve seen from this group in the decade that I’ve been in this role. When this group needs to rise to the occasion and have communications, sometimes discussions that are challenging. That’s what we’re good at because that’s being bluntly honest with your business partners.
And so we’re having some of those conversations right now. And those conversations were really challenged in the first quarter — partly challenged because of uncertainty around what the Supreme Court was going to rule as it relates to tariffs [and] partly challenged by, frankly, fatigue of the last 12 months of the pricing actions that have been happening as supply chains have become more costly. And the real challenge to the group is we need to have those tough discussions every day. […]
Our goal has never been to be great at adjusting prices. Our goal is to be really great at informing our customers, what’s happening in their supply chain. And so with the chaos of the last 12 months or more, maybe that’s a win.
The biggest thing is really fine-tuning some of the things we’re doing and quantifying it. […] Kevin Fitzgerald is the individual in the organization who leads our analytics team and he was going through with our regional leaders [this morning] some very specific outcomes that are needed from pricing actions we’re doing. So it’s really dividing and conquering a little bit and saying, “Here’s where you have some flexibility. And frankly, here’s where we don’t.” And I think it’s like anything: When you get pushed against the wall a little bit, you push back.
“It’s a lot of algebra. It’s a lot of 3D chess.”
Sometimes, the better move is a slow one. During the recent earnings season, several executive teams — among them, those at the helm of Tyson Foods and dental equipment and supplies maker Envista Holdings — said they hadn’t pushed through any price hikes (Tyson) or purposefully trailed the market to build goodwill among customers (Envista).
Bert Nappier, CFO of Genuine Parts Co., also spoke to this approach in late April. Executives at the parent company of auto parts blue chip NAPA and distribution company Motion, among other brands, are aiming for “a steady-as-it-goes kind of environment” as they first quantify added costs the company is seeing and then react.
When information keeps changing all the time because price keeps on changing, I’m left to fill in the blanks. And I would say, generally speaking, you do not want customers to fill in the blanks.
- Marco Bertini, Esade Business School
Higher fuel costs, Nappier told investors, are something Genuine Parts reacts to quickly — and in different ways according to geographies and products, but they’re also a factor that will hurt the company’s bottom line in the second quarter. Here are some additional comments from Nappier, also lightly edited:
The consumer has a lot to consider right now. Customers and consumers have a lot to consider on the pricing front. And we’ll have to be thoughtful about this environment on top of overall inflation and then tariffs. […]
We’re being super thoughtful about how do we balance the additional costs we have in the business with what we can push through to price and then how can we be more efficient, which is an important part of our model as well […] We have to control costs.
It’s a lot of algebra. It’s a lot of 3D chess when we think about it. But we’re also trying to make sure that we put customer first and make sure that we balance all of that across those considerations […] I think we’ve thoughtfully incorporated them into our views. And that’s why we see the conflict as a near-term net negative.
No filling in the blanks
The approach from Genuine Parts and others highlights a key priority to keep in mind as you move forward with your own pricing conversations. It’s crucial to retain the humanity of the process and to know that you can be “bluntly honest” with suppliers and customers, as Florness put it.
On an episode of the HBR IdeaCast, Esade Business School marketing professor Marco Bertini talked about the growing role of algorithms in pricing decisions, particularly in putting dynamic pricing models into place. Such systems, he said, can lead organizations to start to think of prices as just “a numbers thing” at the expense of the role human psychology plays in buying decisions.
While Bertini’s views apply more easily to consumer goods and services — think airline prices that adjust on the fly to demand — his ideas also apply to the business-to-business economy because prices always convey information to customers and prospects. In the age of inflation and tariffs, there’s growing value in remembering that nugget.
“When that information keeps changing all the time because that price keeps on changing, I’m left to fill in the blanks,” Bertini said. “And I would say, generally speaking, you do not want customers to fill in the blanks. Often, that leads down a bad path.”
Key to avoiding that scenario, Bertini added, is to be watchful that pricing decisions stay connected to your company’s core strategy. Easier said than done, given the inflationary pressures of recent years, but a skill that can be massively valuable in the long run.
About the Author
Geert De Lombaerde
Contributor
A native of Belgium, Geert De Lombaerde joined EndeavorB2B in September 2021 to cover public companies, markets, and economic trends primarily for IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World, and Healthcare Innovation. His work focuses on strategy, leadership, capital spending, and mergers and acquisitions, and he also works with Endeavor Business Intelligence on surveys and data projects.
Geert has been in business journalism since the mid-1990s. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati, initially covering retail and the courts before shifting to banking, insurance, and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in 2008. He led a team that helped grow the Post's online traffic by an average of more than 15% annually before joining Endeavor.
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