Recession Pricing Do’s and Don’ts

Recessions typically spur a rash of price-cutting, but for a business to thrive in spite of a bad economy, it requires a more comprehensive strategy.

Pricing during an economic downturn or recession is tricky. Too often, companies simply cut prices to attract more sales. The right pricing, however, can help a company compete and even thrive during difficult economic times. Assessing product demand and customer behavior is crucial to deciding whether to raise prices, as even slight increases can be effective if demand remains strong.

As of 2025, economists are warning that a new wave of wide-ranging tariffs may accelerate inflation and slow consumer spending. This, combined with higher interest rates and persistent supply chain disruptions, has renewed concerns about a possible recession in the U.S. economy.

In such an environment, businesses must be especially strategic in how they price their products and services.

Here are some pricing do’s and don’ts for a recession:

DO:

• Define the value you offer to your customers. Any knowledge of the value you deliver to your customers gives you greater control over, and confidence in, your pricing. Interview your customers to find out how they view your products and services.

• Create a range of low- to high-value offerings. Bundle your products and services — and establish price accordingly — which enables you to appease both cost-conscious and value-conscious customers without cutting prices.

• Control company costs and reduce inefficiencies. Streamlining your company’s processes and expenses is good for business in any economy. Reducing prices to generate more sales will not improve your business in the long term.

• Invest in innovation to offer something unique. Funnel funds into R&D so you have new products and services that give you negotiating flexibility with customers and sales growth. Innovation gives you an edge when customers are seeking something new to lift up their own financial prospects during an economic downturn or when coming out of one.

• Stay agile and keep an eye on policy shifts. Economic conditions in 2025 are heavily influenced by policy changes, such as tariffs and tax reforms. Global stock markets often react to these economic policies, reflecting investor sentiment and potential market performance. Businesses that stay informed about economic activity and adjust their pricing strategy accordingly — while keeping value front and center — are more likely to sustain growth.

Retaliatory actions from other countries can also impact global economic alliances and corporate profits. The implications of U.S. tariff policies on international markets are significant, as reactions from other countries can lead to consumer boycotts of American goods. The potential economic implications of U.S. tariffs and trade policies could lead to a coordinated recession across the world.

DON’T:

• Discount your products or services in order to compete. During a recession, consumer spending typically decreases, and getting into a price war with your competitors — without adjusting the value of the product or service — will just send you and your competition swirling into a downward pricing death spiral where no one wins.

• Reduce prices on your high-value products and services. A better strategy is to keep high-value products priced appropriately but focus on selling more low-value products and services, ensuring that your sales teams are effectively aligned with pricing strategies.

• Play poker with price-driven customers. When cost-driven customers threaten to take their business elsewhere, either (1) confidently point out the unique value your product and service offers, which justifies the price you charge, or (2) let the customer take his business and badgering to your competitor instead.

• Understand the economic impact of tariffs. Price increases are a direct consequence of trade policies, and businesses must navigate these challenges to maintain competitiveness.

• Use effective negotiation strategies. Businesses can improve pricing outcomes by training sales teams in effective negotiations, especially in the face of market challenges like inflation and recession.

• Adjust pricing strategies to maintain profitability. Market conditions, such as tariffs, a global pandemic, and economic downturns, impact corporate profits, making it essential to adjust pricing strategies to restore profit stability.

• Align pricing strategies with sales teams. To maximize revenue during economic downturns, it’s important to ensure that pricing strategies are well-coordinated with sales efforts.

• Identify areas for improvement. In value management, pinpointing areas for improvement and recognizing cost-saving opportunities can enhance product quality, streamline processes, and maximize efficiency.

Reed Holden and Mark Burton are leading pricing gurus and cofounders of Holden Advisors, a consultancy that works with business-to-business firms to design and implement value-driven pricing strategies that increase profitability in highly competitive markets. They are coauthors of Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table (John Wiley & Sons, 2008).

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.