Tempted to cut prices? Here’s what to try instead.
In 2026, we’ve seen households starting to pull back on non-essential spending. When this happens, it is tempting for brands to reach for the most obvious lever: cut the price or steepen the discounts.
Sometimes, reducing your price, whether through discount or list price reductions, can be the right move. A well-designed deal can send a clear message to customers: “We hear you, and we’re in it with you.”
But wholesale price cuts are rarely the best place to start.
When brands move too quickly to reduce prices, they can give away margin, weaken their market position and train customers to wait for the next deal. That’s why at Untapped Pricing, we advocate for a more strategic response to price changes.
In this article, we explore:
- Why brands are feeling pressure to cut prices
- When price reductions can work
- What to try before lowering your prices or deepening discounts
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Why are some brands considering cutting prices?
Many brands have spent the past few years raising prices in response to inflation, rising input costs and supply chain pressures. For a while, customers absorbed a lot of those increases. However, today, leadership teams are finding that customers are increasingly selective about where their money goes. This is backed by research from firms such as McKinsey and Deloitte, which show shoppers have been pulling back on “nice to haves.”
The same meal, subscription, or service that felt acceptable a few years ago can suddenly feel expensive or unnecessary today because the customer’s context has changed.
Fast-casual “bowl” chains such as Chipotle, Cava and Sweetgreen are a useful example. These brands grew in a market where customers were willing to pay for freshness, health and convenience. But as consumers consider their spending more closely, a $15–20 lunch that once felt like a good deal now feels like an unnecessary splurge.
Some brands that pushed prices too far are now trying to rebuild trust and, importantly, traffic.
When does cutting prices work?
There are three main ways businesses tend to make price reductions work.
1. Volume recovery
A business lowers prices in the hope that more new customers will buy, or that existing customers will buy more often.
This can work when price is one of the main reasons customers are holding back, and when the extra sales generated are enough to offset the margin given away.
However, it is risky when businesses overestimate how much volume they will gain from the change. If the extra volume does not materialise, the business has simply made less money from the same customers.
2. Cost resets
Sometimes businesses have room to reduce prices because the cost base has changed.
Supply chain costs may have eased, tariffs may have been reduced, commodity costs may have fallen or operational efficiencies may have improved.
In these cases, passing some value back to customers can be a smart way to build trust, especially if they remember that the price rose due to one of the pressures mentioned earlier.
3. Mix management
The smartest brands rarely cut prices across the board. They cut where customers notice, and protect margins where they deliver the highest value.
For years, the US petrol station Kwik Trip was known for selling bananas at market-low prices. The banana price helped create a strong perception of good value for the money and gave customers a reason to come into stores. Once there, those customers were more likely to buy higher-margin items.
These strategic price reductions were targeted around the items customers used to judge value. Where margin was sacrificed on bananas, the business had a clear plan to recover it through higher-margin purchases elsewhere in the basket or at the pump.
What to do instead of blanket price cuts and heavy discounts
A price cut is not always the best answer. Heavy discounts and price cuts can be an expensive way to solve the wrong problem. If customers are hesitating because they do not see the value of the offer or the entry point feels too high, cutting the price may only mask the real issue. It can also give value away to customers who would have bought anyway.
Before reaching for a blanket reduction, brands should look for more targeted ways to rebuild value perception, reduce friction and make the offer easier to say yes to.
Use loyalty to make value more visible
Rather than cutting prices across the board, brands can use loyalty schemes to reinforce or create value for the customers they most want to keep/attract. A well-designed loyalty mechanic gives customers a reason to return and makes savings feel personal and tangible.
For example, the supermarket chain Sprouts Farmers Market has recently overhauled its rewards programme. Members earn points on purchases, which can then be converted into rewards for a future shop.
The clever part is not just the financial savings, it’s the behavioural impact from when and how the savings show up in the customer experience.
Right after a customer sees the total price of their basket, they are told, “You have $2 in points, would you like to use those today?” Instead of anchoring on the total spend, they shift your focus to the savings. And, on the way home, you get an app notification that you just earned an additional $4 to use next time.
The well-timed savings messages tap into the peak-end rule: people remember the emotional high point of an experience, and how it ends. So instead of remembering the price of the eggs, the customer remembers saving at the register.
Cut only the Key Value Items (KVIs)
If a price reduction is needed, it does not need to apply everywhere.
Some products carry more weight in customers’ minds than others. These are the items customers use to judge whether a brand feels like a good value overall.
In grocery, that might be milk, eggs, bread or bananas. In a restaurant, it might be the lunch special or the happy hour menu. In a service business, it might be the entry-level package or the offer most often compared with competitors.
That is why targeted price reductions can be more powerful than blanket cuts. They focus on the prices customers notice, rather than reducing margin across the whole range.
The key is to understand which prices are acting as value signals. These are not always the highest-margin products or even the biggest sellers. They are the prices customers remember, compare and use as shorthand for whether the brand feels expensive or fair.
Lower the barrier to entry
Sometimes customers hesitate because the first step feels too expensive or too risky.
In that case, cutting the main price can be the wrong move. It reduces the value of the core offer when the real issue is a need to lower the barrier to entry.
How do you lower the barrier to entry? Introduce a trial offer, first-purchase incentive or starter tier. This gives customers a way to experience the value before making a bigger commitment.
The test of a good new entry point is that it helps customers overcome hesitation, without undermining the core offer or becoming the price customers expect forever.
Create clearer options
When customers are under pressure to make smart spending decisions, seeing only a single price can make the decision feel binary: buy the full offer or walk away.
Presenting customers with clearer good / better / best options gives them more ways to say yes.
Dairy Queen’s Mini Blizzard is a good example. Introduced in 2010, the fast-food chain added a smaller size to its existing Blizzard range. At launch, Dairy Queen used market research to make an evidence-led decision when the “mini” size and price showed strong customer perception of value. The mini option created an easier way to say yes: lower cost and fewer calories, all while enjoying the experience of a sweet frozen treat that customers had come to know and love.
Not every customer needs to supersize. Not every customer wants the mini. And not all of your customers are ready to make the same level of commitment.
A better pricing architecture helps customers choose the level of value that is right for them while giving the business a strategic alternative to discounting.
Communicate value more clearly
Sometimes the problem isn’t the price; it is that customers do not understand what they are getting for it.
When the value is unclear, customers default to comparing price. They look at the number, compare it to their alternative and decide whether it feels worth it. That can be dangerous when the real difference between you and the competition is harder to see: quality, expertise, service, convenience, risk reduction, speed or outcomes.
If this sounds familiar, it’s time to review how you present your pricing and make the value more explicit:
- What is included?
- What problem does it solve?
- What risk does it remove?
- What time, effort or uncertainty does it save?
- What result does it help the customer achieve?
Better value communication can make the same price easier to say yes to without ever changing the price.
How to make more strategic, evidence-led pricing decisions
Price reductions can work. But they work best when they are strategic, targeted and grounded in evidence — not when they are used as a panic response.
Before reducing prices, a business needs to understand four things:
1. What problem are we solving?
Before changing the price, make sure that price is really the issue. Are customers hesitating because the offer feels too expensive, or because the value is unclear? Is the entry point too high? Is the offer less relevant than it used to be? Or are customers simply becoming more selective about where they spend? A price cut can only solve a pricing problem. It will not fix weak value communication, poor packaging or unclear differentiation.
2. What does the product or service really cost to sell?
Get familiar with your costs, both the cost of goods and the full cost of acquisition, fulfilment, service, support and delivery. This allows you to set your basement threshold so that the changes you make don’t put you selling at a loss.
3. How many extra customers (or how much increase in volume) is realistic?
A lower price only helps if it brings in enough additional volume, frequency or retention to offset the margin given up. This means being honest about how price-sensitive customers really are, how much demand is likely to return, and whether the business has the capacity to serve additional volume profitably.
4. What will the change signal to customers?
Price is never just a number. It communicates value, quality, confidence and market position. A reduction or discount can make a brand feel more accessible and responsive. It can also start a price war. It can make customers question whether the original price was fair. It can suggest the brand is losing confidence in its own value.
So take it from the pricing experts, the best pricing decisions are rarely those knee-jerk reactions made under pressure. They are strategic choices about how to create, communicate and capture value.
That means using evidence to understand what is really happening before deciding what to change. Then, designing a clear pricing strategy that defines the role price should play, the customer behaviour you want to influence, the commercial outcome you are after, and the measures you will use to monitor whether it is working.
Price cuts are easy to make and hard to undo. So before you cut, be sure you are solving the right problem — not creating a new one.
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