When it comes to the current uncertain economic moment, the essential strategy above all else is control what you can control when it comes to costs, cash, where you import from, and, perhaps above all else, your pricing.<\/p>\n\n\n\n
For that we turn, as always, to Adam Echter, who is very familiar to the Chief Executive <\/em>community. In his work at pricing consultancy Simon-Kucher & Partners, Echter became the go-to guy for many CEOs, CFOs and boards as they struggled through Covid, through inflation and now, the Trump tariffs.<\/p>\n\n\n\n He’s been consulting to big-firm tariff war rooms all over the U.S. for months and has been fielding calls at an ever-accelerating rate as the President\u2019s tariff regime was unveiled at a far higher, and more universal, level than almost anyone thought likely.<\/p>\n\n\n\n I reached him Tuesday afternoon on the road between meetings and asked him for thoughts on pricing strategy now that Trump\u2019s tariffs are going live, what companies are doing\u2014right and wrong\u2014in reaction and his best play for the coming days. That one is simple, he says: When it comes to price increases, \u201cdon’t wait.\u201d<\/p>\n\n\n\n \u201cAll the arguments about, \u2018We have to figure out how the tariffs affect our costs so we can pass it through\u2019\u2014that\u2019s effectively a derivation of cost-plus pricing,\u201d he says. \u201cOur position is that this should put you all in a position to ask the market, \u2018What am I really worth?\u2019\u201d The following was edited for length and clarity.<\/p>\n\n\n\n I am seeing shifts in a couple of places. One is if there was any hope that maybe we wouldn’t have to respond, that’s now dashed and people realize they have to do something. There\u2019s the realization that this is here and probably not going to go away immediately. And while there\u2019s debate as to when it will dissipate or if it will dissipate, in the short term, they’re here. So now it’s arrived.<\/p>\n\n\n\n The order of magnitude is also fascinating. If you go back to the first Trump presidency and a 10 percent surcharge on China, those are the sorts of things where a lot of companies figure out that they can either absorb it, maybe pass it on, and while it’s frustrating, it’s not as scary as when you’re looking at 50, 60, 70, 100 percent tariffs.<\/p>\n\n\n\n We’ve entered a different world and it’s critical that people understand: \u201cWhat is my volume loss going to look like?\u201d There are products and services that are completely inelastic to tariffs. If you have to have specialty equipment to make something like advanced semiconductor manufacturing, they’ll pass the tariff on and it’s a must buy. There’s a large category of other products like that where businesses can probably pass on a lot or even more than the tariff value.<\/p>\n\n\n\n So businesses need to understand which category are they in? Am I a discretionary object that if I double my price, people are going to walk and my volume goes away and that’s very detrimental to my business? Or do I have more stickiness than I give myself credit for? The most recent example of something like that, you can go back to the inflation spikes. How many people thought, \u201cOh, it’s impossible. I would never get a 15 percent price increase, a 20 percent price increase.\u201d<\/p>\n\n\n\n Then inflation came and margins got squeezed and company after company went out and did record price increases\u2014and it stuck. Yes, the market wasn’t happy, but they didn’t see the volume loss that they were nervous about.<\/p>\n\n\n\n With the tariffs out right now, people have to address that question. Am I exposed to volume loss? If so, how much am I willing to take? That’s something you don’t want to do lightly. Talking to the market and trying to understand that systematically is important.<\/p>\n\n\n\n Yes. Ultimately, we believe price and costs are decoupled and value and costs are decoupled. At the end of the day, the buyer doesn’t really care about your costs if they see the value in it.<\/p>\n\n\n\n All the arguments about, \u201cWe have to figure out how the tariffs affect our costs so we can pass it through\u201d\u2014that\u2019s effectively a derivation of cost-plus pricing. Our position is that this should put you all in a position to ask the market, \u201cWhat am I really worth?\u201d<\/p>\n\n\n\n There was the great example of Tonka trucks. A 10 percent tariff resulted in a $5 to $10 price increase on a $30 truck. Do the math. They’re taking the price up higher than the tariffs. They’re using the opportunity to test price elasticity in real time and see where it’s going to go.<\/p>\n\n\n\n Tariffs are much like inflation in the sense that, in the inflationary spike we were telling people you only have three choices: Move ahead of inflation, move exactly with inflation and\/or move late and see what happens. Anybody who moved late ultimately compressed their profitability and put their business at risk. We almost always recommend being at least in line, if not ahead of these changes.<\/p>\n\n\n\n With tariffs, you’re not going to get the same leniency on the duration as they would with inflation. I don’t know if people would’ve accepted a tariff surcharge in January of 2025, but on April 10th, for all intents and purposes, the cat’s out of the bag. You don’t have to wait to do the math on costs.<\/p>\n\n\n\n This is an opportunity where if the common understanding is it’s a 10 percent minimum tariff and certain countries that provide significant amounts of input are 20, 30, 40, 50 percent tariffs, you can wait to do the math and figure it out exactly\u2014or you can just proactively say, \u201cWe need to put on a 5 percent tariff surcharge.\u201d<\/p>\n\n\n\n People will understand why it’s there. It’s significantly less than the headline tariff numbers. And it will put your business in a stronger position when you look to 2026 and 2027 because you will have pushed and asked the market, \u201cAm I worth it?\u201d You might see some volume loss, but my guess is you probably will not see much loss.<\/p>\n\n\n\n By being willing to bet the value you offer is a little bit higher than your price today, you’ll put your business in a stronger long-term position by building up the resources to sustain yourself through the transitions that are happening.<\/p>\n\n\n\n With inflation, we talked about the importance of being systematic and getting agile in your tools and systems to respond at the top line, and that we needed to get away from the 2010s high-stability environment and just accept that the 2020s were going to be much more dynamic and the ability to be agile with pricing in general was critical.<\/p>\n\n\n\n With a tariff environment, you need the ability to just do the basics: \u201cCan I put a surcharge on an invoice? Can I put multiple surcharges on an invoice?\u201d Because if you’re trying to constantly update your list prices with all the different tariffs and changes that are happening and moving, it’s going to be incredibly difficult and it’s going to confuse everybody.<\/p>\n\n\n\n But if you have a product that has been stable on its price for the balance of 2025 and 2026, and this hypothetical product is exposed to foreign steel tariffs and plastics tariffs, a country tariff and so on, you need to be able to itemize those on the invoice while showing that the headline price for the product has stayed the same. That’s what agility would look like right now in this environment.<\/p>\n\n\n\n Sitting still is risky. That was proven in 2022 and 2023 with inflation. It’ll be proven again here. Taking a head-in-the-sand approach and hoping that these tariffs will disappear or pass and just absorbing it, that\u2019s probably not the right choice given the magnitude of these tariffs.<\/p>\n\n\n\n Another thing that we’re cautioning is that you probably can’t assume you can pass these tariffs through a hundred percent to customers. If the tariffs were going to be in the low single digits, we’d be having a different conversation.<\/p>\n\n\n\n In our last survey, fielded about a month ago, more than 50 percent of executives claimed they were just going to pass the tariffs through. I don’t think anyone was expecting these to be as high as they are. So I would caution that that’s flawed thinking. I don’t think you can default to that assumption that you and your products are items that you can pass through a hundred percent.<\/p>\n\n\n\n Don’t wait. On the pricing side, the number one talk track that I seem to encounter is everyone wants to understand how the tariffs affect their costs. And they want to understand that at a very granular level. We would encourage you to realize that yes, the tariffs will affect your costs. The specificity of that is TBD. But you have the opportunity to affect your top line now by responding and not waiting.<\/p>\n","protected":false},"excerpt":{"rendered":" Pricing guru Adam Echter on what CEOs need to be doing right now to be sure they don\u2019t get drowned in the tariff tsunami. \u2018Sitting still is risky.\u2019 <\/p>\n","protected":false},"author":3405,"featured_media":363077,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[905,2197,879],"tags":[],"class_list":["post-362861","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","category-globalbusiness","category-strategy-2"],"acf":[],"yoast_head":"\nThe tariffs came in much higher and were more widespread than anticipated. How are you seeing client thinking shift in the last week or so in response?<\/h5>\n\n\n\n
You’ve had clients who are trying to figure out what all this is going to cost them in order to set their prices. But you say that\u2019s a mistake, right?<\/h5>\n\n\n\n
Remind us of some of the things that are fundamental to leading through a period like the one we’re in right now?<\/h5>\n\n\n\n
What’s the thing you cannot do right now or else you really do risk doing damage to yourself?<\/h5>\n\n\n\n
What’s the thing you most have to do right now? The best piece of advice you have for folks as they’re starting to get their heads around what to do right now?<\/h5>\n\n\n\n