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As a business owner, market forces shape what’s possible when you set your prices. If you’re a skin care brand that uses licorice root extract in your formulations, a sudden wholesale supplier shortage can drive up your costs. Although you know you should raise your prices to protect your profit margin, you hold off—maybe it’s the hassle of updating your marketing materials, the fear of losing loyal customers, or the fact that competitors haven’t adjusted their pricing. In this scenario, your prices are “sticky.”
In this article, you’ll learn what sticky prices are, why they happen, and how they compare to flexible pricing.
What are sticky prices?
Sticky prices are prices that stay put even though market conditions suggest they should rise or fall. Shifts in supply and demand might suggest a price adjustment is needed, but businesses either don’t want to—or can’t—make these moves.
For example, a coffee subscription box company might keep prices steady despite soaring bean costs to hold on to customers, while a luxury handbag brand might maintain high prices during a slow season to sustain its prestige image.
Sticky vs. flexible prices
Where sticky prices resist change, flexible prices adjust quickly to reach a more optimal price when market conditions shift. Think about consumer electronics that drop in price as newer models are released—or seasonal décor that follows predictable markups and markdowns throughout the year.
The choice between sticky and flexible pricing is a core aspect of business strategy. Bookstores typically maintain a fixed price on hardcover books—due to publisher agreements and industry standards—while fast fashion brands regularly shift prices, raising them on trending items and marking down others as styles fade.
What causes price stickiness?
- Long-term contracts lock in prices
- Customer backlash hurts long-term loyalty
- Competitor pricing sets expectations
- Menu costs add up
Sticky prices often seem beyond your control, shaped more by industry norms and customer expectations than your own decisions. In a market where stability is the norm, a business that tries to adjust prices prematurely may risk brand perception or customer loyalty.
Here are some of the main forces behind sticky pricing:
Long-term contracts lock in prices
Long-term contracts are a common source of sticky prices, particularly for business-to-business (B2B) companies. Imagine you run a B2B bedding company supplying luxury linens to a growing boutique hotel chain under a two-year contract. Even if cotton prices surge or wage inflation drives up production costs, you’re locked into that contract. Rather than renegotiate or walk away, many businesses choose to absorb cost increases to protect valuable partnerships.
Customer backlash hurts long-term loyalty
Even in times of rising costs, customers have firm expectations for what your products should cost, based on past purchases. The recent wave of shrinkflation during 2023 and 2024 showed this clearly—when snack and prepared food brands kept prices the same but reduced package sizes. Many customers felt deceived and used social media and online forums to criticize these stealth price increases, damaging long-standing brand trust.
To avoid backlash, many businesses choose to maintain pricing even despite higher operating costs, prioritizing customer retention and brand loyalty over short-term profit.
Competitor pricing sets expectations
In competitive markets, you don’t need to peek into your rivals’ books to know they face the same cost pressures. If you and your competitors all sell handmade candles and the cost of soy wax jumps, everyone’s margins take a hit.
Although the market suggestsprices should rise, no one wants to be the first to move and risk losing customers. The result can be a game of “price competition chicken,” where everyone waits for someone else to raise prices first, even as costs eat into profits.
Menu costs add up
The term “menu costs” comes from restaurants that have to reprint menus every time they change a price. If an old-school burger-and-shake joint wanted to raise prices, it would need to factor in the cost of reprinting menus, updating window displays, changing signage, and revising ad materials. This framework applies to ecommerce businesses, too.
Although ecommerce stores can technically update their product prices with a few mouse clicks in their store settings, the reality is more complicated. Printed catalogs and cross-platform listings—for example, on Amazon, Etsy, or pop-up shops—will need an update. You may need a messaging strategy to help customers understand why prices have risen. This takes time and effort from your marketing team.
Examples of sticky prices
Sticky prices are everywhere—from Costco’s $4.99 rotisserie chicken to the famously unchanging 99¢ price tag on Arizona Iced Tea cans. Here’s how sticky pricing shows up in ecommerce:
Subscription services
Prices are sticky with subscription services for two key reasons—first, many customers are locked into annual plans at a fixed rate. But even month-to-month subscribers have a strong expectation that their can of coffee, skin care products, or craft supplies will cost the same each time, making brands reluctant to adjust prices despite rising input costs. This predictability becomes part of the service’s value proposition, making any price change feel like a potential breach of trust.
Chamberlain Coffee, for example, maintained a $19.95 monthly subscription price throughout 2024, even while bean costs rose.
Books
When selling new (rather than used) books, bookstores have little room to maximize revenue through pricing, because they’re competing against giants like Amazon and Barnes & Noble, which usually stick to publisher-set prices. Nor can they risk setting a lower price without severely cutting into their margins. The exception is the rare and collectible book market, where prices are more flexible—a first edition of The Great Gatsby or a signed copy of a popular author’s debut novel may fetch a higher price based on scarcity and demand rather than standard retail pricing.
Daisy Chain Book Co., with both a brick-and-mortar shop in Beaumont, Alberta, and an ecommerce store, sells new and used books. Although its new books follow industry pricing, it’s more flexible with curated used and rare books, where marketdemand—rather than publisher pricing—dictates what bibliophiles will pay.
Gimmick pricing
Gimmick pricing occurs when companies lock themselves into specific price points through marketing and consumer psychology. Once a price point becomes part of a company’s brand identity, it can create a self-imposed price rigidity that persists even when market conditions demand adjustment. The food industry is famous for these sticky price points—from Costco’s $1.50 hot dog and soda combo (unchanged since 1985) to fast food chain’s dollar menus to Little Caesars’ $5 Hot-N-Ready pizza, which managed to maintain its price point from 2004 to 2022.
However, some companies have been forced to abandon their gimmick prices due to inflationary pressures. Subway’s famous $5 footlong pricing was eventually phased out. Even Dollar Tree, after holding firm at $1 for 35 years, finally had to raise prices to $1.25, showing that no price gimmick is forever in the face of inflation.
Luxury goods
Luxury brands carefully manage product positioning, pricing, and perceived value, avoiding discounts that could negatively impact their brand image. While they tend to incrementally raise prices over time, luxury brands keep their prices sticky in one direction: they rarely, if ever, go down.
Downward pressure in the market during the COVID-19 pandemic created exceptions to this rule, as several luxury brandspermitted discounts for the first time. However, research has confirmed that discounting luxury goods can be detrimental to brand image, confirming the sticky price strategy these brands often use.
Sticky Prices FAQ
What is an example of a sticky price?
Arizona Iced Tea's 99¢ can is a classic example, holding its price for decades despite rising input costs. Costco's $4.99 rotisserie chicken and Little Caesars' $5 pizza show the same pattern in food retail. These brands treat the price point itself as part of their identity, making them reluctant to raise it even when margins tighten.
What causes prices to be sticky?
Prices get sticky when businesses are locked into long-term contracts, worried about customer backlash, watching competitors for a first move, or facing the practical cost of updating pricing across catalogs, contracts, and sales channels. Each of these pressures makes a price change feel riskier than holding steady, even when input costs are climbing.
Are sticky prices good or bad?
Sticky prices aren't inherently good or bad; the effect depends on which side of the cost shift a business is on. They help maintain customer trust and market stability by keeping pricing predictable, but they can squeeze profit margins when costs rise and a business holds its price anyway.
Why don't businesses lower prices when costs go down?
Businesses often keep prices unchanged when costs fall because holding steady lets them absorb the savings as extra margin rather than risk destabilizing customer expectations. Lowering a price can also be hard to reverse if costs rise again later, and each change carries menu costs from updating listings, contracts, and marketing materials. Many businesses treat a lower cost as an opportunity for profit rather than a reason to reprice.
How can a business make its prices less sticky?
Businesses can loosen price stickiness by building review clauses into long-term contracts, communicating cost changes to customers ahead of time, and using pricing tools that support small, frequent adjustments instead of rare, disruptive ones. Streamlining how prices sync across sales channels also cuts down the menu costs that make repricing feel like a hassle, so adjustments happen closer to when market conditions actually shift.
