"This isn't a situation you can cost-cut your way out of. The edge goes to whoever understands their customer best."
- Eric Voyer, The Farnsworth Group
Recently, Grant Farnsworth and I did a shop talk on 10 Forces Shaping the Home Improvement and Building Products Market in 2026. The dichotomy of the topics that we chose struck me as significant.
Some topics, like the war in Iran, synthetic respondents, M&A Activity, and data centers seem to have sprung up out of the ground – one minute heading in the “right” direction, and the next taking a complete about face. It struck me just how dynamic (and potentially transient) many of these topics are.
Other topics, like housing mobility, the labor market, and tariffs are issues the building and home improvement industry (and everyone else) have been watching develop over time.
Let's be honest - nobody needed another pricing challenge right now.
- Mobility rates are at a 25-year low.
- The average first-time buyer is now 40 years old - a generation that waited longer to buy, accumulated less equity, and spends differently than prior cohorts.
- A softening labor market is compressing disposable income at exactly the moment energy costs and tariff pass-through are drawing from the same household budget.
- And the K-shaped economy we've been tracking is becoming more pronounced - consumers at the top are still spending, but for everyone else, value and justification matter more than they have in years.
The result? A customer who is more deliberate and more sensitive to price increases than yesterday’s customer.
How to evaluate the success of your pricing strategy in a competitive market
The instinct when cost pressure arrives is to do one of two things: raise prices to protect margin, or absorb the cost and hope the market holds. Pricing strategist Rafi Mohammed has written extensively on this topic for Harvard Business Review, putting it plainly - relying on either move alone is risky. In a market where brand loyalty is already being tested, a knee-jerk pricing decision will cause damage that takes years to undo.
What works? Be deliberate. https://www.thefarnsworthgroup.com/services/customer-usage-attitude –
- Who are they right now
- What do they value
- Where are their limits
- How much pricing power do you have with each of them?
The manufacturers getting that right will come out of this in a stronger competitive position than the ones who just reacted.
What challenges are facing building products right now?
The pressure is coming from multiple directions. It would be easier if this were just a tariff story (which we had similar thoughts about in 2021). Tariffs are concrete, trackable, and - at least theoretically - temporary. But the pricing challenge most manufacturers are facing in 2026 is broader than that, and it's worth naming some of them here:
- Right now, the disposable income picture is facing pressure across multiple fronts. (HIRI has found a very high correlation between disposable income and home improvement spend).
- Gas prices are up roughly 25% since January. At the time of writing, diesel - the number that matters most for our industry's supply chain - is up approximately 40%.
- Wage growth has come down from a peak of 5-6% to around 3.5-4%. And the February 2026 jobs report showed a loss of 92,000 jobs (although there was some good news recently).
According to the New York Fed, approximately 11% of tariff costs are passed through to consumers. The remaining 89% is absorbed across the supply chain - by manufacturers, exporters, importers, and retailers. Suppliers, manufacturers, exporters, retailers…everyone in that chain is being squeezed. And as we noted in our Shop Talk, it’s complicated, but even if tariff pressure eases, don't expect prices to fall.
We're seeing this in our own data too. For example, in our 2026 Building Products Customer Guide:
Tariff Impact: What Builders and Contractors Are Reporting
--> 88% of home builders report tariff impacts on material costs
--> 61% report impacts on total project costs
--> 46% report impacts on revenue
Contractors and builders aren't sitting still either. Our research shows how homebuilders and contractors are reacting to the tariffs:
- Nearly half of home builders are stockpiling materials
- Over a third are passing costs directly to customers
- Roughly a third have added price escalation clauses to contracts
The market is adjusting - but unevenly, and not always in ways that are visible from where manufacturers sit.
Your Customer's Price Tolerance? It May Not Be What You Think
Here's something worth considering….We asked pros what would happen if their preferred brand got too expensive to justify, many say they'd go find a different supplier before they'd switch brands. In roofing, 53% of pros would go to a different supplier to keep their preferred brand rather than accept a different brand at their existing supplier.
So the power of brand can make pros change where they buy. But it has a ceiling.
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The same research shows that pros state they are willing to pay about 19% more, on average, before they'll switch roofing brands. At some point, your most loyal customer has a number. And when prices cross certain psychological thresholds - this is what behavioral economists call left-digit anchoring - the reaction is disproportionate to the actual size of the increase. Going from $0.99 to $1.05 may not seem significant in your planning meeting, but to a consumer, the brain processes a much larger leap than the math justifies.
It's not just our data that backs this up…Oliver Wyman's analysis of retailer behavior during the 2018-2019 tariff wave documented exactly this. A specialty retailer raised prices across tens of thousands of SKUs. The increases averaged under 5%, but they crossed enough threshold points to trigger significant customer backlash. They reversed many of the increases within months. Units came back. Sales didn't. The retailer that got it right used an elasticity-driven approach - larger moves on a targeted set of high-room SKUs, while investing in others. The result: 9% margin improvement and 5% sales growth simultaneously.
The lesson isn't that you can't just raise prices. It's that you need to know which ones, by how much, and for which customers - before you act.
Four ways to Getting Building Products Pricing Right
There's no single answer here. But there are pricing strategies that hold up in this environment better than blanket increases or blanket absorption.
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1. Price products according to the customers and the market
Not all products carry equal pricing power, and not all customers respond to price the same way. Research we conducted in partnership with The Home Improvement Research Institute validates that product quality is the number one driver for homeowners when selecting home improvement products - ranked highly alongside durability and low price. Why is that meaningful? Because yes, price is important, but there’s a complex relationship between price, psychology, features, and percieved quality.
How does value-based pricing differ from cost-plus pricing when competing in the building materials market?
Value-based pricing - anchoring your decisions in what customers actually perceive as valuable, not just what your costs are - is the conversation that holds up when your product is sitting on the shelf in front of your customer. In this article HBR supports the fact that customer value is more important than cost structures. Conducting research to understand what customers value forces you to understand how customers perceive your offering relative to alternatives rather than just marking up a cost-plus model. There are research techniques that will assign a dollar value to each feature.
2. Don't price the same way across every customer type
The Home Improvement and building products channel is not homogeneous. Price it that way at your own peril.
A residential GC or remodeler may have the ability to pass cost increases downstream. A production builder operating on thin margins with a procurement team watching every line item is a completely different conversation. A retail consumer deciding whether to do a project this year or push it to next year? Yup, different again.
The K-shaped economy makes this more acute, not less. If your product plays in the premium or luxury segment, you're more insulated than most. If you're in a value or commodity-adjacent category, you're competing for a consumer whose budget is genuinely compressed. Knowing which customer you're talking to - and pricing accordingly - is how you protect your most valuable relationships while still recovering margin where the market supports it.
3. Understand your price thresholds before you cross them
I like to call myself a "junior psychologist" - to be fair, I think most marketers and researchers are. There are certain price points in your category on which customers have strong mental anchors. You probably already know some of them, but you may not have mapped.
Before any price adjustment, the question worth asking is: are we about to cross a threshold that will trigger a reaction disproportionate to the size of the increase – or just turn off your customer altogether? Taking competitive pricing and historical price trends into account matters enormously here. If you want to nerd out on the behavioral science behind this, this research paper on price thresholds in retail dives in deep.
4. Leverage SKU Rationalization as part of your pricing strategy
The cost pressure of the past several years is forcing a conversation that a lot of manufacturers have honestly needed to have for a while: which SKUs are pulling their weight?
In categories with high SKU counts and incremental feature differentiation, portfolio rationalization can do more for your margin picture than a price increase. It also simplifies your channel partner conversations and reduces operational load…at the current moment when supply chain complexity is most expensive.
The key is anchoring those decisions to what customers actually value - not what you think they value, and not just what your internal margin analysis says. Knowing which features drive genuine preference versus which onescustomers simply tolerate, gives you a defensible rationale for every line item decision.
If you’re heading into a product line review with a distributor or retail partner, this is especially urgent. As we’ve written about in detail, showing up to that conversation without data on which SKUs customers actually value puts you at a significant disadvantage. Your competitors may already be bringing it.
So What? The Questions Worth Answering Before Your Next Pricing Decision
Making pricing decisions without grounding them in current customer data is risky in any market. In this market it feels like the stakes are even higher than normal. Brand equity that took years to build can erode faster than most manufacturers expect when pricing missteps pile up.
Before your next move, these are the questions worth being able to answer with confidence:
- Where does purchase intent actually drop in your category, and at what specific price points?
- How does price sensitivity differ between your contractor customers versus your builders, homeowners customers separately, and also your retail channel partners?
- Which product attributes are genuinely driving brand preference - and would customers pay more to protect them?
- Are there SKUs in your portfolio that customers wouldn't miss if they were simplified or eliminated?
- How are your competitors responding, and are your customers aware of it?
These aren't hypothetical questions. The Farnsworth Group can help you develop competitive pricing strategies - with the right research design and the right respondents. And the answers will drive not just the pricing decisions you make, but your profitability and staying power.
Ready to build a smarter pricing strategy?
At The Farnsworth Group, we've spent over 35 years focused exclusively on building products, home improvement, and farm and garden. We're on the phone with manufacturers, suppliers, retailers, and channel partners every day. We know who your Pro customers really are, how to reach them, and how to ask the questions that get to the truth of how they make decisions. If you're working through a pricing strategy right now, we'd welcome the conversation. Schedule a Consultation today.
We'll help you understand your customers well enough to price with confidence.
The Farnsworth Group 2026 Building Products Customer Guide; Harvard Business Review - "Setting a Pricing Strategy Amid Ever-Changing Tariffs" (Rafi Mohammed, April 2025); McKinsey & Company - "Tariffs on the Move? A Guide for CEOs for 2025 and Beyond"; Oliver Wyman - "Strategies for Retailers to Adapt to New US Tariffs"; New York Federal Reserve; HIRI US Size of the Building Products Market Forecast; JCHS Leading Indicator of Remodeling Activity; NAHB Housing and Interest Rate Forecast; NAR Homebuyer and Seller Generational Trends Report.
Written By Eric Voyer
Director and Senior Consultant
Eric brings nearly 30 years of experience in market research, business development, and strategic consulting within the home improvement, building products, and outdoor industries. He spent decades in syndicated research for consumer durables, where he helped leading brands turn complex data into actionable insights that drive growth. Eric's expertise spans both quantitative and qualitative methodologies. At The Farnsworth Group, Eric focuses on client engagement, project design, and strategic storytelling to ensure insights lead to clear, confident decisions.
Originally from Orlando and now based in Louisville, KY, Eric studied Business at Transylvania University, where he also competed as a collegiate goalkeeper. Outside of work, Eric still enjoys playing soccer, loves to Ski and Scuba and has a new passion for playing ice hockey.
Frequently asked questions
The Farnsworth Group's 2026 Building Products Customer Guide shows that contractors and builders are taking a range of active steps to manage cost pressure: nearly half of home builders are stockpiling materials ahead of further price increases; over a third are passing costs directly to their customers; and roughly a third have added price escalation clauses to contracts to protect themselves from future swings. The market is adjusting - but unevenly. Manufacturers who understand how their specific channel partners are responding are better positioned to price and communicate in ways that preserve those relationships rather than straining them.
Portfolio rationalization is the process of evaluating which SKUs in your line are genuinely pulling their weight - and eliminating or simplifying the ones that aren't. In categories with high SKU counts and incremental feature differentiation, rationalization can do more for your margin picture than a price increase, with fewer risks. It also simplifies conversations with channel partners, reduces supply chain complexity, and focuses your marketing investment on the products where your brand story is strongest. The key is grounding those decisions in what customers actually value - not just what your internal margin analysis says. As we've written, showing up to a product line review without that data puts you at a significant disadvantage.
Pricing power shows up in a few measurable ways. Our research across specific product categories, like roofing for example, shows that pros will pay about 19% more on average before switching brands - and that 53% would go to a different supplier to keep their preferred brand rather than accept a different brand at their existing supplier. That's real pricing power. But it has a ceiling, and that ceiling varies by product category, customer segment, and competitive context. The reliable way to know where yours is is through primary research - specifically price sensitivity studies and brand equity measurement conducted among your actual customer segments. Without that customer-level data, your pricing decisions will not be optimized.
Value-based pricing means anchoring your pricing decisions in what customers actually perceive as valuable - not in what your costs are. In building products, this matters because customers frequently rank quality, durability, availability, and brand reputation above low price when selecting products. That hierarchy represents real pricing power - but only if you understand how your specific offering maps to those drivers relative to your competitors. Research methods like conjoint analysis and brand perception studies are the practical tools for quantifying that. Companies that price from customer-perceived value consistently outperform those working from cost-plus models.
The building products channel is not homogeneous, and pricing it as if it is will cost you. A residential GC or remodeler typically has the ability to pass cost increases downstream to their end customer. A production builder operating on thin margins with a professional procurement team watching every line item is a completely different conversation. A retail consumer deciding whether to do a project this year or defer it is different again. Segmenting your pricing response by customer type is how you protect your most important relationships while still recovering margin where the market will support it. Contractors and remodelers can generally pass costs through, while residential builders often cannot.
Psychological pricing - specifically the management of price thresholds - is underutilized in building products and home improvement. Customers in this category have strong mental anchors on familiar products: a box of fasteners, a gallon of paint, a bag of fertilizer. When a price crosses a round-number threshold, the brain processes it as a much larger leap than the math justifies. This is known as left-digit anchoring - the leftmost digit of a price has a disproportionate influence on how customers perceive it. Manufacturers who map these thresholds before adjusting prices can take meaningful margin recovery on the right SKUs while protecting brand perception on the ones where crossing a threshold would trigger switching behavior.
The most common mistakes we see: applying a single pricing approach across all customer types, when contractors, builders, and retail consumers have very different cost pass-through ability and price sensitivity. Raising prices broadly rather than targeting increases to the SKUs where margin room actually exists. Crossing psychological price thresholds without realizing it - a 4% increase that tips a product over a round-number price point can do more damage than a 10% increase that doesn't. And making SKU and portfolio decisions based on internal margin analysis alone, without grounding them in what customers actually value. Oliver Wyman's analysis ofthe 2018-2019 tariff wave documented a retailer who made broad price increases under 5% - crossed enough threshold points to trigger significant backlash, reversed the increases within months, and never fully recovered the lost sales.
Customer data informs pricing strategy at three levels. First, it tells you where your pricing power actually is - which products and segments can absorb an increase and which can't. Second, it reveals your price thresholds - the psychological price points where customer behavior changes disproportionately relative to the size of the increase, a phenomenon behavioral economists call left-digit anchoring. Third, it tells you which features and attributes customers actually value versus which ones they simply tolerate - which is the foundation for both value-based pricing decisions and portfolio rationalization. Primary research methods like Van Westendorp Price Sensitivity Meter, conjoint analysis, and customer segmentation studies are the most reliable ways to surface this data for building products audiences.
The Farnsworth Group conducts custom qualitative and quantitative market research exclusively within the building products, home improvement, and farm and garden categories. For pricing strategy, that typically means research designed to answer five core questions:
- Where does purchase intent drop in your category, and at what price points?
- How does price sensitivity differ across your customer segments?
- Which product attributes drive genuine brand preference - and would customers pay more to protect them?
- Which SKUs in your portfolio would customers not miss?
- And how are your competitors moving, and do your customers know it?
We've spent over 35 years understanding how to reach these audiences and ask the questions that get to the truth of how they make decisions. Learn more.
Tariffs raise input costs, but they don't change how customers perceive value - and that's the gap most manufacturers get wrong. The instinct is to raise prices to recover margin, but in a market where consumers are already squeezed by energy costs, wage pressure, and affordability constraints, even modest price increases can cross psychological thresholds and trigger outsized negative reactions. The right response is to understand exactly where your pricing power is real and where it isn't - which requires customer research, not just cost modeling.
The manufacturers navigating this period most effectively are taking a deliberate, research-driven approach rather than reacting with blanket price increases or blanket cost absorption. The four strategies with the most traction in our client conversations are: pricing according to customer-perceived value rather than cost-plus models; segmenting pricing responses by customer type (pro contractors, builders, and retail consumers all have very different price sensitivity profiles); mapping price thresholds before crossing them; and rationalizing the product portfolio to improve margin without raising a single price. The common thread is that all four require understanding your customer before you act.
Tariffs are one of several compounding cost pressures hitting the building products industry right now, but they're not the whole story. According to the New York Fed, approximately 11% of tariff costs are passed through to consumers - the remaining 89% is absorbed across the supply chain by manufacturers, exporters, importers, and retailers. The Farnsworth Group's 2026 Building Products Customer Guide found that 88% of home builders report tariff impacts on material costs, 61% report impacts on total project costs, and 46% on revenue. Even if tariff pressure eases, don't expect prices to fall - a manufacturer who has been absorbing costs is not in a position to hand back margin voluntarily.