How companies can protect margins while meeting consumer expectations this holiday season.

By: Ben Garden, Managing Director, Iris 

As companies enter the final quarter of 2025, the familiar challenge of holiday promotions has become far more complex. Consumers remain primed for Black Friday and year-end deals, yet the economic backdrop has shifted: tariffs are reshaping cost structures, demand is inconsistent, and customer fatigue with price increases is at an all-time high. Against this backdrop, promotional pricing is no longer simply about driving short-term volume, but about balancing urgency with long-term profitability.

The new dynamics of Q4 2025

Three forces make this season fundamentally different from years past:

  1. Tariff volatility. Many companies are absorbing duties within their cost base, while others are passing them directly onto consumers through surcharges and fees. Either approach complicates promotion planning, raising the question of whether discounts are offsetting genuine value or merely masking tariff impacts.

  2. Unpredictable demand. Consumer spending has wavered sharply across 2025. Strong quarters have been followed by soft ones, making it difficult to anticipate whether a holiday promotion will stimulate incremental demand or erode margins unnecessarily.

  3. Consumer fatigue. Years of steady price increases since the pandemic have heightened buyer sensitivity. Customers are more skeptical of promotional claims, and perceptions of fairness weigh heavily on brand equity.

In this context, the traditional playbook of broad, aggressive discounting is more likely to damage long-term margins than to create sustainable growth.

Pricing Analytics as the foundation of smarter promotions

The real differentiator this holiday season is not whether companies run promotions, but whether they truly understand which promotions create value — and which quietly destroy it. Analytics provides that clarity.

Take the case of a national quick-service restaurant chain. Faced with rising food and labor costs, they needed to raise prices but feared losing traffic. By building predictive models on two years of transaction data, we pinpointed where small, surgical adjustments could be made without affecting guest counts. Just as importantly, the same model revealed that nearly half of their existing promotions were cannibalizing demand rather than generating it. The lesson: without transaction-level visibility, companies can spend heavily on promotions that feel busy but deliver no incremental value. Read case study.

A global CPG company confronted a different challenge: soaring commodity and energy costs in the convenience channel. Here, the question was not just which price to charge, but which package sizes to prioritize. We tested over 600 consumers and modeled elasticity across SKUs and packages; the company could see which offerings maximized both consumer appeal and system margin. The result was a redesigned SKU portfolio that increased system margin by 7% and retailer margin by 15%. The takeaway: when volatility is high, portfolio optimization can be as powerful a lever as pricing itself. Read case study.

We have seen similar results across other industries. An automotive parts retailer leveraged cross-sell analysis and targeted event promotions for Black Friday and Cyber Monday, generating a 2.5% revenue lift in year one. A billion-dollar restaurant chain applied counterfactual modeling to disentangle overlapping promotions, discontinued those that underperformed, and improved both guest count and ROI. These examples reinforce the same point: companies that can isolate the true drivers of promotional effectiveness outperform those that rely on instinct or tradition. Read case study.

Across sectors, the lesson is clear: pricing analytics transforms promotions from blunt instruments into precision tools. In a tariff-era holiday season, where margins are fragile and consumer trust is thin, that precision is no longer optional, but essential.

A three-part framework for tariff-era promotions

Based on our work, companies can use a structured lens to improve promotional ROI in volatile environments:

  1. Diagnose promotional ROI. Leverage transaction-level analysis, elasticity modeling, and attribution to identify which offers truly drive incremental value.

  2. Design for volatility. Incorporate tariff-adjusted margin modeling, selective discounting, and portfolio optimization to protect profitability.

  3. Deliver real-time adaptation. Build dashboards and governance processes that monitor effectiveness during the season, enabling rapid course correction and ensuring promotions are perceived as fair and value-driven.

The way forward

This holiday season presents both risk and opportunity. Companies that continue to treat promotions as blunt instruments risk compounding tariff pressures and consumer skepticism. Those that embrace analytics-driven frameworks, however, can design promotions that stimulate demand, protect margin, and build trust with customers.

Holiday pricing does not have to mean margin sacrifice. By combining proven promotional frameworks with tariff-era realities, companies can turn Q4 into a platform for profitable growth rather than post-holiday regret.

At Iris Pricing Solutions, we work with clients to stress-test promotional strategies and build analytics capabilities that ensure promotions drive value, not just volume. To discuss how these approaches can be tailored to your business, please get in touch.