Pricing is the most decisive weapon in a management armory. Products and services under price regulations are exceptions, but this is now limited in the post-socialist world. High demand elasticity to price, and competitive substitution, are major deterrents to the exercise of management prerogative to raising selling rates. These risks are often more imagined than real. However, it is difficult to fight fears that loyal customers may be lost because of new sticker prices.
It is easier to balance contradictory profit margin and brand share objectives through the following three functional strategies:
1. Keep your cost of funds lower than suffered by competitors, attract equity, shop around for cheaper loans, and put capacity expansion on a strict diet
2. Give your fixed costs a close shave every year. Cutting back on head count through outsourcing is unpopular in some quarters, but it can deliver in terms of staying above water during lean times for business.
3. Swap spectacles for telescopes. Quit fretting because a competitor has stuffed retail shelves with an extravagant promotion. Customers may return to your brand once the deal is over. Talk to stakeholders in decades not quarters.
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