How can businesses operate effectively in a stagflationary market, asks David Gilroy. I recently received two diametrically opposed messages back-to-back. Firstly, from Qatar Airways setting out compelling reasons to visit Qatar. Followed by an alert from the Foreign Office telling me in clear unambiguous terms not to visit Qatar. I holidayed there last year and can recommend it. Sadly, not now. I guess I must still be on their mailing lists. I also happen to be on the lists of many major travel companies all in marketing overdrive despite the uncertainty around the conflict in the Middle East. Vital goods are not flowing from the Gulf, energy prices are soaring, inflation is baked into the economy, growth is static and consumers are fast becoming cautious. There are tough times ahead. How do businesses respond? Do they batten down the hatches, drive down costs and conserve cash? Or do they continue to invest in sales to grab the market share opportunities and trade their way through the mire? Stick or twist?
Driving for sales in a stagflationary market where economic growth is stagnant, inflation is high, and consumer confidence is fragile presents a uniquely complex challenge for businesses. Traditional growth strategies often falter under these conditions, forcing organisations to rethink how they generate revenue, retain customers, and position their offerings. While aggressively pursuing sales may seem like a necessary response to declining demand, it carries both opportunities and risks that must be carefully weighed. Before evaluating the strategy, it’s important to understand what makes stagflation distinct. Unlike a typical recession, where demand drops and prices often stabilise or fall, stagflation combines weak economic growth with rising prices. This creates a paradox: consumers are spending less, yet the cost of goods and services continues to increase. This means that input costs are rising (labour, logistics, materials), customers are more price sensitive, credit may tighten and forecasting becomes uncertain.
The case for driving for sales
One of the strongest arguments for pushing sales in a stagflationary market is the need to maintain cash flow. As costs rise, businesses cannot afford a sharp decline in revenue. Driving sales, even at lower margins can help keep operations running and prevent liquidity crises. In this sense, sales growth becomes less about profit maximisation and more about survival. Stagflation often causes competitors to scale back spending, reduce headcount, or pause growth initiatives. This creates an opportunity for more proactive companies to capture market share. By investing in sales, businesses can strengthen brand visibility, acquire customers at a lower competitive cost and build relationships that last beyond the downturn. History shows that companies that maintain or increase commercial activity during downturns often emerge stronger when conditions improve.
Inflation provides a unique opportunity to adjust pricing structures. While customers are sensitive to price increases, they are also somewhat conditioned to expect them during inflationary periods. Driving sales in this context may involve repackaging offerings, (shrinkflation) introducing tiered pricing models and emphasising value rather than cost. Companies that can effectively communicate value may sustain or even increase revenue per customer, despite broader economic weakness. Aggressive sales efforts often reveal which customer segments remain willing and able to spend. These insights are invaluable for refining strategy, identifying high value or recession resistant customers, shifting the focus to essential or non-discretionary offerings and tailoring messaging to evolving customer priorities. In this way becoming a learning mechanism as well as a revenue strategy.
The case against driving sales
Perhaps the most significant downside of aggressive sales strategies in stagflation is the risk of eroding margins. To stimulate demand, companies often resort to discounts, promotions, or extended payment terms. This can lead to shrinking profit margins, negative unit economics and long-term damage to pricing integrity. In extreme cases, businesses may generate revenue that is not actually profitable, masking deeper financial issues. Frequent discounting or aggressive sales tactics can weaken an operator’s perceived value. Customers may begin to associate the brand with lower prices rather than quality or differentiation. Once a brand is repositioned downward, it can be difficult and costly to rebuild its original image.
In a stagflationary environment, customers are already under financial pressure. Aggressive sales tactics such as constant upselling or high-frequency marketing can backfire. As in my case with the travel companies – enough already. Driving sales often requires significant investment in marketing, sales personnel, and promotional campaigns. In a constrained economic environment, these resources may be better allocated elsewhere such as improving operational efficiency and investing in product innovation. It can become a race to the bottom compromising long-term resilience.
Striking the right balance
Given these competing considerations, the question is not whether to drive for sales, but how to do so intelligently. Rather than pursuing sales at any cost, businesses could focus on high-value transactions, targeting the most profitable customers, emphasising range assortment and steering away from discounted offerings. Segmenting the customer base would allow for a more tailored approach rather than one size fits all. Service is a brilliant added value option and is hard for competitors to emulate. This can go a long way to retaining customers and building resilience for the long-term. In uncertain times, trust becomes a key differentiator. Rather than purely transactional sales tactics, businesses should focus on building relationships. This can include openness about price changes, enhanced customer support and frequent iterative contact.
Sales strategies should be closely integrated with cost control efforts. Driving revenue without managing costs is unlikely to produce positive outcomes. This alignment involves monitoring volume movement closely rather than just value, adjusting pricing dynamically and ensuring that sales incentives reflect profitability not simply volume. Companies must resist the temptation to abandon long-term strategy in pursuit of short-term gains. Sales initiatives should support, not undermine, broader business objectives. Companies should double down on their values and standards.
In a challenging economic environment, the goal is not simply to sell more, but to sell smarter.
David Gilroy, Store Excel
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