Pricing under Pressure: Cost Volatility, Customer Affordability and Value Perception in Micro and Small Food Businesses

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Abstract
This study examines how micro and small food businesses make pricing decisions under cost volatility, customer affordability pressure, and value perception constraints. Drawing on semi-structured interview evidence from 12 Malaysian micro and small food and beverage businesses, this study adopts an interpretive qualitative multiple-case design. The data were analysed using thematic analysis and cross-case comparison, with dynamic capabilities as an interpretive lens. The findings show that pricing is not a simple cost-plus calculation or the application of a single pricing method. Instead, micro and small food businesses practice adaptive hybrid pricing by combining cost awareness, competitor reference, affordability judgment, value protection, and operational adjustment. This study develops the concept of a pricing corridor, where cost functions as the pricing floor, customer affordability functions as the pricing ceiling, and value perception operates as the mechanism of price acceptance. Businesses respond to pricing pressure through gradual price adjustments, supplier searches, portion maintenance, student pricing, product-size adjustments, platform-specific pricing, promotions, menu revisions, and simple cost-tracking tools. This study contributes to the pricing strategy literature by explaining how hybrid pricing operates under the boundary conditions of owner-managed micro and small food businesses with limited pricing analytics, direct customer interaction, volatile input costs, and constrained price pass-through capacity. It also contributes to the SME capability literature by showing how sensing, seizing, and reconfiguring are enacted through everyday pricing routines.

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