Stock-based pricing, also known as inventory-based pricing, is a form of dynamic pricing that uses the amount of stock available to determine the price of the product. For many companies’ their level of stock is an important factor in determining prices. Some companies do not have any issues with having products in stock. This means that for them it isn’t a potential source of challenges. However, for many companies, stock levels are a challenge to manage - in the optimal scenario, businesses have just enough stock to accommodate all demand.
To know more, you can head over to our pricing strategy guide where we took an in-depth explanation approach.
Pricing strategies based on stock levels come in many different forms. However, these are the four most common example situations, that you can implement in your business:
Stock-based pricing brings a lot of advantages and when set up successfully can increase your pricing effectiveness. How you set it up depends on you, however here are the most popular use cases for this strategy.
Companies that deal with products that have a time limitation often sell products that can expire, based on their stock levels, such as food; products that are only in demand in a certain season; or products that have no value after a certain date, such as tickets for a concert. Businesses that do offer these products or services do need to take into account that after a certain time, their product decreases in perceived value. When these businesses have a larger inventory than preferred at a certain point in time, they should think about lowering prices, to still be able to sell everything.
These kinds of stores that have a limited inventory capacity should also strategically manage their shelf and storage space. Every product that doesn’t sell, holds space that cannot be used by products that do sell. Therefore, you often see that when stock is low, retail and e-commerce tend to lower prices to make room for new inventory again.
You can implement stock or inventory data and levels in your pricing strategy in two ways. First, it is possible to keep track of this by hand or with the help of spreadsheets and excel, to manually adjust prices when stock levels change. However, this is time inefficient and this process is prone to mistakes.
Most companies implement a stock-based pricing strategy with the help of smart pricing software. These software models usually import relevant data from businesses into pricing models, with the help of AI. These models can then automatically generate and implement the right prices for your products for different stock levels.
SYMSON can help businesses with implementing a stock-based pricing strategy, with its in-house developed AI pricing software. By importing the right stock level data from your organization into the software of SYMSON you can start utilising the strategy and we recommend following these steps: