Pricing Strategies
A GUIDE FOR PRICING STRATEGIES
Stock-Based Pricing
What is it?
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.
How to modify your prices according to your stock level.
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:
When stock is high maintain standard price
When stock is high, decrease your prices
When stock is low, increase prices
When stock is low, decrease prices
How to use it?
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.
Increase the revenue from your product assortment
Respond to changes in demand
THE GAINS
Benefits of stock-based pricing
Increases profit margins
One of the most common reasons for implementing this pricing strategy is that companies can increase their profit margins more efficiently. The companies that argue this, tend to increase prices when stock is low.
Optimizes cash flow
Some companies want to have as little inventory as possible, to minimise storage costs or money being stuck in inventory. For these companies, this pricing strategy could help with moving products as efficiently as possible.
Combats problems in the supply chain
Nowadays, supply chains can be disrupted very quickly. If you always want to have available stock, even if the product has a complicated supply chain, then it may be wise to implement your stock data in your pricing strategy.
INDUSTRY TRENDS
Who is using it?
Time-limited Products or Services
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.
Retail and E-commerce
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.
HOW TO HANDLE THE CHALLENGES OF STOCK-BASED PRICING
The most common challenges pricing managers face today
- Are you having products in your portfolio that constantly sell out faster than others? Are you also having products that seem to be selling much slower than others? Adjusting the prices of products according to demand is a great way to increase your revenue and profit and the smart price optimisation software SYMSON can do this process for you!
- Are you adjusting your prices according to demand manually? Are you experiencing changes in how fast or slow certain products are being sold? In order for a stock-based strategy to be effective, the demand has to be monitored constantly, thus making your revenue as optimised as it can be! With an automated price management solution such as SYMSON, this process can be automated and price changes can be made as often as you like!
- If you are a business using different platforms to manage your sales, stock level and others it can be difficult to integrate them with each other due to inconsistencies in real-time information. Sometimes information can take a while to update across all your systems and this can lead to losses in revenue. With the price management solution SYMSON, you can integrate all your data into one single software so that all the data can be analysed seamlessly.
THE DISADVANTAGES
Disadvantages and how to handle them
May lead to negative responses
When prices rise when demand is high (and stock is low), then this may lead to negative responses from customers. The way to solve this is to explain price rises effectively.
Not perfect when not used with other pricing strategies
Stock is one factor in determining the optimal price, but other factors are more important. Therefore, you should combine this with other pricing strategies, ideally.
HOW TO SET IT UP
How to implement stock-based pricing
In your organisation
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.
Integrate your ERP with your chosen stock-management system
Analyse the demand for the different products you offer
Adjust the prices of your products to the demand
Update your real-time prices
Analyse the results and run again
In Symson
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:
Make a secure data connection with your chosen systems to continuously update prices
Configure the stock-check pricing rule
Select the product for which you wish to apply the rule
Add notifications to stay up-to-date with changes
SYMSON will automatically update your prices
Export the pricing data and apply your new prices
Analyse the results and make adjustments if needed
THE KEY IS A COMBINATION OF STRATEGIES
Why combine with other pricing strategies?
One way to optimize your prices, even more, is to combine your stock and inventory data with other available data, such as historical sales numbers, demand forecasting information and prices of competitors. This will improve your pricing drastically since you take more price-determining factors into account. In total, you can use 9 smart pricing strategies together in SYMSON.
GET A DEMO
How to use Stock-based Pricing in SYMSON
How it works
How to combine different pricing strategies
How to get recommendations for the perfect pricing
How to track competitors
Summary
- 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.
- The biggest benefits of a stock-based pricing strategy are that it improves profit margins, optimizes, cash flow and combats problems in supply chains.
- Stock-based pricing performs best in combination with other factors, such as seasonality, to make prices even more responsive to changing factors.
The SYMSON Solution
Smart Algorithms
Use smart algorithms and intelligent pricing AI to predict optimal price points for your products automatically.
Every business case is unique and each pricing strategy is based upon different factors, which can be influenced by high inflation rates. Smart algorithms and AI are able to predict the most optimal price points for different products automatically, by using multiple data sources such as costs, weather, competitor prices, price elasticity, and more.
Every business case is unique and each pricing strategy is based upon different factors, which can be influenced by high inflation rates. Smart algorithms and AI are able to predict the most optimal price points for different products automatically, by using multiple data sources such as costs, weather, competitor prices, price elasticity, and more.
SYMSON
SYMSON uses its in-house developed dynamic pricing software to optimise margins and to automate mundane tasks for pricing professionals. Get insights in your pricing management – from price elasticity per product to margin improvement advice and price automation with the Pricing Strategy Builder. For most companies, it would be advisable to look into cost-based pricing and price elasticity, to combat high inflation rates. However, every business case is different, and at SYMSON we provide custom solutions for all of our clients.
