How to use stock levels in your pricing strategy
Suggestions for a more advanced stock based pricing method
This article covers the basics of what a stock-based pricing strategy is and how to implement it in the Omnia system. Of course, more advanced strategies are also possible, depending on what is relevant to the category your company is operating in. The methods can vary from simple stock rules, to more advanced rules based upon stock levels, sales and seasonality. For information and help on all these more advanced strategies, please reach out to your CSM. Some examples of more advanced strategies are explained below.
Use the amount of sales over a period to trigger the up/downward price shift
The amount of sales over the past week(s)/month(s) are variables that can also be used to determine when a product needs to increase or decrease in price. If you map these sales fields, you can use them in the Pricing Strategy Tree. A more advanced implementation might be to use these variables to determine your stock coverage:
Stock coverage
Your stock coverage is the amount in stock divided by the sales over a certain period:
| #1 | #2 | |
| Amount in stock | 133 | 133 |
| Sales last 4 weeks | 12 | 84 |
| Stock coverage | 11.08 | 0.63 |
This stock coverage can be used in your pricing strategy: in the example above you might want to discount #1 - the stock levels are relatively high, whereas the amount of sales is quite low. In contrary, you might think about increasing your price for #2 as this article has relatively high amounts of sales compared to the stock level.
Depending on the characteristics of the products you sell and the stock levels and sales volumes that are typical for your company, you can decide to split your articles into separate buckets. Based on these buckets, you can then create relevant branches in the Pricing Strategy.
Incorporating Stock Age to prevent discounting new products
To prevent discounting new products - that will have a high stock coverage when the first batch of stock arrives at the warehouse - we recommend also feeding the field Stock Age to Omnia and mapping that field in Product Import. Stock Age is typically defined at the number of days since the last batch of stock came in (last stock increase).
Take into account end of season date
For some products, a low stock might not be a good trigger for an increase in price. For these products, that are usually seasonal products, you might want to decrease the price when the stock level decreases. By providing the end of season date in your feed to Omnia - and then creating a calculated field of number of days until season end date - this is something that can be taken into account.
This is an example of how you could implement a stock based pricing strategy in Omnia:
The top sub branch deals with overstock situations. If the stock coverage is more than 2 months Omnia will price competitively (position one in the market). An extra condition is added in between to check whether the Stock Age is more than 30 days, to prevent Omnia from discounting prices of newly added products (that have relatively high stock and no sell through history yet).
The bottom sub branch makes sure that for products with low stock (less than 0.25 month stock coverage) we price back to MSRP (Manufacturer Recommended Selling Price), provided that the product is not near phase-out (days to season end date is more than 90 days). In this branch the Stock Age does not play a role. If the coverage becomes too low, you want to increase your price, regardless of when the last stock came in.