There is a common but deeply flawed belief in business that the selling price of a stock item should be based on its cost price. While this may appear logical at first glance—after all, one must recover what was spent—it is often a dangerous approach that leads to lost opportunities and, in many cases, actual losses.
The reality of the market is very different. Products that could be sold at higher prices are often sold at lower ones simply because they were procured cheaply. Businesses leave money on the table because their pricing model is tied to historical costs instead of real market value. Conversely, products purchased at higher costs cannot be sold at inflated prices just to maintain a margin—the market dictates what customers are willing to pay and they will not entertain unjustified premiums.
Cost-Based Pricing Works—But Only Before You Buy
Cost-based pricing has a role, but it belongs in the procurement stage, not the sales stage. When planning to buy stock, the selling price acts as the starting point. The business determines what price the market will bear, factors in the cost of sales, operational overheads, required margin and risk buffer and then calculates the maximum acceptable purchase price.
For instance, if a product can reasonably be sold at $100 and the business wants to maintain a healthy profit margin while covering all associated costs, it might determine that it cannot pay more than $70 for that product. The focus then shifts to sourcing or negotiating procurement below this threshold. This is a proactive and strategic pricing model.
Once Purchased, Stock Is an Asset—Not Money
After the stock has been purchased, its cost is no longer a controlling factor in pricing decisions. The money is already spent. That stock is now an asset, not liquid capital and its cost becomes a sunk cost. In management accounting, what matters is not what was paid, but what the product is worth now—its current market value, how soon it can be sold and what profit it can generate.
Financial accounting might still record inventory at purchase cost or lower of cost and net realisable value (NRV), depending on applicable accounting standards. But for management decision-making, cost price is largely irrelevant, except perhaps for post-mortem analyses and continuous improvement in procurement strategy.
Don’t Ignore Holding and Finance Costs
Another often-overlooked aspect is the cost of holding inventory—both in terms of storage and finance. These costs exist even if you haven’t taken a loan to buy stock. Capital has an opportunity cost. Funds tied up in inventory could have been invested elsewhere. Every additional day that inventory sits unsold incurs a hidden cost and this must be factored into your pricing and turnover strategies.
Dynamic Pricing Based on Market Demand
In an ideal business environment, prices should never be static. Just as demand fluctuates, so should pricing. Dynamic pricing is the strategy of adjusting selling prices in real time—or near real time—based on current market conditions, competitor pricing, stock levels, seasonality and buyer behaviour.
This is particularly important in inventory-heavy businesses. Products sitting in the warehouse are not static in value. Market demand may rise, creating an opportunity to increase selling prices and boost margins. Conversely, if demand drops, prices may need to be lowered to encourage faster movement and avoid accumulation of dead stock.
Factors That Drive Dynamic Pricing:
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Demand-Supply Gap
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Competitor Pricing
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Shelf Life or Obsolescence
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Customer Segments and Behaviour
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Stock Levels
To implement dynamic pricing effectively, businesses need real-time visibility into stock, sales velocity, procurement timelines and market signals. Manual pricing updates are rarely fast or accurate enough. This is where ERP systems like Tuhund offer a decisive advantage. With intelligent pricing engines, real-time dashboards and automated rule-based pricing algorithms, Tuhund enables businesses to continuously adapt to market changes.
Leveraging Tuhund for Competitor Analysis and Lost Opportunity Insights
Dynamic pricing becomes far more powerful when it is informed not only by internal data, but also by external market realities—especially competitor behaviour. This is where Tuhund's Competitor Analysis Module plays a transformative role.
Tuhund allows businesses to track and analyse every lost opportunity—not just mark it as closed or failed and move on. Opportunities can be marked as lost at any stage of the sales cycle, though it most often happens during the quotation phase. Sales teams are encouraged to go beyond just recording lost deals—they are expected to document the reason, the competitor who won the business and what pricing or offering they beat you on.
Over time, this builds a powerful dataset that provides actionable insights:
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How much business are you losing?
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Who are you losing it to—and why?
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Which product categories or customer segments are most vulnerable?
These insights feed directly into procurement and pricing strategies, allowing businesses to reposition or pull back where needed and double down on areas of strength.
Knowing When to Let Go: Strategic Product and Customer Deselection
Not all products are worth selling—and not all customers are worth keeping.
This may sound counterintuitive, but in many cases, businesses hold on to unprofitable product lines or difficult customer accounts out of habit or fear of losing volume. Without clear data, such decisions are emotional and reactive.
Tuhund changes that.
Tuhund provides clear visibility into the actual worth of a customer, factoring in not just tangible costs like discounts and credit terms, but also intangible ones—most importantly, the cost of time.
Every activity carried out by your team—whether it’s sales calls, follow-ups, site visits, support tickets, or post-sales service—is automatically logged and costed. Tuhund tracks the actual time spent by every person involved and assigns a cost to those hours. It also distributes overheads proportionately and feeds this into true customer profitability calculations.
This is where the Claims Module becomes especially critical. It captures warranty claims, return requests, rework, and exceptions, all of which impact the cost-to-serve.
Tuhund also allows you to:
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Rank customers based on behaviour and performance, not just revenue
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Tag and track individual stakeholders within each customer organisation
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Record and analyse qualitative insights (such as ease of doing business, responsiveness, cooperation)
With this level of intelligence, you can make informed decisions about which customers to prioritise, which ones to nurture and—when needed—which ones to let go of.
Sometimes, the most profitable decision you can make is to lose a customer who drains resources, erodes margins and distracts from better opportunities. Tuhund gives you the confidence to make those bold moves—not based on gut instinct, but grounded in data.
Conclusion: Price to Win, Not to Recover
Relying on cost-based pricing is like driving with your eyes fixed on the rear-view mirror—it blinds you to what lies ahead. In today’s competitive and dynamic markets, the selling price must be guided by market demand, value perception and strategic priorities, not just procurement history.
Once stock is purchased, the money spent becomes irrelevant. What matters is how much value that asset holds now and how it can be best monetised. Pricing decisions must be dynamic, data-driven and aligned with broader business goals—not rigidly tied to spreadsheets or habits.
With the right system in place, like Tuhund, businesses gain the visibility and intelligence they need to:
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Set prices dynamically based on real-time conditions
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Understand and track competitor behaviour
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Analyse lost opportunities with precision
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Know when to exit product lines or even walk away from unprofitable customers
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Make bold, informed decisions that improve profitability and strategic focus
Ultimately, smart pricing is not about covering cost—it's about maximising value. And that requires insight, not instinct.
