From Margin Erosion to Margin Expansion: Strategic Pricing for Non-Profitable Products

In today’s manufacturing, margin compression isn’t just a market reality—it’s a structural issue. For many manufacturers, the root cause lies within the product portfolio itself. Hidden among your SKUs are products that not only underperform—they actively drain margin and working capital.

These losses are often buried in averages. At Vayoom, we help manufacturers surface and address them through product stratification—a capability that doesn’t just flag unprofitable products but gives you the visibility and intelligence to price strategically and profit intentionally.

For CFOs and CEOs, this is more than operational hygiene. It’s an opportunity to recover 2–6% in margin without adding headcount, capacity, or new infrastructure.

Product Stratification: The Foundation for Greater Profits

Unlike broad segmentation models, product stratification reveals the true financial behavior of each product by incorporating cost-to-serve, volume variability, customer mix, and margin contribution. It’s the foundation that enables operating strategies to be both targeted and defensible—so you’re not guessing which products deserve a pricing reset, or operation improvement where it won’t move the needle.

Once stratification has identified which SKUs are underperforming, strategic pricing becomes your first, most immediate lever.

Strategic Pricing Approaches for Non-Performing Products

1. Customer-Specific Bundling: Delivering Value, Capturing Margin

Bundling works—but not in a one-size-fits-all approach. Through the lens of the Customer Profit Center, Vayoom enables bundling strategies tailored to the specific value a product provides to a given customer.

By pairing low-margin SKUs with high-margin items that matter to that customer—whether it’s due to logistics savings, technical integration, or procurement simplification—you elevate perceived value and recover greater margins. These bundles are priced with both product cost and customer value in mind, allowing for customized quoting that drives profitable growth.

2. Tiered Pricing: A Targeted, Cost-Aware Option

While tiered pricing can help reach broader market segments, it’s not always cost-effective to implement. The added complexity—in operations, forecasting, and support—must be justified by the upside.

When used, it should be driven by product stratification insights and applied methodically. For example, consider tiering where volume or lifecycle position justifies differentiation, not just where competitive pressure suggests it. It is also customer dependent.

3. Quoting with Cost and Delivery Intelligence

In complex B2B environments, rigid pricing fails. But it’s not just about offering discounts—it’s about quoting with options.
Vayoom helps manufacturers introduce quoting frameworks that allow sales to present cost-informed alternatives:

• Different production sites with varying lead times
• Sourcing options with price and reliability trade-offs
• Logistics configurations that affect margin and delivery
• Technology platforms or service tiers that influence lifetime value

This approach empowers both sales teams and customers with flexibility—while maintaining margin discipline.

Profitability Requires Visibility

Most manufacturers don’t need to overhaul their pricing philosophy—they just need the clarity to know where to act.

At Vayoom, we provide that clarity. With purpose-built product stratification tools and actionable pricing strategies, we help manufacturers move decisively turning dormant SKUs and margin-negative products into engines of profitability.

Are underperforming products draining your margins? Let’s change that.

Many manufacturers price their products without fully understanding what it costs to make them. And without that clarity, it’s impossible to negotiate pricing that both protects margin and builds trust with customers.

A good salesperson understands and solves the customers problems. But the sales teams often treat pricing as a numbers game—close as many deals as possible, as fast as possible. But pricing is not just about the number. It’s about the relationship. Strong pricing negotiations, when done with insight, reinforce the partnership between manufacturer and customer.

Effective pricing must sit between two guardrails: what the market is willing to pay (informed by customer and competitor intelligence) and the actual cost of making the product. That lower bound—the true cost—is often the least understood. And when it’s missing, manufacturers resort to guesswork or broad-stroke pricing tactics.

Take what happens when unplanned costs hit—like spikes in logistics or new tariffs. Many companies respond by issuing blanket price increases across all SKUs. But across-the-board hikes—5%, 10%, or more—tend to backfire. They frustrate customers, damage relationships, and often trigger pushback or lost sales.

Strengthen Customer Relationships and Protect your Margins

A smarter, more strategic approach is possible with accurate product-level costing.

When you understand the real margin on every SKU and every customer, you can tailor your pricing actions. Instead of raising prices across the board, you adjust selectively—raising prices only on underperforming items while holding or even lowering prices on others. This targeted strategy not only protects margins but opens new ways to deepen customer partnerships.

Vayoom helps manufacturers implement this approach by treating every customer as a “Customer Profit Center.” With clear cost visibility and a portfolio-wide view, you can uncover levers to grow volume, negotiate more flexibly, and build long-term value on both sides.

Smarter pricing isn’t just about numbers—it’s about insights. And it starts with knowing your true cost.

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