How the System Handles Products Sold at a Loss

Some products are structurally unprofitable: their cost plus tax meets or exceeds the price they sell at, so every sale loses money. There's no "profit-maximizing" price to find for a product like this: the profit is negative at every point. Rather than chase a number that doesn't exist, Price Optimization handles these products deliberately. This article explains what you'll see and why.

When a product can't be modelled reliably and it's selling at a loss, the system stops trying to fine-tune the current price and instead does something simpler and safer: it targets break-even plus a 10% margin. In practice you'll see a suggestion to raise the price to that level, regardless of where the price sits today.

A 10% markup isn't guaranteed to make the product profitable overall (other costs may still bite), but it's a deliberate, bounded step in the right direction rather than continuing to sell below cost. Think of it as stopping the bleeding first, then optimizing properly once the product has the data to support it.

A separate situation is a product with no cost data at all. Here the system can still model how much the product sells and what revenue it generates, but with no cost, it can't reason about profit. So any profit-based suggestion is suppressed for that product rather than being guessed.

The reliable fix is to supply complete cost data. Once cost is in place, the product can be optimized on a profit objective like any other. In the meantime, if you need those products optimized, a pure demand or revenue objective doesn't depend on cost and will still work (see Choosing Your Optimization Objective).

For the bigger picture on why some products get simple instructions instead of a fully optimized price, see Why Some Products Aren't Optimized. For how missing cost also affects your guardrails, see How to Add Safeguards to Your Pricing Strategy.