How to Improve Product Margin: A Cross-Functional Playbook for Consumer Brands

Margin isn’t owned by one team, in a consumer goods brand, finance, operations, product, procurement and even marketing all influence it. Operations is often accountable for hitting the target, but the levers sit across the business, from product design and sourcing to pricing and marketing. Finance shows where the opportunities are; operations and the wider team turn them into action.

This piece is about how operations drives product margin, rather than treating it as something finance measures after the fact. We've written it for consumer goods brands between £2M and £20M because that's where the pattern shows up most predictably, and where the recoverable margin is often the most substantial.

The obvious levers everyone reaches for first

Most founders and leadership think about product margin as a supplier challenge: squeeze COGS, push MOQ down, renegotiate payment terms, tighten commercial mechanisms. Also standard, and often under-touched: freight and logistics, rate benchmarking, mode optimisation (sea versus air versus road), warehouse footprint review, 3PL renegotiation.

These moves matter, and they should be reviewed annually rather than every three years. Done well, especially when the initial supply chain set-up was scrappy, they can deliver material margin recovery, but they're the visible layer, and the returns diminish over time.

The deeper margin moves sit elsewhere, in the strategic operating decisions most founders don't recognise as margin decisions at the time they're being made.

Here are five that consistently move the number.

Five strategic levers that shift margin

1. Product design

Every product design decision will impact margin: how many SKU variants does the range actually need, how many components are shared across the range versus bespoke to a single SKU, what material choices are baked into the design, a cheaper but structurally equivalent material can shift margin materially, how much manufacturing complexity is baked into a design that the customer doesn't see or value.

Component commonality means the same physical parts, the same base, the same closure, the same trim, used across multiple SKUs. The supplier produces at higher volume per component, and the business holds less inventory variety. It's one of the fastest ways to reduce COGS without changing the product experience.

Example: a personal care brand with 40 SKUs was using six different bottle types. Consolidating to two bottle types across the range (same closures, same labels, different fill) reduced packaging COGS by 12% and cut inventory SKUs by more than half. Nothing about the customer experience changed. The margin move sat entirely upstream, in the design decision.

Design is where margin gets set, everything downstream is optimisation around decisions made upstream.

2. Sustainability moves that reduce COGS

Counterintuitive but common: sustainability decisions frequently cut cost rather than add to it. Lighter recyclable packaging is often cheaper per unit than heavier alternatives. Local sourcing eliminates freight and duty burden. Efficient product design reduces material waste and off-cut cost. Renewable energy in manufacturing can lock in energy costs against price volatility. The mistake most brands make is treating sustainability either in silo or as a marketing story with a cost tag attached. Done properly, it's an operating decision that improves the P&L at the same time it strengthens the brand.

3. Packaging design

Cost per unit is one number. Cost per shipped unit is the number that actually hits the P&L, and it can be materially higher.

Dimensional inefficiency, packaging with voids, non-stackable shapes, oversized shippers, can add materially to logistics cost per unit before anyone notices, because the cost sits in freight rather than in the packaging line itself. Packaging redesign that right-sizes shippers, eliminates voids and uses stackable geometries often produces the fastest margin uplift of any project on this list, because the wins compound across every unit shipped.

The move is to design packaging at the unit level, beautiful and delightful enough for the customer, dimensionally efficient enough to drive down cost per shipped unit. Both matter. Most brands optimise for one and pay for it in the other.

4. SKU rationalisation

SKU rationalisation almost always releases margin, but it's the exercise founders resist longest because it feels like cutting range rather than sharpening it.

Take a D2C brand turning over around £8m. Revenue is growing, but gross margin isn’t moving. The obvious diagnosis is to improve costs across the P&L: renegotiate with suppliers, reduce packaging costs, tighten fulfilment. But once operations, finance and FP&A properly dig into the numbers, the biggest lever often sits elsewhere: SKU rationalisation. Around 70% of the SKU range may collectively drag margin down by five percentage points, adding inventory cost, forecasting effort and operational complexity without generating enough revenue to justify it.

The answer isn’t simply to cut products. It’s to rebuild the merchandising and product strategy around the business model, where the market is heading and what customers genuinely value.

Cut the underperforming tail, then consolidate the range around the SKUs that earn their place. Margin improves, working capital is released and operations become dramatically simpler, without the customer feeling like they have less choice. The range becomes more relevant.

Every SKU carries a cost beyond the product itself: tied-up inventory, forecasting effort, obsolescence risk and added complexity across supply chain, operations and finance. Rationalising the tail tackles all of these at once, making it one of the highest-impact quick wins, and one that most founders avoid.

5. Forecasting accuracy

Forecasting is one of the clearest points where operations and finance come together. Get it wrong and the cost shows up everywhere: overstock leads to obsolescence and markdowns, understock means lost sales and expensive last-minute freight, and excess inventory ties up cash that could be used elsewhere.

Improving SKU-level forecast accuracy from 60% to 80% can release meaningful working capital while protecting gross margin through fewer markdowns and less expedited freight. But better forecasting depends on reliable demand data, and that starts with a finance function capable of producing accurate revenue and unit data by segment.

Plus six more worth knowing

We chose these five because they’re where we most often see margin being left on the table. But they’re not the only opportunities.

Portfolio mix and range architecture, supply chain design, nearshoring versus offshoring, duty engineering, returns policies, manufacturing models and channel mix can all have a significant impact. Each deserves a conversation of its own, and most brands will find meaningful margin gains in at least three or four of them.

And then there's pricing

Pricing is one of the most powerful margin levers, and one of the most underused by teams. Assuming volume holds, a well-executed 1% price increase flows almost entirely into gross margin. Compare that with delivering a 5% cost reduction, which can involve months of supplier negotiations, contract changes and additional working capital. Pricing can move the number much faster.

Most consumer goods brands between £2m and £20m do change their prices, but rarely as part of a deliberate strategy. Prices increase when input costs rise or when a competitor forces a review. That’s reactive pricing.

A proper pricing strategy starts with a different question: what should this product cost based on the value it creates for the customer, the brand’s position in the market and the role it plays within the wider range, not simply what it costs to make?

Take a growing brand with a flat gross margin. Its pricing architecture hasn’t been reviewed for almost three years. The data shows that some SKUs are underpriced despite clear willingness to pay, while others cost more than the value customers believe they receive.

Rebuilding that architecture means raising prices where the brand has room to do so, often without losing volume, reducing prices where greater volume can more than offset the lower margin per unit, and tightening the promotional calendar. The result can be a meaningful net margin uplift and a range that feels more coherent to the customer.

Moving towards value-based pricing isn’t simply a spreadsheet exercise. It requires customer research, competitive analysis and an honest assessment of where the brand genuinely sits in the market.

The other half of the equation is promotional discipline. Every promotion gives away margin. When discounting becomes embedded in revenue expectations, brands can find themselves trapped in a cycle they can’t leave without taking a short-term revenue hit. The businesses that use promotions strategically, rather than defensively, protect both their positioning and their margin.

Where to start

Strong margins start with numbers you can trust: clean data, a disciplined close and reporting that gives the leadership team a clear basis for decision-making.

Turning those insights into action, through supplier renegotiation, SKU rationalisation, packaging redesign, pricing architecture or more rigorous forecasting, is where The Ops Engine comes in.

Wherever the gap sits, speak to the team best placed to close it.