What is it and how does it work and how does it look – News Couple

What is it and how does it work and how does it look

As a wholesaler or supplier of large quantities of certain products, you will encounter situations where you want more buyers – situations where they may have the bandwidth to buy more but lack the motivation to do so.

These types of situations put you in a difficult position, and getting buyers to pay more cash for orders of higher volume is a challenge in itself. One of the most common and effective ways to tackle this dilemma is through what is known as volume reduction.

Here, we’ll explore this concept further, look at the different types of volume discounting, see the pros and cons of taking advantage of one of these strategies, review some examples, and differentiate it from a similar concept called quantity discounting. Let’s jump.

Let’s take a look at the three most popular types of volume discounts.

Discount size limit

Minimum volume discounting is a way that a discount a business offers only takes effect after a buyer reaches a certain limit — or quantity — when they purchase it. For example, a supplier may offer a discount on any unit purchased in excess of the initial 100 units.

Gradient size discount

Graduated volume discounting is similar to the threshold method whereby discounted prices are offered to buyers after they purchase a certain quantity of a commodity. But while threshold volume discounts broadly apply to every purchase after a certain point, tiered volume discounts are offered in tiers — meaning that 100 units may come at full price, the next 50 may come at 75%, and 50 units may come after That’s at 50%.

Package size discount

With bundle discount, the company offers a discount for a predetermined quantity of the product. For example, it may offer a discount on packages of 100 units. If a company buys 99 units, you will not get the discount. If she buys 101 units, she only gets a discount on the initial 100 units.

Volume discount pricing strategy

Pro: It can encourage buyers to buy more.

This point may seem rather obvious, because it is the literal end game of the strategy itself. Volume discounts, like any other type of discount method, are designed to motivate buyers to buy more. If you can create an effective volume discount pricing strategy, you should be able to continually increase purchases.

Con: You are undermining the potential profit.

This point is relevant to any discount strategy. By offering merchandise at lower prices than usual, you are cutting off the profit earned by each unit. But if you sell enough at a not-too-too-discountable discount, you can offset those losses per unit with higher sales.

Pros: Like any other promotion, it can attract new customers.

Reduction, as a concept, is based on the fact that many buyers are receptive to better deals – and if you can effectively design and promote a volume discount strategy that will interest buyers, you can attract a solid base of new customers.

Cons: Can set unreasonably low pricing expectations.

This is a risk you always take by offering any kind of discount. Any of these methods can fundamentally drive goalposts and become a benchmark for what consumers expect of your brand if you’re not careful – and the volume discount strategy is no exception.

Volume Pricing Example

Quantitative pricing is usually used by companies or manufacturers that sell goods in bulk to motivate buyers to demand more. For example, let’s imagine that a buyer from a company like Walmart is looking to purchase a particular brand of televisions to stock its electronic divisions in the Northeast United States from an overseas manufacturer.

Walmart intends to buy 10,000 units, but the supplier wants her to buy 12,000 — and here’s what different volume discount strategies might look like if the supplier took advantage of them.

Discount size limit

As we established, the manufacturer contacted Walmart wanting to order at least 12,000 units right away, but Walmart is only interested in ordering 10,000 at the moment. To incentivize Walmart to purchase an additional 2,000 units, the manufacturer offers any additional units purchased over the initial 10,000 at a 15% discount.

Gradient size discount

Once again, the manufacturer is trying to motivate Walmart to order at least 12,000 TVs. If you choose to use a graduated volume discount strategy, you may offer 10,000 units at full price, the next thousand at a 15% discount, and the next thousand at a 20% discount.

Package size discount

In this way, the manufacturer may offer a 10% discount on 12,000 TVs. If Walmart wanted to get that deal, it would have to buy that fixed amount.

Quantity discount

Volume discounting is often confused with a similar method called quantity discounting. And although the two have essentially similar premises, the main distinction between the concepts comes down to size.

Volume discounting is usually used to motivate buyers to buy large quantities of an item – consider bulk or bulk purchases. For example, a wholesaler may offer bulk discounts that apply to orders over 1,000 units.

On the other hand, quantity discount is usually reserved for smaller deals. For example, a retail outlet running a “buy one get one free” promotion would benefit from a quantity discount strategy.

Successful recruitment of a downsizing strategy can be a challenging process, and is only suitable for certain types of businesses. But if your company moves large quantities of certain products, it serves you to understand the concept.

Sales Pricing Strategy Calculator

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