What is Volume Discounting?
Volume discounting is a pricing method that rewards customers if they purchase more of a product or service, incentivizing a higher purchase volume. Volume discounting or volume pricing can offer a range of discounts to customers who purchase products or services in large quantities.
How Does Volume Discounting Work?
Volume discounting works as an incentive for customers to buy products or services in bulk. The strategy allows customers to buy more at a reduced rate, allowing businesses to see a higher sale volume. Buying in bulk often gives more value to customers as they can save money on their items.
Choosing the correct pricing model will depend on your business and its unique needs. It’s therefore important to analyze the average quantity per order. This way, you can see the growth of the unit quantities, meaning the incremental model will retain higher unit prices. If there is a price break, the difference in price between the models will grow.
Benefits of Volume Discounting
Volume discounting has several benefits. In particular, volume pricing is beneficial for B2B. There are several benefits of volume discount pricing, including but not limited to:
Volume Discounts Give Customers An Incentive to Buy More
Offering discounted products or services can be a great incentive for customers. Volume discounting is an effective strategy if you’re looking to quickly move your stock. It also works well when you have limited costs involved, like offering free shipping.
Volume Discounts Add Competitive Value
Using discounted products can give businesses a competitive price advantage. The first step is to understand your customers and what discounted rates are attractive to them. Volume discounting can motivate customers and even increase their demand. Customers who value your products are likely to repeat their purchases if discounts continue. Volume pricing can help you stand out from your competition, especially in a saturated market.
Volume Discounts Appeal to a Range of Customers
Promoting products to the right target audience can be the difference between low or soaring sales. Creating a price plan can appeal to both small businesses and large organizations. A volume discount method allows businesses to not be discouraged from the final price, which will appeal to more types of businesses. The idea is to make buying a large quantity of products or services appealing, adding convenience and ease into their buying process.
Disadvantages of Volume Discounting
Keep in mind, there can be some disadvantages to volume discounting as well. Often, these side-effects occur if discounts are applied in excess.
Volume Discounts Can Result in Devaluing Products or Services
If a you change your prices without a sound plan, it could lead to customers devaluing your products. Customers may want to understand why products and services are now at a significantly lower price point, questioning the real value of stock.
Volume Discounts Can Result in Loss of Revenue
When discounting your products, you may discover that you’re missing out on revenue. To make up for the discounted rates, you may need to increase your sales in order to continuing growing.
Lowering Your Price Can Decrease Value
Reducing the prices of your products allows you to set a new value. Be sure you understand who your customers are and what they’re willing to pay before the price of a product or service is changed. Increasing prices may put your target audience off, resulting in a purchase with a competitor.
Get in touch with our team today to learn more about volume discounting with Vendavo.
