Volume pricing offers a discount for products or services bought in volume.
Traditionally a discount was justified if a customer bought ten or more units of a product because the cost of sales was lower.
Sellers used it as an incentive to encourage larger order sizes.
Traditionally, a discount price would be set on unit sales from 10 to 50, and a higher one for 50-100, and so forth.
The discount would increase as the user bought more products.
The advantage of volume pricing is that it encourages higher purchases.
Often competitors offer volume discounts requiring you to do the same.
It can be used as part of the promotion of the product as well.
The disadvantage to volume pricing is that it cheapens the value of the brand as it treats the product as a commodity.
Also, it reduces the revenue.
To set your volume pricing first consider your core pricing model and maintain it.
Review the competition to see what is offered and how customers will compare you to.
Know your cost to build and deliver the product and don’t go below that price in discounting.
Identify typical purchase volumes and set up discounts for each tier.
Set your discounts to last a limited amount of time so if the market conditions change you can modify your discount pricing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.