Volume Pricing Overview: 3 Benefits of Volume Pricing

Volume pricing is a sales strategy that involves lowering the price per unit of a product as the quantity of the order increases. Volume pricing plans can be an effective way to sell more products as you entice customers to purchase a higher quantity by offering competitive rates. While the discount can be an incentive for customers to purchase larger quantities, one of the disadvantages of volume pricing is that you may end up creating a lasting expectation of lower prices for your products.

Many companies, from e-commerce startups to small businesses, use volume pricing methods. The product pricing model can help you:

1. 1. Appeal to a wider audience: Companies who offer a volume discount can sell to a wide range of customers, regardless of the number of units the consumer wants to purchase. You can target the audiences who have the means to purchase more units given the right incentive and the customers who might only need to purchase one or two products. If a new customer only wants a few units, they can pay the full price, while customers who want to buy in bulk can get the lower price. Opening up to both small and bulk orders widens your customer base.
2. 2. Offer competitive prices: A volume discount pricing model allows you to offer low prices on large quantities and still meet your profit margin. By offering a competitive price per unit, you can draw new clients to your business and create valuable, loyal customers.
3. 3. Sell more products: If your business has a high volume of products, you can use a volume pricing structure to entice customers to buy larger quantities and get units off your shelves quickly. This helps you drive revenue and saves you money on the total cost of inventory storage.

In a volume pricing model, the price per unit changes depending on the number purchased; in a tiered pricing model, the cost of a unit changes based on the tiers. For example, in a tiered pricing strategy, you can offer different price points for the tiers; you can price the first one to ten units at one dollar each and the next tier of eleven to twenty units at fifty cents each. If the customer buys twenty units, the first ten will cost the set price of one dollar each, and the next ten will cost fifty cents each.

However, in a volume pricing model, if you offer a discount based on volume, all units cost the same price. If your base price is one dollar a unit, but you offer a reduced price of fifty cents per unit when purchasing twenty or more, and the customer buys twenty units, they will pay fifty cents each—the same price for each unit.

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