Volume Discount: Buyer's preference and how it works

WHAT IS VOLUME DISCOUNT?

A volume discount is an economic incentive to encourage individuals or businesses to purchase goods in multiple units or in large quantities. The seller or manufacturer rewards those buying in bulk by providing a reduced price for each good or group of goods. Volume discounts allow businesses to purchase additional inventory at reduced cost and allow sellers or manufacturers to reduce inventories by selling more units to bulk buyers who are incentivized by the lower price.Volume discounts allow buyers to purchase goods at a discounted rate. These savings are often passed on to consumers. For example, Walmart is able to purchase such large quantities of each particular good that it routinely receives volume discounts from its vendors.

WHY BUYING IN BULK IS CHEAPER FOR CONSUMERS

Elimination of Retail Expenses

The price you pay for individual products at a retail store includes a markup over the manufacturer’s price so that the store can pay for expenses like rent, utilities, employee wages, and other costs of doing business.While most of us like the convenience of a local grocery store for perishable household items like milk and eggs, purchasing non-perishable items in bulk from a wholesale store prevents you from having to pay these markups.

Fewer Trips to the Store

Fewer trips to the store mean fewer purchases in general, but there are other ways this bulk buying benefit can help you save money. For instance:

1. Less gas – 88% of households drive to the grocery store for an average round trip of four miles.4 Considering the cost of gas, reducing the number of grocery store runs in your routine can lead to serious savings.

2. Fewer impulse purchases – Grocery stores can often tempt us with sales on items we don’t actually need or indulgences we end up impulse buying while we’re standing in line at the register. Even if individual price tags aren’t huge, those impulse purchases can easily add up over time.

DISADVANTAGES OF BULK PURCHASING

While there are many advantages to buying in bulk, there are also some potential disadvantages to consider. These can include:

1. Upfront cost: While buying in bulk can save you money in the long run, it often requires a larger upfront investment.

2. Limited storage space: Buying in bulk often requires more storage space than purchasing individual items.

3. Risk of waste: If you don't use all the items you purchase in a bulk before they expire, you may end up wasting money and resources.

THE PSYCHOLOGY BEHIND VOLUME DISCOUNTING

The psychology underpinning volume discounting is predicated on showing appreciation to customers, simultaneously generating a sense of urgency to take advantage of the discounts.Threshold volume discounting, for instance, incentivizes customers to purchase larger quantities in greater quantities to attain a better deal.The perception of getting a better deal or more value for their money can be a powerful motivator for customers to buy more items per order, rewarding those who make large-volume orders. This perceived value is particularly crucial for B2B software businesses, as it cannot be connected to a physical product.In essence, the psychology behind volume discounting revolves around the perception of value and the desire to maximize that value. By offering volume discounts, businesses can tap into this psychological aspect and encourage customers to make larger purchases, ultimately leading to increased sales and revenue.

THANK YOU

Harsh Manoj Sharma

G - 701

Group No. 9