Definition
Volume discount pricing is a strategy adopted by many companies to generate bulk sales through discounted prices. This pricing model helps companies to encourage customers to make more purchases of the same offering. It results in a win-win for the buyer and seller. While the selling company can easily reduce its inventory and generate more sales, the buyer can get quantity discounts and thereby short-term cost reduction.
Example
Volume discounts can be seen in various product/service offerings in our daily lives. For instance, a shopkeeper may offer a scheme like buying three packs at a reduced price. Large companies such as Amazon and Walmart seek discounts from sellers and pass them on to retail customers. Brokerage firms may offer a discount on commission if an investor makes a huge investment.
Why it matters
Volume discounting matters as :a. It helps companies to remain competitive in the business and sometimes even beat the competition. b. It is a popular promotional strategy used by many B2C businesses.c. It allows companies to attract a large customer base. d. It benefits customers by allowing attractive discount rates for bulk purchases.e. It is used by companies to establish a brand name and capture a larger market share.