5 situations volume discount pricing makes sense
Volume discount pricing makes a lot of sense in many businesses, physical and digital alike. The best example of the power of volume discount pricing can be easily found at a supermarket around the corner. You can always find an appealing discount for a larger package of absolutely any product whether it’s toothpaste or gum.
This strategy makes a lot of sense for manufacturers, it helps sell more product. In software and SaaS industry it makes even more sense, as it costs less to produce more digital product, or in some instances it doesn’t cost anything to do so, therefore the profit margin for bigger sales volumes is greater.
Although it might seem like a great idea to adopt volume discount pricing model right away for your business, volume discount pricing makes only sense in the following situations:
1. When your product license is limited just to one device or user
Let’s say you sell media or bookmark management software. One of the benefits for such software is syncing between devices to manage bookmarks, movies or music across platforms.
Another similar scenario is when your product is widely used by schools or universities, such as office suites or educational software. Usually these clients have huge computer labs and would need more licenses to install it on all computers in the labs. As this target group is often very price sensitive, the volume discounts can serve a decisive factor in choosing your solution.
In this case, volume discount pricing serves as an incentive to purchase more licenses, so that your product can be used on more devices.
2. When your product pricing is tied to usage
There are a lot of software and SaaS products, pricing of which is based on the storage volume, or number of contacts. For example, you sell a solution for cloud storage and you sell storage volume in 50GB units.
With volume discount pricing you can lower the price per unit by 10%, 15% or 20% percent, depending on the number of units your customer buys. This can help significantly increase the value of your product.
3. When your product users are teams
There are plenty of professional software solutions that are used by teams. Video editing or 3D design software can serve as perfect examples in this case. Sometimes companies and studios have 50 designers and your product license is only limited to be used only by 10 at a time.
Volume discount pricing can help you sell more licenses to these companies and also increase the perception of value and customer satisfaction from your customers’ side.
4. When you want to encourage customers to buy more licences for family and friends
Volume discount pricing can do a great job acting as a holiday promotion. Holidays is the time when people buy gifts for family and friends, but also people really try not to overspend during this period.
With volume discount pricing, your customers can be easily convinced to buy more games as gifts for a cheaper price. This strategy works great for games especially.
In this instance, volume discount pricing not only helps you sell more product licenses, but also grows your user base.
5. When your product usage is tied to virtual currency or credits
There are many popular online games that sell virtual in-game items for virtual currency. These games get players hooked and users usually come back to buy more virtual money. Despite the often reckless spending patterns on online games, these users would like to save their money one way or another.
Volume discount pricing can persuade these groups to buy more virtual currency that can be used for a longer period of time, or for more valuable in-game items that will ensure many won battles for your players.
In this case, volume discount pricing helps you increase your average cart value and create a more predictable cash flow.
How do you apply volume discount pricing in your business? Share your ideas below.
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