It is common to offer discounts for customers who buy in large quantities, especially in the B2B channel. This requires the business to define volume prices.
There are multiple ways to do it. The most common is the “all units” model, when each unit’s price is equal to the unit price for the cheapest volume tier reached.
In this example, we have 4 tiers, and the unit price decreases as we go from one to 4.
- One cable costs 4.49.
- If you buy two, they are 4.45 each, and when buying three of them, you pay just 4.40 each.
- For 4 and more, we have an overage price of $4.36.
In the incremental model, a discount is only applied to units ordered above a specific price tier.
In the example, we have 3 tiers from 1 to 5, from 6 to 9, and 10 and above.
You move to the next tier price only when one tier is completely filled.
The table illustrates how the calculation works.
Also remember that when you are configuring volume discount, you can specify it in absolute numbers or as a percentage.