Quantity Discounts

So you want to sell more items to your customers? The best way to get them to buy more of a particular item is to give them an incentive to do so. "Buy 2, Get 1 Free". The cost of incentive is then offset by the profit margin.

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The popular technique of selling at a % discount, is generally a lower profit maker than getting the prospect to pay more or buy more than they normally would by dangling a better carrot. Consider an item like an Ipod that would normally be a 1-item purchase. By giving quantity discounts with an incentive of Buy 2, Get 1 Free would generate more profit than offering the corresponding 30% discount on the 1 item.

Example:
Retail = $100
Wholesale = $50
Profit Margin = $50

Selling 1 Item at 30% discount would yeild a $20 profit.
($100 retail - 30% discount - $50 cost = $20 profit)

The "Buy 2, Get 1" method would yeild a $50 profit.
($200 retail - $150 cost = $50 profit)

If you use an incentive that costs less than the item you’re giving for free, you’ll increase your profit margin even more. Simply change the offer to "Buy 2, Get X".

A $25 incentive would increase your margin to $75.
($200 retail - $100 cost - $25 incentive = $75 profit)

Vacation incentives from GetUp&Go may provide you with a lower cost incentive. And the retail value of travel incentives are much, much higher.

Learn more about Pricing strategies at Wikipedia.

by Todd Mittleman