Volume discounts can be found everywhere retail or online transactions are occurring. At the gas station: Buy 2 cokes for $3. At the grocery store — sometimes you won't even realize it's volume discounts in prepackaged goods (6 pack, 12 pack, 18 pack, case of beer or wine by the case). Think Costco and their volume discount strategies! Volume discounts work in a way to reward buyers for buying in larger quantities as the seller is happy to reduce the margin to sell more units.
Why Volume Discounts Increase AOV
Volume discounts are a way to increase your AOV (Average Order Value). You've already captured a user at your brick and mortar or e-commerce store — now how do you increase the cart value to maximize the return on your advertising investment? It works for both physical and digital products. Increasing AOV is one of the most important factors in driving revenue and profitability to your shop.
Choosing the Right Pricing Strategy
There are multiple pricing strategies when creating discounts to try and incentivize the behavior you are trying to drive. The discount percentages and the break points can factor into how people take advantage of your discounts. Take a look at your previous sales on a product that you sell. Are you seeing multiple units purchased in a single order? Do you think that someone might consider buying one for a friend or family member, for their office or second home, or for a holiday gift coming up in the future?
What is the additional return to you by offering that second or third unit for 10–20% off? More often than not, on items that are single purchases with high margins, offering this discount can be a major driver in increasing your AOV. The cost to experiment is low and can really boost your volume.
Try out the Volume & Discount Pricing app today!