The ultimate guide to volume discount for merchants in 2025
Volume discount allows businesses to increase sales volume and take advantage of economies of scale to save costs. From the merchants’ viewpoint, offering volume discounts helps them sell more products in a shorter time frame while building stronger business relationships. From the customer’s perspective, volume discounts offer great value by lowering the cost per item when buying in larger quantities.
While this strategy shows many benefits, volume-based discount can expose merchants and retailers to lowered price value and product devaluation, leading to potential sales loss.
In this article, we will explain the definition, the benefits & disadvantages, different types with real-life examples, and how you can implement volume discount successfully for your business.
Let’s dive in!
Understanding volume discount: What is it?
A volume discount is a price reduction given to buyers who purchase goods or services in large quantities. When customers buy in bulk, they receive a discount that makes the price per item much cheaper compared to buying a single product.
Let’s say a customer wants to buy office supplies, specifically pencils. If they buy a box of 10 items, the merchant might charge only 15 cents per count. But, if they decide to buy 100 items at once, that same merchant can give them a 10% as a special discount for the large-volume order.
Shopify volume discount is a common pricing strategy in e-commerce and retail, particularly in industries like wholesale, distribution, hospitality, and manufacturing. With the rise of online marketplaces and digital purchasing platforms, this approach has become even more popular, making bulk buying more accessible to businesses of all sizes.
The psychology behind volume discounting
Volume discount works because it taps into several marketing psychology triggers that motivate customers to buy more. Let’s look at some of the most powerful ones:
Perceived value effect: People naturally feel like they are getting a good deal when the price per unit drops, even though they're spending more overall.
Loss aversion: Customers worry they'll miss out on savings if they don't take advantage of the bulk discount. The fear of "leaving money on the table" can be stronger than the desire to save money by buying less.
Planning instincts: There's a psychological comfort in knowing everything is under control. Buying in bulk makes people feel prepared, reducing the stress of frequent purchasing decisions.
Anchoring effect: When the regular price is right there next to the bulk discount, the savings look crystal clear. People love seeing that they're making a smart choice.
These psychological triggers make volume discounts feel like obvious wins for customers. Let's explore different types of volume discounts you can structure to maximize their impact.
Different types of volume discount strategies
Tiered pricing
Tiered pricing, also known as stepped discount, is a price-volume model in which the discount price increases for each quantity range. That said, the customer moves to the next tier only when one tier is completely filled.
For example, a box of pencils costs 4 $ if customers buy from 1 to 100 units. From 101 units to 200 units, the price might drop to 3$. Then, from the 201st unit, the price can only be $2. If your customer decides to buy 250 boxes of pencils, their total will be:
($4x100) + ($3x100) + (2$x50) = $800.
Volume brackets pricing
Volume brackets, sometimes referred to as threshold volume discounts or quantity breaks, offer a set price for specific quantity ranges.
Let's say a box of pencils costs $3 each for 1-200 units, but drops to $2 each for 201-400 units. If a customer buys 250 units, they fall into the 201-400 range, so their entire order gets priced at $2 per unit:
2 × $250 = $500.
On many occasions, you will see people use the term “all-units pricing” as something similar to volume brackets. This means that if a buyer reaches a certain quantity threshold, the reduced price applies to all units.
For instance, if a customer purchases 150 units and crosses the 100-unit threshold where the price drops to $5 each, all 150 units get priced at $5 each. In simple terms, it is an all-or-nothing deal: Customers have to hit that threshold to get the discounts, or the price stays the same.
This approach happens mostly with B2C and B2B transactions, in which merchants encourage customers to buy more to unlock better per-unit prices. Supermarkets, grocery stores, and warehouse clubs often use this strategy to move products faster while giving shoppers genuine savings.
Package pricing
Package pricing, or bundle pricing, is a pricing strategy that applies a discount when customers buy multiple different products or services together. For example, an online beauty store creates a bundle of a cleanser, toner, and moisturizer together for $45. That is cheaper than spending $60 for each item.
Package discounts are great ways to upsell related products and services. There are many creative strategies that merchants come up with to increase their sales, namely “Buy One Get One”, “Product Bundles”, and “Free Gifts.”
Mix and match pricing takes bundle deals one step further by letting customers choose which products they want to combine. Instead of getting a pre-made package, shoppers can pick and choose items from a selection to create their own custom bundle. For example, Eterna Nutrition lets customers build their own 4-pack of vitamin gummies for the price of only 3.
Besides these main types, here are other volume discount strategies you might come across:
Cumulative volume pricing: This type of discount model rewards customers based on their total purchases over time, rather than requiring them to buy everything in one big order.
Variable rate pricing: A pricing strategy where the cost per unit changes based on different factors, such as stock levels, market conditions, time of year, etc.
Seasonal discount pricing: When sales seasons take place, merchants often offer special volume discount deals to stimulate sales of specific items.
Contractual discount pricing: In B2B transactions, businesses often negotiate with each other to get the best offers possible based on purchase commitment, order size, and negotiation skills.
Advantage of volume discount: What are the benefits?
Volume-based discount offers many benefits for businesses, both financially and functionally. Let’s look at some advantages a volume discount can bring to you:
Increased sales volume: The most obvious benefit is a significant boost in the number of items you sell. Even though you make less profit on each individual item, you end up making more money overall because you're selling so much more.
Better cash flow: When customers make bulk purchases, they pay you upfront money right away. For subscription businesses, this also makes it easier to predict how much money you'll make in the coming months, which helps with planning and budgeting.
Efficient operation: Selling in large quantities creates economies of scale, which means the more you make or buy of something, the cheaper it becomes per item. Moreover, large-volume transaction also reduces the frequency of restocking and other handling fees, resulting in cost savings.
Improved inventory management: Volume pricing helps you move products faster, reducing inventory holding costs and lowering the risk of being stuck with unsold products.
Stronger business relationship: Volume discounting can foster loyalty by offering more favorable terms for repeat purchases. When trust and mutual benefits are established, customers get a better deal while you maintain an ongoing sales and revenue stream.
Flexible market adaptation: Volume discounts allow businesses to adjust their pricing strategy and base prices to respond to market changes. It also helps with market expansion with an affordable price per unit, which can attract customers who couldn't justify the regular prices.
While volume discount offers several benefits, you need to be careful when planning your pricing structure to remain profitable. Moreover, the effectiveness of volume-based discounts also depends on factors such as the industry, product or service, and customer behavior. Let’s look at some disadvantages of volume discounting that you should consider.
The dangers of volume discount: Some disadvantages
Volume discount may seem to do a great job in increasing your sales. But if you look closer, volume discounting can expose you to some serious threats:
Lost profit: According to Insight2Profit, for every 5 percent reduction in price, a business needs to sell 38 percent more product just to remain at the same profitability level as before.
Lowered reference price: Every time you lower your price, customers will expect that price to become standard. In the worst-case scenario, customers will expect similar or better discounts in future business deals, which can put pressure on profit margins.
Reduced perceived value: When you reduce your price, customers will become suspicious. They will question the quality of your products and brand due to lower prices.
Complicated pricing structure: Using a volume pricing strategy can add complexity to your CRM system and billing process. Instead of one simple price, you now need to keep track of multiple pricing tiers based on how much customers buy. Not to mention customers getting overwhelmed with the pricing system.
Ultimately, volume discount can either improve your profit if you do it the right way. Otherwise, it will cost you profits. In the next section, we will show you the best practices to implement price-volume models without breaking the bank.
Tips to implement a volume discount program successfully
Before you start your own volume discount program, make sure to think strategically about what you want to achieve based on your current business health, market position, and the industry you are in.
Here are some of the best tips from our expertise working with multiple e-commerce storefronts to implement the price-volume model successfully:
Plan your volume discount strategy
First of all, you need to decide what your goal is when choosing your volume discount pricing formula. Make sure to have a look at your business capacity and metrics to make the right decision.
For business capacity, businesses that benefit the most often have the advantage of economies of scale and large customer bases. That said, they can offer more competitive discounts than other competitors without hurting their bottom line.
When looking at your metrics, pay attention to COGS (Costs of Goods Sold), CAC (Customer Acquisition Costs), and other administration costs to design your discount model. You should also check out market research and look at your customer buying patterns to understand what motivates people to purchase more. The better you understand your costs and your customers, the smarter you can be about setting up volume discounts.
Maintain clear communication and transparency
When you have developed your volume discount, it is important to communicate clearly to your customers and your employees.
Your customers need to easily understand how your pricing works. So, avoid confusing jargon if necessary. Make this information visible on your website, in your sales materials, and during conversations with potential buyers. Use simple examples and clear charts rather than complicated explanations.
Your employees need thorough training on the new pricing structure so they can confidently explain the discount tiers to customers. To support them and prevent calculation errors, you can use a volume discount Shopify app that automatically displays the correct prices as customers adjust quantities.
Prepare and review regularly
Volume discount will affect how your business operates, especially if you start selling much larger quantities than usual. Make sure to invest in scalable logistics solutions, find more storage space, or build stronger relationships with suppliers. Most importantly, know the lowest price you can charge and still make money, and set a minimum price floor for that.
Once your volume discounting is up and running, don’t forget to review your price and infrastructure frequently to make sure it remains relevant and effective. Keep an eye on your profit margins, customer feedback, and how much extra work the volume orders are creating. Be ready to tweak your discount tiers, change minimum quantities, or adjust terms as your business grows, costs change, or market conditions shift.
Comply with legal and ethical requirements
When setting up volume discounts, you must be careful to follow local laws and ethical business standards.
Volume discounts often bring about price discrimination, a practice in which a business charges different prices for the same product or service to different customers. So, be transparent about your discounts by clearly explaining how they work and what quantities customers need to buy to qualify. Avoid creating pricing that could unfairly exclude certain groups or violate anti-discrimination laws.
Be careful not to price your volume discounts so low that you're engaging in predatory pricing, the act of lowering prices to force competitors out of business, then raising prices once they’re gone. This practice is illegal and can get you into serious trouble. Keep your volume discounts reasonable and based on legitimate cost savings from bulk orders, not on trying to destroy your competition.
When in doubt, consult with a legal professional to make sure your discount structure complies with local competition and consumer protection laws.
Conclusion
Volume discount can be a game-changer for your business when implemented thoughtfully. They help increase sales, improve cash flow, and build customer loyalty. However, volume discounts only work if you still make money. It's tempting to offer huge discounts to attract customers, but if you're barely making any profit, you'll hurt your business.
The key is finding the right approach that fits your industry, customer base, and business goals. Start simple, see what works, and build from there.
FAQs
Harry Nguyen
Digital Marketing Specialist at Qikify
Hi, I’m Harry, your friendly neighborhood marketer at Qikify. I am all about providing E-commerce merchants like you with the best insights and industry tips to help you grow your online stores and drive more sales.
Out of office, I like working out at a gym and learning about all things E-commerce and Marketing.
Feel free to reach out to me on LinkedIn. I’m always up for a coffee chat with other marketing folks and store owners to exchange ideas and explore potential collaborations.
TABLE OF CONTENT
- Understanding volume discount: What is it?
- The psychology behind volume discounting
- Different types of volume discount strategies
- Advantage of volume discount: What are the benefits?
- The dangers of volume discount: Some disadvantages
- Tips to implement a volume discount program successfully
- Conclusion
- FAQs
