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How do we determine volume discounts?
My company sells a software product (soon to be more products). I have been asked a few times about volume discounts, but am unsure how to decide what to offer. Do I offer breaks at 10 units? 50 units? 100 units? How much of a break do I offer? Do resellers get less of a discount than a big box store? What about non-profit discounts? I don't want to offer such large discounts that I'm stuck when Wal-Mart comes calling (dream on!). What is a good way to break out a discount structure? My profit margins are fairly good, but if I sell for much less than 50 percent off, I'm not really making enough money to run operations and grow the business.
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#1 - Check out the industry standards and research what you can and should offer.
#2 - Work on price breaks at approximate sales numbers. Eg, a software provider for SME's, might have price breaks at 5 users and 10 users whereas a program sold to multinationals will have price breaks at 250 users etc.
#3 - Work out the maximum discount you will give and make that for the largest volume and then work your way backwards from there.
All the Best,
Brad Sugars
Brad Sugars is the founder of ActionCOACH, a business coaching franchise. As a world-renowned entrepreneur, author and business coach, he has helped more than a million clients around the world find business and personal success. Sugars has owned and operated more than two dozen companies including his main company, ActionCOACH, which has nearly 1,000 offices in 22 countries.
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