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.#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,