Quantity Discounts

Quantity Discounts

by Todd Mittleman

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.

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.

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.

3 Reasons