Volume Based Pricing refers to a pricing model where the price for a product or service varies based on the quantity purchased by the buyer. Generally, this approach offers discounts on the price per unit as the volume purchased increases, incentivizing buyers to purchase larger quantities. The rationale behind this pricing model includes economies of scale for the seller, increased sales volumes, and providing greater value to customers who commit to higher purchase levels.
For example, a supplier might charge $10 per item for orders of less than 100 units, but reduce the price to $9 per item for orders between 100 and 500 units. Orders exceeding 500 units might receive a rate of $8 per item. This creates an incentive structure encouraging the customer to order larger quantities to benefit from the discounted rates.
Volume Based Pricing is commonly employed in industries such as manufacturing, wholesale trade, and subscription services. This pricing strategy aligns well with businesses aiming to reward bulk purchases, manage inventory levels, or strengthen customer loyalty.