Quantity break

A discount that deepens as the customer buys more units: buy two, save 10%; buy three, save 15%. Each tier is its own order with its own margin.

In plain words

A quantity break, or volume discount, lowers the price per unit as the number of units goes up. The tiers are shown side by side, so the customer sees what buying one more would save.

Each tier is a separate order to price. The discount grows with the tier, and so does the fulfilment the order saves per unit. Whether a deeper tier keeps more or less than the one before it depends on which grows faster.

Formula

  • Tier price = unit price × units × (1 − that tier's discount)
  • Tier margin = tier price − unit costs × units − one order's fulfilment and fees

Worked example

One bag at $40.00, two at 10% off for $72.00, three at 15% off for $102.00. The engine prices each tier as its own order: $15.36, $32.63 and $48.06.

The margin rate rises with the tier, from 38.4% to 45.3% to 47.1%, even as the discount deepens. The shared label outweighs the price given up.

The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)
Revenue
$40.00
Cost of goods
−$12.00
Pick and pack
−$1.18
Packaging
−$0.50
Shipping label
−$7.50
Card fee per order
−$0.30
Refunds
−$2.00
Card processing
−$1.16
Contribution margin
$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

The deepest tier is not always the best one to sell

A tier can keep the most per order and still be the wrong one to push, if few visitors take it. What matters is each tier's margin times the share of visitors who buy it. Sometimes the middle tier, taken by many, earns more per visitor than the top one.

Using it

Price every tier before you publish, and look at the step between tiers: what the customer saves by moving up, and what you keep. If moving up costs you margin, the tier's discount is too deep. If it gains a lot, you have room to make the step more tempting.