For most wholesale distributors and manufacturers it is common to offer pricing discounts based on the quantity of an item purchased. For example, a single widget might sell for $10 but an order of 20 widgets might be priced at $9 each.
Our pricing consultants see many companies that have set clear structures in place by which to guide discount offerings. Purchases of 1-9 units might be priced at $10 while purchases of 10-19 units would be priced at $9. The problem our pricig experts see lies in the enforcement of such pricing discount schedules.
Take for example the company with $15 million in revenue who is leaking $700,000 in price and margin just because they are not adhering to their discount schedule. Exceptions become the rule and an analysis reveals that most customers are getting a deeper break on the discounts. So, the purchase described above of 1-9 units should be in effect paying list price at $10 but instead is only paying $9.
Containing quantity discount break point management can drive a significant amount of margin. Often, there is no need for adjusting the break points but simply adhering to the schedule that is already in place.