Volume Premiums - More Isn't Always Less

Volume discounts don't always make sense. Charging a higher per-unit cost in a larger pack size contradicts the traditional cost plus pricing model but offers vendors a great way to increase profits.

Volume Premiums - More Isn't Always Less

With traditional cost plus pricing volume discounts are generally assumed. There is an established pattern of "the more you spend, the more you save" and we assume that the larger pack size offers a per-unit savings over the smaller size, and that the jumbo Costco pack promises even greater savings.


But not every volume buyer looks at volume the same way. Some are interested in the most units for the least money, and in that case a volume discount works for everyone. Other buyers might be interested in the novelty of a larger pack size, and be willing to pay for it. In that case selling the larger pack size at a volume discount means leaving money on the table.

Liquor companies use sophisticated techniques to increase sales and profits by understanding the value each type of customer assigns to volume (vs pack size/packaging) and pricing accordingly.

Product Differentiation Value-Based Pricing