What is a quantity breaks offer?
If you are not aware of this kind of discount, quantity breaks discount is the famous “Buy X get Y% off”. Many famous retailers use this kind of offer because it’s very efficient in increasing the average cart order for the product affected by the discount.
Depending on the product sold, a quantity breaks offer can have different variants. A consumable like a battery, a cleaning product, an electronic cigarette refill, or a simple bubble, for example are perfect products for an offer with unlimited volume as they are cheap and consumable.
On the other side, products like a shirt, a phone case, or a travel bag are perfect for a bundle offer like “Buy 3 get 1 FREE”.
Quantity breaks psychology
How does it work? Why are these discounts so powerful, and why are they irresistible for many of us?
Quantity discounts exploit the same psychological level as a classic discount: Urgency. Somehow, the urgency is different with a quantity discount. Where a classic discount is almost always an offer limited in time, creating the feeling of urgency, a quantity discount offer can be permanent. Here, the urgency is created because of the conditions required to trigger the discount.
Contrary to a simple discount offer, the customer is usually not “attracted” by the quantity discount; he has already decided to buy the product. But once he is ready to pay, he has to choose between: Buying more and getting a discount, or keeping only the current volume and losing the discount, knowing that the only way to take it back is to make another purchase.
Internal reference price
Studies found that running long-term fixed discounts on a product can affect the internal reference price of your customer, which can be dramatic for a brand. Even in the long run, quantity break offers to affect much less the internal reference price of your products.
The reason is that for a volume discount, the discount is “justified” by the quantity and is much more challenging to compute, especially if you use multiple discount levels ( for example: Buy 3 get 10% off, Buy 5 get 15% off, Buy 10 get 20% off ). In the long run, using a volume discount is not a problem and is a strategy used by many big brands, as we’ll see later in this article.
Quantity breaks vs fixed discount
What’s exactly the difference between a quantity break discount and a fixed discount ? In which case is volume discount the most efficient?
Even if they look similar, volume discount offers are actually very different from classic discounts. First, as we saw in the first part of this document, it depends on the type of product you want to sell. When a 20% discount on a brand new car is a great deal, you can’t offer a quantity break offer for a car ( who would buy the second car for 20% less ? ).
A fixed discount usually aims to bring more traffic to your store and increase your orders. A volume discount offer should be used mainly to increase your average order value. If your customer didn’t already decide to buy one of your products, why would he decide to buy 2,3 or 4 for a discount?
The other main difference between these two types of discounts is the duration of the offer. Where a classic fixed discount should be limited in time to protect the internal reference price of your products, a quantity breaks offer can be permanent.
The most famous quantity breaks offer
One of the most famous quantity breaks offered by MacDonald.
Chances are you already visited one of their restaurants, and if you did, like 95% of their customers, you ordered a menu. You could have chosen to buy only a burger, but after looking at the prices, you saw that the bundle: burger + french fries + beverage was only a few dollars more than the burger alone and, compared to the units prices of the items, it’s almost a 30% discount. That’s the first volume discount made by McDonald’s: the menu.
But that’s not the only volume discount they offer. After you choose your menu, you have to decide the size of the menu, and you quickly realize that the bigger the size, the less you will pay for the volume:
- Small menu: 7$
- Medium ( x2 fries and beverage size ): 8$
- Large ( x4 fries and beverage size ): 8.5$
This is the second volume offer used by McDonald’s to increase their Average Order Value: multiple menu sizes with decreasing volume price.
Conclusion
Quantity breaks offers are a great way to sell more on your store by increasing your Average Order Value. They are very different from fixed discounts and do not serve the same purpose. This kind of discount can be used in the long run without affecting the internal reference price of your products, which is a huge advantage over fixed discounts.