Factors to consider before adopting quantity discount method

[Augusta]

It can impact positively on a business if you adopt the quantity discount method to lure or entice customers or buyers to purchase more per price unit. But you need to consider some factors before adopting this method of luring buyers.

The factors to consider include:

High capital needed

You need to consider the capital you would need to use this method. you would need high production volume to use this method

Squeezed profit margin
Know that you would be squeezing your profit with this method so you need to consider this

incessant production
Be ready to always always have incessant production as you would be having high turnover.

 

[Ramolak19]

Prior to using a quantity discount method, companies should think about managing their inventory, pricing strategy, demand forecasting, and production costs. Examining how quantity discounts affect corporate margins, client demand, and cash flow is crucial. Furthermore, companies must to determine whether fulfilling minimum order quantities is feasible and consider the long-term effects of using a quantity discount technique on their overall operational efficiency.