Insights

Volume Discount Sensitivity Analysis for Optimal Pricing Strategies in B2B Firms

By

Aidar Vafin

Volume  discounts  are  particularly  prone  to  misinterpretation  in  the  B2B  sector.  This  is  because corporate clients  are  more  inclined  to  purchase  things  in  large  quantities.This  research  argues  that when  considering  a volume  discount,  the  first  line  of  examination  should  be volume  discount sensitivity analysis. Keyword: B2B,Sensitivity analysis, Volume hurdle, volume discount.

Volume  discounts  are  particularly  prone  to  misinterpretation  in  the  B2B  sector.  This  is  because corporate clients  are  more  inclined  to  purchase  things  in  large  quantities.This  research  argues  that when  considering  a volume  discount,  the  first  line  of  examination  should  be volume  discount sensitivity analysis.We define volume sensitivity as how much a product's volume discount influences a customer's desire or readiness to purchase. It indicates the relative relevance of volume discount to other  product  features  or  buying  factors  for  purchasers.We  discussed  how  techniques  such  as  the Ladder  method,  Van  Westendorp  method,  and  Gabor-Granger  approach can  assist  the  firms in devising optimal volume discount strategies.  This research also discusses the volume hurdle analysis in  the  context  of  volume  discounting. If  a  firm  anticipates  meeting  the  volume  hurdle,  a  volume discount  may be necessary. If the volume hurdle exceeds the predicted change in sales, the volume discount cannot be supported, and the company should adopt other options.