Volume Discount Sensitivity Analysis for Optimal Pricing Strategies in B2B Firms
Keywords:
B2B, Sensitivity analysis, Volume hurdle, volume discountAbstract
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.
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