Volume pricing is a pricing model where the cost per unit decreases as the total quantity purchased increases. Essentially, customers pay a lower price per unit when they buy in larger quantities. This model is commonly used to incentivize bulk purchases or higher usage levels.

For example, imagine a software company that sells licenses to use its platform:

• 1–49 licenses: $20 per license

• 50–99 licenses: $18 per license

• 100+ licenses: $15 per license

In this scenario, if in a given month a customer buys 85 licenses, their order would all in the 50-99 tier. So the customer’s total for that month would be $1,530.

In this case, the more licenses a customer buys, the cheaper each individual license becomes. The goal of volume pricing is to encourage customers to purchase in larger quantities by offering a more attractive price for higher volumes. This model benefits both businesses, which can increase sales, and customers, who can reduce their overall costs by buying more.