TradeBriefs Editorial

From the Editor's Desk

What B2B Companies Get Wrong About Volume Discounts

I have a favorite client who always eggs me on to tell the "7-Eleven Big Gulp story" in meetings. "C'mon, tell it," he nudges. Often, I do.

My friend's fascination with the story is well-founded. 7-Eleven does a fantastic job of employing volume discounts. Fountain drink sizes at the convenience store's Cambridge, MA location range from 16 to 32 ounces (priced from 99 cents to $1.39). While 16 ounces of soda - a Gulp - will satisfy my thirst, I inevitably purchase the 24-ounce Big Gulp because it's only 20 cents more. By lowering the price-per-ounce on larger sizes in a manner that mirrors my reduced willingness to pay for more soda, 7-Eleven entices me to purchase a bigger size.

Squeezing me for an extra two dimes may not seem like much, but remember, fountain soda drinks are notorious cash cows. 7-Eleven reports that after introducing the Big Gulp line - which has included sizes as large as 128 ounces (Team Gulp) - profits from fountain drinks increased by close to 100%. Some 7-Eleven operators report that Big Gulp fountain drinks account for almost 10% of their stores' revenues.

The moral of this story is clear: When properly implemented, volume discounts can unleash generous new profits and growth.

Continued here


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