Tiered pricing lowers the unit price as the quantity goes up, in bands called price breaks. A bearing might cost $16.70 each from 1 to 49 units, $15.90 from 50, $15.20 from 200 and $14.60 from 500. The question that decides your margin is how the breaks apply: band by band (tiered), or to the whole order once a break is reached (volume).
How quantity breaks look
Distributors usually call these quantity breaks or price breaks. In most ERPs they sit on the item or the price level as a small table of quantities and prices, and they apply per quote line.
Tiered vs volume pricing on a real order
A contractor orders 250 bearings. The same four breaks give two different totals depending on the method.
Volume pricing is easier to explain and is what most B2B buyers expect on a quote. Tiered pricing protects margin on mid-sized orders and is common in usage-based and subscription billing. Pick one per price list and say which on the quote, because a customer who expected one and got the other will call.
The cliff in volume pricing
All-units pricing has a trap. At 199 units the order costs 199 × $15.90 = $3,164.10. At 200 units it costs 200 × $15.20 = $3,040.00. The customer gets one more bearing and pays $124.10 less.
Buyers find these cliffs quickly. They order up to the break, or they ask for the 200 unit price on 180 units, and reps usually say yes. Two ways to soften the cliff: keep the steps between breaks small, or price any order just below a break at the break total, so the customer never pays more for less.
Check the total just below each break. If buying more costs less, your breaks are too far apart.
Quantity discount, volume discount or rebate?
The words get used loosely. These are the three structures distributors actually run:
- Quantity breaks
Lower unit price for more units on one line.
- Order value discount
A percentage off once the order passes a value, such as 3% over $5,000.
- Volume rebate
Paid back after a period, on total purchases. See the rebate guide.
Breaks reward a big order. Rebates reward a big year. A customer who places forty small orders a year gets nothing from breaks and everything from a rebate, which is why the two work better together than either alone. The rebate guide covers how rebates change your real margin.
How to set break points
Good breaks follow how customers already order, and each step is paid for by a real cost saving.
- Look at real order sizes
Pull a year of order lines per item. Set breaks where orders cluster.
- Match pack sizes
Put breaks on carton and pallet quantities, so big orders also ship cheaper.
- Pay for each step
Size the discount from what you save on handling and freight per unit.
- Check the floor and the cliff
The last break must clear your minimum margin, and no total may drop.
The cost saving is easy to underestimate. If picking, packing and invoicing a line costs you $8, that is $0.80 a unit on an order of 10 and $0.04 a unit on an order of 200. Most of the discount at the 200 break is paid for by handling you no longer do per unit.
How many price breaks?
Three or four breaks per item are enough for almost every distributor. Each extra break adds a price to maintain and another cliff to check, and customers stop reading a break table after the fourth line.
A simple pattern that works across most catalogues:
- A break at the first carton quantity, so customers who buy by the box get a reason to.
- A break at a typical project or reorder quantity, taken from your order history.
- A break at a full pallet or a full reel, where your handling cost drops the most.
Fasteners and fittings sold by the hundred can justify a fourth break. Bearings, motors and anything sold one at a time rarely need more than two.
Showing breaks to customers
Breaks only change buying behaviour when the customer sees them before ordering. Print them on the price list under each item, show them on the web store next to the unit price, and put the next break on the quote line: "250 units at $15.20. At 500, $14.60."
That last line does more work than the whole table. It turns a quote into an offer, and a buyer who was going to split the order across two suppliers often consolidates instead. Keep the wording identical everywhere, so the price on the quote matches the price on the store and on the invoice.
Where fixed breaks stop working
A break table treats every customer the same. A contractor who buys 5,000 bearings a year across many small orders pays the 1 to 49 price on most of them, while a one-off buyer of 200 gets the best price on the table. Breaks also ignore stock: the 500 unit price applies even when you have 520 left and no more due for six weeks.
Price management software keeps quantity breaks alongside price levels and customer contracts, and can apply them per line with the customer's history in view. The break becomes one input to the price, not the whole answer.
Check the margin on a break price
- Cost
- $11.60
- Gross profit
- $5.30
Common questions
With tiered pricing, each band of units is charged at its own price, so the first 49 units cost more than the next 150. With volume pricing, the whole order gets the price of the highest band it reaches. On a 250 unit order of the bearing in this guide, tiered pricing comes to $3,978.50 and volume pricing to $3,800.
A quantity discount is a lower unit price for buying more in one order or one line. It is usually set as price breaks, such as one price for 1 to 49 units and a lower one from 50. It differs from a volume rebate, which rewards total purchases over a period and is paid after the sales.
Breaks set without looking at how customers order invite gaming: buyers round up to the next break, or ask for the break price on a smaller order. All-units volume pricing also creates cliffs where a bigger order costs less than a smaller one. And one set of breaks for every customer ignores who is buying.