Anthony Iannarino is an international speaker, author, and sales leader. He posts daily sales tips and insights to The Sales Blog.

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On Volume Discounts

alt text image a man mowing a large yard

Let’s say I have a one acre yard. I offer you $30 to mow the lawn and trim around the edges. You agree, accept my offer, and begin working. It’s a pretty big yard, and it takes time and effort.

You do an excellent job, and I decide to reward you by giving you more of my business. I offer to let you mow the adjoining acre of land, suggesting that I pay you an additional $20 to mow and trim that acre. You are already mowing the first acre, and you can just keep mowing in a straight line. Plus you don’t have to drive anywhere, and it’s really like having two customers. You’re grateful for the additional work, as it means you need to acquire one less customer.

I didn’t yet mention that I have a 3rd acre. I offer to allow you to mow the third acre, and since I am giving you so much volume, I offer to pay you $15 for the third acre. It’s really not going to take you that much longer. And look at the volume I am giving you! I’m likely your biggest customer. Now you are getting $65 for the one stop on your weekly route.

The first acre is worth $30. The second acre, which is exactly the same size as the first acre and takes just as much time and effort to mow and trim is somehow worth 30% less for the same effort. The third acre, through the sheer magic of volume discounts, is now worth only half of the 1st acre.

How much should I pay you for the 4th acre?

I am exaggerating to make a point. The effort that it takes you to do some work doesn’t change just because you have more work to do. The investment of time and energy doesn’t change either. Some work doesn’t really provide economies of scale, nor does it lend itself to volume discounts. Sometimes more work is just more work.

In the time that it takes you to mow the three acres, you should have earned $90 instead of $65.

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Filed under: Pricing, Sales 3.0

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