Everyone likes to save money so here's a tip for those buying products with quantity discounts...like patches. Always do the math to make certain you're not paying more than necessary. To make this point clear, let's use an example.
- Suzy wanted to buy 170 patches from a company with the following prices.
$1.00 for quantities from 100 to 199.
$0.75 for quantities from 200 to 299.
Suzy bought 170 patches and paid $170. Makes sense, right? Now, suppose Suzy had bought 200 patches even though she only needed 170. Well, then she would have paid $0.75x200=$150. In other words, she could have bought 30 more (200) patches for $20 less money. Instead, she paid more for less. And, that is bad deal and a very common mistake. So, here's how to avoid it.
THE BREAK-EVEN QUANTITY
- Quantity discounted pricing always includes price brackets such as the 100 to 199 quantity bracket with which Suzy was concerned. And, there is always a quantity in price brackets where the total price is the same as the total price paid at the bottom end of the next bracket up. We call that the break-even quantity. In Suzy's case, the break-even quantity is 150 patches. Here's why.
If Suzy had bought 150 patches she would have paid $150. And, if she had bought 200 patches she would have paid that same amount...$150. But, because Suzy wanted 170 patches, she paid $20 more than necessary.
WHAT TO DO
- Many customers simply calculate the total at the bottom of the next bracket up and then buy what they need while making sure they don't pay more than that. But, what if they can get more patches for less money? And, how many can they get? Or how many can they get for the same amount of money? Or what if they can get many more patches for the price of a few more and don't know it? These questions are easily answered if they know what the break-even quantity is. So, here's how to calculate it.
DOING THE MATH
- It's super easy. To determine the break-even quantity just find the total at the bottom end of the next bracket up and divide it by the unit price in your bracket. In Suzy's case that would be ($0.75x200)/$1.00 or $150. Simple, right?
- Now that you know how to find the break-even quantity, you'll never pay more for less and that applies to all products with quantity discounts; not just patches. But, it can raise some questions. For example; what if Suzy didn't want 30 more patches? Or, what if she was buying from a website and it didn't give her any options except to buy 200 patches and throw away 30 if she couldn't find a home for them. We'll have the answers to these and other questions in future editions of Patch Talk. So, stay tuned.