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Wednesday, October 27, 2010

Sweet Spots in Quantity Discounts

In Knowledge@Wharton, they discuss quantity discounts in stores like Costco, where big and multipacks rule.  I have been a Costco member for years, but always wondered about how the 'discounts' given really helped the consumer.  The amounts offered seemed to be too large for the average family, but not large enough for a small business.  Plus many products seem aimed at compulsive buys, in which the amount makes it even less likely that your buy is sweet.  Good piece. 

" ... How much of a discount should companies give if they don't have any history of bulk sales of that product or service? In a recent paper, Wharton marketing professor Raghuram Iyengar and Columbia marketing professor Kamel Jedidi offer a model for determining what price will convince customers to buy more while still yielding maximum profitability for the seller ... "

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