What is Multiple Unit Pricing?
“Multiple-unit pricing is a practice where a company offers consumers a lower than unit price if a specified number of units are purchased.”
“Selling a product at a price lower than that of other products of the same category is called Multiple Unit Pricing. This is true, especially in case of bulk orders.”
Multiple Unit Pricing in the Introduction to Business
Multiple Unit Pricing is a pricing strategy in which if the customer buys multiple units of the same product and pays a lesser price for them. It is a pricing strategy where the seller offers a lower price per unit when two or more products of the same type are bought together. This is kind of strategy is brought up by thinking from the perspective of the consumer. A consumer perceives that he makes great savings when he buys in bulk. The customer perceives that if they buy a single product it would be more expensive than buying the same category products together. Here, the strategy focuses on encouraging the customer to buy more than they need. In simple words, a product is usually sold at a pre-decided price, which is equal to or less than the Maximum Retail Price of the product but here, to increase the sales of the product or to increase the number of buyers, retailers often give the customers some offers on the product or some freebies & extra samples to increase the sale. Usually, the freebie is the same product or a product at a little lower or the same cost. For example One Toothpaste and Dental floss free on purchase of one Mouthwash.
Use of Multiple Unit Pricing
Market Penetration during introduction phase
As the product is in its introduction phase, there has to be some strategy or scheme that persuades the customer to buy the new product. Generally, a customer is habitual of using his usual brand, there has to be something that encourages him to buy the new product. Thus this promotional pricing strategy would do wonders for the brand. As the customer would be attracted to buy the product which offers multiple pricing unit strategies, the customer would be inclined towards buying this product.
Example: A new brand of Soap- Mild & Clear
Completing existing stock
When the seller has his stock that is on the borderline of expiry or is of an old trend, he would try to sell off his products by attracting the customers to buy the product using the Multiple Unit Pricing strategies. As the customer would be allured to get the freebie, he would end up buying the product that the seller actually ants o sell-off.
Example: Finishing up usual collection of clothes to bring in winter collection.
When the seller wants to achieve a particular goal for his business, he tries to induce the customers to buy the products using the Multiple Unit Pricing strategies. This is done to acquire a target market audience. So basically, this strategy is used to sway the customers and thereby achieving the target sales.
In cases where the customer gives a customized order i.e., with his particular set of specifications, the buyer gives a multiple unit price scheme. Here, the price of the products is set according to the size of the order. As the order is made in bulk, the customer gets a good discount rate.
Example: Bakery products.
Penetration with existing products
This strategy is usually taken up for helping the company exist even in rough times and to try and increase the sales of the company. When the organization wants to increase the existing share of the products, multiple-unit pricing is opted for. This not only increases sales but also gets a number of customers and penetrates the existing share of the products in the market, thereby increasing the profits of the company.
Example: Sunsilk Shampoo selling its products by using the strategy- Buy the Festive kit- one shampoo, get one Conditioner and Eye Pencil free.
Advantages of Multiple Unit Pricing
- Sales can be increased due to the Multiple Unit Pricing strategies.
- The marketers can penetrate various target markets, showcase and sell their products and achieve great results.
- This type of pricing is used to attract new customers and increase the consumption of the product, thereby increasing the target market and sales.
- Helps in achieving the targeted sales.
- Customers can get the products at a lower price as compared to the price they would have paid elsewhere while purchasing the products separately.
- Sellers can sell more units of products through the use of this strategy.
- It offers some kind of variety and benefits for the customers when they get the freebies or the products along with the actual product they buy.
Disadvantages of Multiple Unit Pricing
- It is difficult for the seller to calculate and set the price of the product that are priced using the Multiple Pricing Unit strategies.
- Customers may sometimes receive expired or nearing expiry products.
- When purchasing in bulk, though the customers may gain great profits and deals, the sellers may face losses because of selling the products at a lower price.
- It becomes difficult to keep records.
- Customers may receive defective products.
- Multiple Pricing Unit strategies is useful to sell off products but it may decrease the profit margin of the company as it may seem difficult to calculate the amount spent for the marketing intermediaries such as retailers and distributors.
Context and Applications
This topic is significant in the professional exams for both undergraduate and graduate courses, especially for
- Bachelor of Commerce
- Master of Commerce
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