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How to increase your average order value with volume discounts this holiday season

How to increase your average order value with volume discounts this holiday season

Have you ever seen a sale and convinced yourself, “C’mon! You’re basically losing money by not taking advantage of this!” While that never is truly the case, customers will reason with themselves in this manner. They will almost always focus more on the amount they’re saving than the added amount they’re spending. Volume discounts play right into this mindset.

Volume discounts—also known as quantity breaks—is a powerful tactic for increasing your Shopify stores’ average order value. The strategy behind volume discounts is that as a customer adds more items to their cart, their cost per product goes down, and they save more money.

A common use of volume discounts is ski resorts offering 3-, 5-, and 10-day lift tickets. Let’s use Whistler Blackcomb’s Edge Card as an example. When customers buy passes with more days, their price per day goes down. With the 2-day pass it costs $124.50 per day, the 5-day pass costs $101.80 per day, and the 10-day pass costs $87.9 per day.

While you may not be selling lift tickets to a ski resort, this discount strategy can be applied to businesses of all sizes. In the weeks leading up to Black Friday, Cyber Monday, and the rest of the holiday season, we’ll be taking a deep dive into Ultimate Special Offers’ top four offer types (by popularity)—starting with volume discounts. We’ll also be taking a look at BOGO offers, bundle sales, and gift with purchase promotions.

Deciding which products to offer

Black Friday, Cyber Monday, and the rest of the holiday season is a great time to offer volume discounts. If your customers are Christmas traditionalists, they likely spend between $10-$50 per family member on stocking stuffers. Add that up and holiday shoppers could be spending up to $200 on multiples of various products.

Factor this into your strategy when choosing which products to apply volume discounts to. It's also a great idea to add a tagline like, "Makes a great stocking stuffer", to these products to make it very obvious for your customers.

Another angle to take when deciding which products to apply volume discounts to, is to check your analytics. Look at your order history (specifically around the holiday season) and identify the products that your customers are buying two, three, or four of at one time. Set your volume discount tiers at a number just above these usual order amounts and you'll be on your way to increasing your average order value.

Choosing the right tool

There are a few options when it comes to offering volume discounts in your Shopify store. You could set up individual discounts with only a single tier using Shopify’s Automatic Discounts feature, but that is time-consuming and disjointed. Plus the offer analytics leave a lot to be desired. 

There are apps that provide this discount exclusively but you’ll be on the hook for around $20 per month for an app that only has a single function.

Your best bet? Ultimate Special Offers. Shopify’s only all-in-one discounts app will provide you with the ability to run volume discounts, along with seven other offer types. On top of these other offer types, Ultimate Special Offers provides a robust analytics dashboard that will allow you to review, adjust, and optimize your various offers on the fly.

Setting up volume discounts

There are three traditional ways to set up your volume discounts. You can offer a dollar amount discount, a percentage discount, or set a new price. The type of discount you choose will depend on the products you’re offering at a volume discount. The most important aspect to keep in mind when setting up a volume discount is to not set it up in a way that will deplete your profit margin—we’ll explain this in detail below.

Dollar amount discount

This offer type works best when offering a volume discount on a single product or a collection with similarly-priced products. This is because you will have a rough idea of your customer’s cart value when they hit a volume discount tier. Let’s say you’re selling socks. If all your socks are around $20 you could offer $20 off when a customer buys five pairs or more. By applying this discount to products with the same value, you won’t undercut your profits.

Percentage discount

This offer type will work well when offering a volume discount on multiple products, an entire collection, or your whole catalog. This is because the percentage is relative to the cart’s value and will never give customers too good of a deal. Let’s say you’re selling jewellery and the pieces in your store vary from $5 to $150. If you’re offering 10% off when someone buys any three pieces, that 10% could vary from a savings of as little as $1.50 all the way up to $45. But no matter the combination of products, the savings will never slash your profits by too much.

New price discount

Like the dollar amount discount, this offer type works best when offering a volume discount on a single product or collection with similarly-priced products. The difference? You can let your customers know the exact price of their order upfront. Let’s go back to the sock example. You could promote “Five pairs of socks for $80” on your homepage and your customers won’t have to do any calculations themselves.

Scheduling your sale

You’ll likely have an idea of when you’ll want to run your volume discount sale before you start setting it up. Whether it’s for Black Friday, Cyber Monday, or for another stretch during the holiday season, you’ll need to set a start and end time for your sale.

This is another reason why Ultimate Special Offers outpaces the other options. With Ultimate Special Offers you can schedule the timing of your sales in advance so you don’t need to worry about waking up early to turn it on or staying up late to turn it off. This will leave you more time to work on last-minute marketing materials to promote your sale!

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