The Growth Discount feature calculates the potential price reduction when production volume increases. As production grows, fixed overhead costs are spread across a larger output, reducing the cost per unit. WTP calculates these potential savings and translates them into a recommended growth discount.
Use this feature when negotiating prices for higher production volumes or long-term supply agreements.
Open the Growth Discount calculator by clicking the growth icon at the bottom of the results table of the Industry Cost Profiles page.
A new page opens where you can calculate the Growth Discount. The Default volume is set to 100. Enter the New volume (for example, 125 for a 25% increase). WTP automatically calculates the recommended growth discount.
The calculation is based on the premise that part of Manufacturing Overhead and GSA costs are fixed and can be spread over a higher production volume. These percentages are shown in the Overall Price Change table. Adjust these values only if you have more accurate information about your supplier's cost structure.
If you change the fixed percentages, the calculation will automatically be adjusted. The Discount Ladder at the bottom of the page shows how different production volumes affect the recommended discount.
These values are based on industry averages for your selected Industry Cost Profile and provide a useful starting point for discussions with your suppliers.