Bulk pricing and the internet

Bulk pricing exists because of economies of scale.

The idea is that the cost of producing “one additional item” falls as you produce more of them. This is because you have a large initial cost and a low repeat cost (marginal cost).

For example, if you’re making a lego brick with a new shape you have to create the mold before you can fill it with plastic to make the brick. If the mold costs $1,000, and the plastic for each brick costs $0.01 (and we just assume no other costs exist), then the cost of making one brick is $1,00.01.

The cost of making 10,000 bricks is $1,100.

If I’m selling one brick, I have to charge over $1,000 to make a profit. If I’m selling 10,000 bricks, I only have to charge more than 11 cents.

That’s why bulk pricing exists. At higher numbers, the cost goes down.

But this doesn’t really apply to digital products. I’m taking a lot of variables that are close to zero and assuming they’re zero, just like Chris Anderson tells us to do.

The cost of one blog post is the same as the cost of 10,000 blog posts. If I sold this post, and you bought 10,000 of them, I couldn’t make it any cheaper than a single order; my expenses are the exact same.