How to compare MOQ price tiers

Pricing · 6 min read · reviewed 2026-10-01

Unit price is not unit cost

A tier quotation is a table of unit prices with break quantities attached. The break quantity is the quantity above which that price applies. It is not the quantity above which that tier is cheapest — those are two different numbers, and only one of them is in the quotation.

The reason is the setup charge. Tooling, plate-making, artwork, machine changeover and inspection setup are one-off costs attached to an order, not to a unit. Spread over 500 units they are material; over 5,000 they are noise. Until the volume is large enough to dilute them, a lower unit price can produce a higher total.

Effective unit cost is the number that compares:

Effective unit cost = (setup + quantity × unit price) ÷ quantity

The ladder, priced properly

Four tiers, one product, $420 of setup on the first two and $520 on the last two — a common pattern where a second plate or a different packaging run is needed at volume:

Effective unit is the only comparable column. Tier one's headline of $9.20 becomes $10.040 once the $420 of setup is spread over 500 units — a bigger jump than any discount in the table.

Two things appear that the quotation does not say. First, the 500-unit tier carries $10.040 of effective cost against a headline $9.20 — the setup alone adds more than the discount saves. Second, the total order value climbs from $5,020 to $39,520, which is not a saving you receive; it is cash you have to find.

The break-even quantity between tiers

Between two adjacent tiers the crossing point is where the extra setup of the deeper tier equals the per-unit saving multiplied by quantity:

Break-even qty = (setup_deep − setup_shallow) ÷ (price_shallow − price_deep)

Here tier two beats tier one from 1,000 units; tier three beats tier two from 182; tier four beats tier three from 5,000. Note that the third figure sits above the tier's own 5,000 break quantity — which means there is a band between 3,000 and 5,000 where the third tier's price applies but the fourth tier is still the cheaper order. Ordering at the tier break, the thing the quotation nudges you to do, is the wrong quantity in that band.

The costs the ladder does not show

Freight per unit falls with volume, then stops. Up to a full container, more units means the fixed container cost is spread wider. Past a full container you are buying another container, and the curve flattens abruptly. If the deeper tier pushes you over a container boundary, the freight saving per unit disappears exactly where the price saving was supposed to appear.

Carrying cost of the extra units. Buying 5,000 instead of 1,000 means 4,000 units sit in a warehouse. Storage, insurance, shrinkage and the cost of the money tied up are all real, and they accrue monthly. At a 10% annual cost of capital, holding $39,520 of stock for a year costs about a tenth of it — which can consume most of the $6,900 the volume discount produced.

The risk of being wrong. A deep tier is a bet that the product sells. A shallow tier is the option to change your mind. That option has a value, and on a new product or a new market it is usually worth more than the discount.

What to negotiate, in order

1. Move the setup, not the price. A supplier who will not drop from $9.20 to $8.60 on the first tier will often waive or amortise the setup charge for a repeat order. That is worth more at low volume than any price step, and it costs them less to give.

2. Ask for the break quantity of the next tier, not the next tier. "What quantity gets me the 8.05 price" is a question a supplier can answer. It is frequently well below the printed break, because the printed break is a marketing number.

3. Price the middle option. Ask for a quote at the quantity you actually need, between two printed tiers. Suppliers quote off-menu constantly; the ladder exists to anchor, not to constrain.

4. Separate tooling from goods on the invoice. If tooling is a distinct line, it is negotiable, amortisable and sometimes yours to take to another supplier. If it is buried in the unit price, you have paid for it every time you reorder.

Where the number goes wrong

• Comparing tiers on unit price. Setup cost is per order. Its effect on the unit only becomes small at volume, and the crossing point is rarely the printed break quantity.
• Ordering exactly at the tier break. The break is where the price applies, not where it becomes cheapest. Between tiers the optimum can be thousands of units above the printed number.
• Ignoring the container boundary. Past a full container the freight per unit stops falling. A deeper tier that crosses that line can cost more landed than the tier below it.
• Forgetting carrying cost. Extra units have to be stored, insured and financed. On slow-moving stock the discount is often smaller than the holding cost it creates.

Calculators that do this for you

Each one runs the arithmetic above on your own numbers. The guide explains why the figure is what it is; the tool produces it.

Common questions