# Tiered pricing and price levels for contractors

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# Tiered pricing and price levels for contractors

Tiered pricing gives each trade account a price level, and the tiers that hold up are built from cost at a target margin rather than a flat percent off retail, so here is the margin math behind contractor tiers, quantity breaks, and job pricing, plus the house rules that keep them from eroding.

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[Titus Capilnean](https://www.linkedin.com/in/tituscapilnean/), Head of Marketing
October 27, 2026
Last updated October 27, 2026

Set up tiered pricing by giving each trade account a price level that matches the business it does with you, and build each tier from cost at a target margin rather than a flat percent off retail. Cost-based tiers hold your margin when a vendor raises prices, while percent-off tiers absorb every increase until someone opens the gross margin report and starts asking questions.

The rest of this guide is the math behind that answer, plus the house rules that keep tiers from eroding once they're in place.

## What price levels are

A price level is a named tier of pricing you attach to an account, so the right price shows up at the register without anyone doing arithmetic at the counter. Common ones at a supply store are retail for walk-ins, a contractor tier, a landscaper tier, a farm tier, and a wholesale tier for businesses that resell what you sell them. The names matter less than the rule underneath each one, and there are three ways to build a tier:

**Percent off retail.** The contractor gets 10% or 15% off the shelf price. It is easy to explain and easy to set up, which is why so many stores start there, and it is also the most fragile, as the math below shows.

**Cost plus a margin.** The price is computed from what you paid for the item at a target margin. If your contractor tier is a 25% margin, the price is cost divided by 0.75, and it recalculates whenever cost changes.

**A fixed price per item or job.** A specific number for a specific product or bid, such as a price on deck screws for one contractor's deck job through the end of the month. This is job pricing, and it works best as the exception rather than the structure.

## The margin math of percent-off tiers

Percent-off tiers feel safe because the discount sounds small. The trouble is that a discount comes off the price, not off your cost, so it always bites harder than it looks. Here is an item that costs you $12.00:

| Price level | Price | Margin on $12.00 cost |
| --- | --- | --- |
| Retail (Tier 1) | $20.00 | 40.0% |
| Contractor, 10% off retail | $18.00 | 33.3% |
| Contractor, 15% off retail | $17.00 | 29.4% |

That 15% contractor discount takes $3.00 of your $8.00 profit, more than a third of what the item earns, which is a much bigger concession than "15 percent" sounds like across the counter. If you want a refresher on why margin and markup get confused at exactly this moment, our [margin vs. markup guide](/resources/guides/margin-vs-markup-pricing-hardware-store/index.md) walks through it, and the [gross margin formula](/resources/guides/gross-margin-formula/index.md) shows what these points add up to across a year.

## Why cost-based tiers survive cost increases

Here is where percent-off tiers get expensive. Your vendor raises that item from $12.00 to $14.00, you update the cost, and you mean to update retail, but repricing is a project and truck day is tomorrow. Meanwhile the contractor tier keeps doing what it was told:

| Tier type | Price at $12.00 cost | Price at $14.00 cost | Margin after the increase |
| --- | --- | --- | --- |
| 15% off retail (retail still $20.00) | $17.00 | $17.00 | 17.6% |
| Cost plus a 25% margin | $16.00 | $18.67 | 25.0% |

The percent-off contractor still pays $17.00, and your margin on that sale drops from 29.4% to 17.6% without anyone changing anything. The cost-plus tier reprices the moment cost is updated, because the formula, price = cost ÷ (1 − margin), doesn't care what the shelf tag says. Percent-off tiers move when retail moves, cost-plus tiers move when cost moves, and in a year when vendor costs move faster than your shelf tags, that difference is the whole game.

That is why one paint retailer told us they're moving "from dollar-based to margin-based custom pricing to protect profitability." The tier should defend the margin, not the sticker.

## Quantity breaks and volume pricing

Tiered pricing answers who is buying, and volume pricing answers how much they are buying, through quantity breaks where the price changes once the quantity crosses a line. The classic case is feed:

| Quantity | Price per bag | Margin on $13.20 cost |
| --- | --- | --- |
| 1 to 9 bags | $18.99 | 30.5% |
| 10 or more bags | $17.49 | 24.5% |

The 10-bag customer gets a real break, and you give up six points of margin in exchange for a bigger ticket and one trip to the pallet instead of ten. The same structure works for fasteners by the pound versus the box, or anything where buying a full unit should cost less per piece. Set the breaks by unit of measure where you can, so by the foot and by the roll, or by the bag and by the pallet, each price correctly, and our guide to [units of measure](/resources/guides/units-of-measure-buy-by-the-roll-sell-by-the-foot/index.md) covers stores that sell both ways. One caution: a quantity break stacked on top of a contractor tier can take a 30% item under 20% without anyone noticing, so decide in advance whether the customer gets the better of the two prices or both, and write that down too.

## Job pricing and special deals

Every store has jobs worth pricing by hand. A contractor is bidding a long run of fence, or a builder is about to take the whole framing package to the yard across town, and the tier price is not going to win it. Job pricing is the fixed-price method from earlier: you quote a number for that job, that quantity, and that window of time, and when the customer accepts, the quote becomes the sale.

Two rules keep job pricing healthy. First, treat it as a per-job decision with an expiration, not a quiet permanent tier upgrade, because a price given for one spring project has a way of showing up on the account forever. Second, check the margin before you quote, not after, because when you are pricing to meet a competitor, cost-plus thinking tells you exactly how much room you have, while percent-off thinking only tells you how it feels.

## Rules that keep tiers from eroding

A pricing structure doesn't fall apart in a meeting. It erodes at the register, one exception at a time, and every garden center knows the question: "Your contractor tier is 15% off. Who remembers that at four o'clock on a Saturday in May?" Five rules handle most of it.

**Put the tier on the account, not in a cashier's head.** When the discount lives on the contractor's account, it follows them to the register no matter who is working or which crew member walks in. When it lives in a longtime counter hand's memory, it retires when they do, a problem we cover in [contractor charge accounts for paint stores](/resources/guides/contractor-charge-accounts-paint-stores/index.md).

**Decide who can override.** A tier price should be the default, not a suggestion, so pick the two or three people allowed to go below it and make everyone else ask.

**Write down when a tier is earned.** If Tier 2 requires a certain volume or a charge account in good standing, say so, because an unwritten threshold turns into "he's been coming here for years" pricing, which is how your best tier ends up on an account that buys twice a year.

**Review the tiers once a year.** Costs moved, customers moved, and the landscaper who earned the top tier five years ago may not have earned it since, so an annual review against what each account bought last year keeps the structure honest.

**Keep it in the system, not on a laminated card.** The card under the counter, next to the rubber bands and an old vendor catalog, is where tiered pricing goes to die. If the price is not computable from the account and the item, it is not a price level but folklore.

## A short legal note

The Robinson-Patman Act, as the [FTC explains it](https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/price-discrimination-robinson-patman-violations), concerns sellers charging competing buyers different prices for the same commodity. It applies to commodities, not services, and the defenses include price differences justified by different costs of manufacture, sale, or delivery (the FTC names volume discounts as an example of cost differences) and price concessions made in good faith to meet a competitor's price. It mostly matters when you sell to businesses that compete with each other, so if you run a wholesale side, talk it through with your attorney, because this guide is about margin math, not legal advice.

## How Rundoo handles price levels

In Rundoo, every product carries a Price Strategy: Dollar, where you type the price; Margin, where the price is computed from cost at a target margin; or Discount, a percent off Tier 1, usually retail. Rule-based price tiers, Tier 2 and up, can be "X% off Tier 1" or "cost plus Y% margin," scoped by vendor, department, or class, with anything unmatched falling back to Tier 1. Quantity breaks can be set by discount or by margin, and by unit of measure, with price rounding to .99 available.

Two details do the heavy lifting. First, the lowest price wins: every tier, custom price, and job price is evaluated together, and the best one for that customer is what ends up in the cart. Second, the tier follows the account, so a contractor with terms, a price tier, and job-specific pricing gets the right price whoever walks in and whoever is on the counter. A receipt does not change Standard cost, so cost-plus tiers move when you update Standard cost on the product's Costs tab or through the Price changes queue, where you see the margin change before you apply it. If you are switching systems, Rundoo migrates pricing tiers along with customers and balances, as our [buyer's guide to POS charge accounts](/resources/guides/pos-with-charge-accounts/index.md) describes, and the [pricing and purchasing page](/product/manage-pricing-purchasing/index.md) shows how the pieces fit together.

The stores that lose margin to contractor pricing rarely lose it in one bad decision. They lose it in a hundred small ones nobody wrote down, so pick a tier structure your counter can run on its busiest Saturday, build it from cost and margin, and look at it again next year.

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## Frequently asked questions

What is tiered pricing in retail?

Tiered pricing is a structure where different customers pay different prices for the same item based on their relationship with the store. In a supply store that usually means a retail tier for walk-ins and one or more trade tiers for contractors, landscapers, farmers, or wholesale accounts, with each tier built as a percent off retail, a margin on cost, or a fixed price for a specific item or job.

How much of a discount should contractors get?

Work backward from the margin you need rather than forward from a round number. On an item that costs $12.00 and retails at $20.00 (a 40% margin), a 10% contractor discount leaves a 33.3% margin and a 15% discount leaves 29.4%, so decide first whether that margin keeps the account profitable after the service and terms that come with it. Many stores set the contractor tier as a target margin on cost instead, which holds steady when vendor costs rise.

What is the difference between tiered pricing and volume pricing?

Tiered pricing is based on who the customer is: a contractor pays the contractor price whether they buy one item or fifty. Volume pricing, also called a quantity discount or quantity break, is based on how much they buy: the price drops when the quantity crosses a line, such as ten bags of feed. Most supply stores use both, with tiers attached to accounts and quantity breaks attached to products.

How do you set up price levels in a POS?

Define the tiers first (retail plus one or two trade tiers is plenty to start), then set the rule for each tier as a percent off retail or a margin on cost, scoped by department or vendor where those differ. Attach the tier to each customer account so the price follows the account to the register, add quantity breaks on the products where volume matters, decide whether the customer gets the lowest applicable price or a combination, and review the setup once a year.

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