The pricing strategy behind package discounting is similar to that of the tiered pricing structure but, in this case, a company specifies a discount for an exact number of units, with the discount getting bigger as the unit numbers go up. If the customer selects 8, each unit costs $70. At the end of the day, it is a win-win situation for all the parties involved. Ujido volume discount pricing example. As our tiered pricing model blog details, it's a lucrative pricing strategy best used where the customer is already likely to require high quantities. There are an array of reasons that the businesses and the brands give Volume Discounts to their vendors and customers. And if you purchase 15 units, you will enjoy the discount for 10 units and will have to pay full price for the 5 units. Other price perception strategies include ‘buy one get one free’ and other such offers, which play on a buyer’s unconscious greed and determination to procure an additional and likely unneeded additional item for ‘free’, and highlighting an item’s former price. The 2kg bag’s price per kilo is significantly reduced. The next package is 25 units. For example, the discount is applicable only after the sale of 100 units. And if the competitors are already following the Volume Discount strategy, it is high time that you have to embrace the same in your own unique way. Contact customer support here. Offer percentage-based volume and quantity discounts ; Offer $ based volume and quantity discounts ; Create dynamic discounts for future products with tags ; Add unlimited discount levels ; Increase Shopify sales with discounted pricing and quantity-based discounts. And when you offer Volume Discounts to your customers motivating them to purchase your products in large quantities, your cash flow problem is solved automatically. Here the increments are fixed by the company and if the customer wants to purchase an unstated amount, for example 6 units, they must purchase with a combination of package deals. There are two reasons to offer a volume discount: (1) As a competitive price cut and (2) To capitalize on the law of diminishing marginal utility. Volume discount pricing can be found in almost all places where a transaction occurs. Here is the discount is applicable for the certain packages of the units. For example, a specific amount of discount is applicable to the A number of units in total. ... Volume discounts. And, crucially, why is it so lucrative when selling digital products? You can follow me on Facebook. This will usually be in the section of the contract pertaining to pricing. Volume discount on cart discount rules. It is a wonderful strategy but is not viable for every business especially in the case of perishable items. They pass on the same to their customers making their brand carve a niche for themselves in the market and gain a competitive advantage. Pricing Strategies, Bundles & Volume Discounts By Chris Dawson May 21, 2015 - 7:35 pm Wiser is a dynamic pricing and merchandising engine that … Use this to help figure out how to set list prices and adjust pricing once you start negotiating your proposal. The margin is often stated as a percentage, so in this example, the margin is 20%, because $200,000 is 20% of $1 million. Please refer to Variable Consideration and Constraint for additional information on accounting for contracts containing variable consideration components. You give customers a discount when they purchase more merchandise. Increase Average Order Value, reward your customers, and give your wholesalers more flexibility on pricing. for strict volume discounts •Frequent-buyer programs – generally ok ... tying arrangement when the price discount, as applied to the original price of the second (or “tied”) product, in effect lowers the price of the tied ... for example, in the Third Circuit. Option 1 – Volume based pricing by Bands This approach to volume based pricing means basing the sales price to the customer on whichever band they fall into. !” Don’t worry, I hear you. Examples of Volume Discounts. Perfect the moment when users become customers, Control & Optimize your Net Dollar Retention, Offload your sales tax, payments, and data compliance, All subscription data reconciled automatically, Strategic advice to migrate & grow with Paddle, Technical guides and reference documentation, Turn your software product into a software business from Day 1, Flexible infrastructure to iterate & break the $1M ARR milestone, Platform & advisory for IPO-ready compliance & dollar retention, See the whole Paddle Revenue Delivery Platform, The Stats Behind Optimizing the Monetization of your SaaS Company, Tackling the Growing Pains of your Design Software Company, 3 Stage Action Plan To Reduce Churn For Software Companies. Here’s a reminder …, 70 Wilson St, Finsbury, London EC2A 2DB, United Kingdom, We're looking into your account. Let's stay in touch :), Your email address will not be published. VOLUME DISCOUNT. If the customer selects two, each unit costs $80. Increase AOV by setting discounts, applying it to products, collections, or your entire store with a click! Volume discounts are one type of variable consideration referenced in Accounting Standards Codification (ASC) 606-10-32-7. That means, if you buy 27 units, you will enjoy the discount on 25 units and will have to pay full price for the 2 units. Required fields are marked *, Copyright © 2020 Marketing91 All Rights Reserved, The importance of consumer buying behavior, What is Cycle Count & What is Cycle Count Process, New Product Development - Process and 7 Stages, Pricing Discounts or Discount Pricing Strategy. With the promise of a high profit margin, why wouldn’t these companies encourage high quantity buying? I love writing about the latest in marketing & advertising. Just like in Excel you can set a certain discount or price per product to apply to a certain quantity. The discount is passed on from the raw material vendor to the manufacturer and from the manufacturer to the wholesalers and retailers. The firm is able to sell the first 100 units at an original and full price. In the common “all units” model, the price of each unit is equal to the unit … Our team will be in touch soon. “$1 each or 3 for $2? The value of buying in bulk isn’t only felt when you do a big Costco haul. “$1 each or 3 for $2? Package pricing is not too dissimilar from tiered pricing, but in this case a company offers a set number or ‘package’ of licences it is willing to sell in one transaction, as explained in our blog Volume Discount Pricing: The Formulas to Calculate the Best Deals for your Business and Buyers. Other times the deal might not be signaled on a big offer sign, but the discount is still there, for example when you buy a 2kg bag of rice for $2.80 instead of the 1kg bag for $1.95. Please refer toCustomer Options for Additional Goods or Servicesfor additional insights on customer options. There are myriad schools of thought where pricing is concerned and different businesses will benefit from different solutions. Let us have a look at some of the most common reasons: The businesses and brands nowadays are operating in the highly dynamic market environment that is high on the evolving tastes of the customers and competition from the new as well as established players in the market. For instance, for the tier of 100 to 200, X amount of discount is given. For example, companies, such as Walmart and Amazon, are routinely beneficiaries of volume discounts from their vendors because they always purchase a large quantity of every good. Annual volume bonus: an end-of-year bonus paid to customers if preset purchase volume targets are met. For example, you own a clothing store. Whether your goal is to start a wholesaler program, entice new customers, or just reward loyal and repeat purchasers, Volume & Tiered Discounts is right for you. The volume discount applies to the start price after attribute pricing and customizable product pricing adjustments have been applied. All-Units Volume Discount – Per Unit Price As you can see from the graphic, the price per unit depends on the number of units the customer chooses to buy. For the purpose of calculating the volume discount for a given calendar year, all BISx/BISx4 Kits purchased by [**], excluding Aspect Products that are shipped free of charge, will be included in the total volume discount calculation.The initial pricing for a given calendar year is based on the total volume of BISx/BISx4 Kits purchased in the prior calendar year. Determine the current volume discount. The overall process of discounts can be formulated in various forms but the modus operandi of Volume Discount is tiered in nature and approach. Volume discounts Discounts trigger as your usage grows, so you always get a fair price. Custom Pricing & Discounts. One example of this is a software company that priced their product at $79. For example, if your gross margin is 40 percent and you decide to discount your goods or services by 5 percent, you'll need to increase your sales volume by 14.3 percent in order to make a profit. The strategy of Volume Discount is quite helpful in enhancing your market share, brand value, the long list of loyal customers, and attaining financial stability. And sales pricing strategy and promotional ideas such as Volume Discount are one of them. Even though the concept and strategy of Volume Discount come with a huge range of merits and benefits, you have to each and every step with caution. Companies also use volume discounts to close their first deal. June 3, 2019 By Hitesh Bhasin Tagged With: Marketing management articles. Cash discount: a deduction from the invoice price if payment for an order is made quickly, often within 15 days. However, while pricing is a key consideration for the success of your product, pricing your product very low or perpetually discounting runs the risk of devaluing your brand and can actually have the adverse effect on your overall business success. Generally, pricing strategies include the following five strategies. I created this simple pricing calculator to show how small changes in price, volume, and costs, can have a huge impact on your bottom line. With one click apply bulk discounts and quantity breaks to individual products, collections, brands, product types or your entire store! Volume discount pricing can be found in almost all places where a transaction occurs. Volume discounts enable a buyer to purchase a large quantity of a good at a discounted rate. For example, a company may offer the following discount structure: Often referred to as the ‘all units’ model, the discount is greater as the number of units sold increases - and the discount applies to all units. The normal retail price of this widget is $10. NOTE: If you use volume discounts with other types of price adjustments, then the final price depends on the order in which Siebel Pricer applies the pricing … BoonPlus Easy Pricing App supports volume pricing in Quantity, Term, Tiered and Block, you can easily confgure a volume pricing through our discount schedule, and the discount can be done by percent, dolloar or by a fixed rate for each tier. Volume discount pricing theory states that a firm can generate more net income by selling more items at a lower price than it can selling less items at a higher price. Companies employ volume discount pricing for a number of reasons, but in the case of a supermarket volume discount, shops often want your custom while they have your attention. Volume Discount When you offer a volume discount, your customers end up paying less per item as long as they buy a larger amount of that item. Cost-plus pricing—simply calculating your costs and adding a mark-up; Competitive pricing—setting a price based on what the competition charges For instance, a local store might charge $8-10 US Dollars (USD) for one pair of underwear, but offer five pairs for $25 USD. Why is Volume Discount given in the market? With the exponential boom of Wal-Mart, dollar concept stores and other discount stores in the 1970s and 1980s, small businesses are facing increased pressure from those who put this theory into practice. They’d rather you opt for buying more quantity at a reduced per unit price than buy a smaller pack and take your custom elsewhere next time. A product marketed at $49.99 is registered by the brain as belonging to a lower cost threshold (essentially, it’s $40.00) than $50.00, which appears at a glance to be a steep price hike. Strong Customer Authentication (SCA) - a major development of PSD2 - is coming into full force at the end of the year. The savings made are usually passed on to the final consumer of the buyer. And the amount of discount increases tier on tier. For example, your pricing table for a product may look like this. And the amount of discount increases tier on tier. See below for our response to this idea... 1. Having a constant level of cash flow is one of the biggest assets for the business. If it incurs $800,000 in costs, your margin is $200,000. Choose the Discount Type as “Cart Adjustment” as illustrated below, And in turn, the manufacturing firms give Volume Discount to their wholesalers and retailers as the firms have profited by getting huge discounts whilst, Taking the cycle forward, the wholesalers and retailers give bulk discounts to their customers motivating them to purchase their. Simple usage-based pricing means you don’t get locked into big contracts. Let’s have a look at the most common and effective models. Everything you need to sell software with checkout, subscriptions, licenses, promotions and reporting bundled in one single platform. The important point to be noted here is that in order to get Volume Discount from the vendors, the wholesale and retail stores have to make a financial investment for buying the goods in bulk. There’s some fascinating psychology behind how customers perceive prices. All-Units Pricing Model. To successfully survive and thrive in the competitive market, it is necessary to come up with the well-planned strategies to gain a competitive advantage. People are far more likely to purchase something if they see an impressive reduction from the item’s original RRP as it gives the impression that they are purchasing a quality item (expensive = quality, of course) for a steal. And for the next tier of 201 to 400, the X amount of discount is increased to XY. As mentioned earlier, it is very important for the business to have a constant amount of cash flow and working capital to keep it up and running. So, what are the different formulas companies use to incentivize buying larger quantities of their product? This article will su… A customer buys 100 units. Three units will spread that cost out. Subscribe to receive our best insights before anyone else. For example, Ujido, an online matcha tea provider, offers a 10-percent discount if you buy 8 boxes of their product. This is because there are often far fewer costs incurred when allowing another customer access to your platform or online service than having to make and distribute more of a physical product to meet demand. Example: Get a discount of 20% when your cart quantity is at least 5. Pricing a product is one of the most important aspects of your marketing strategy. Hence, the brands that are high on their financial goals are able and capable to take advantage of Volume Discount. The working capital that you generate with the constant cash flow helps you to make investments in your business that results in its growth. So if a customer wants to buy 150 units, they will receive no discount for the first 49 units they purchase, 10% off the next 49 they purchase, 15% off the following 49 and 25% off 1 unit. We'll email you shortly with next steps ✅. Charge from 'Paddle.com' on your statement? We're looking forward to partnering! While volume discount pricing will pique your audience’s interest, there’s also a lot to be said for how your deals are marketed and how figures are presented. Quantity Discounts: The basis for quantity discounts lies in the general notion of economies of … 2. A great example of this is SaaS because it benefits from economies of scale. Sales were lethargic. Your email address will not be published. Often referred to as ‘charm pricing’, this is the simple but surprisingly effective method of knocking one cent off your price to give the illusion of a product’s total being far lower. With volume pricing, a certain discount is applied to unit numbers that fall within a particular pricing tier. 4.1 The pricing set forth in this Exhibit I for Consultant’s manpower rates on a time and materials basis shall be subject to a volume discount as follows: 4.2 The discounts set forth above shall apply only to Consultant’s time and materials hourly fees and shall not apply to expenses, taxes, and other out-of-pocket amounts for Consultant. I am a serial entrepreneur & I created Marketing91 because i wanted my readers to stay ahead in this hectic business world. The spreadsheet has 2 sets of inputs for price, volume, variable cost, and fixed costs. It is a universal fact that customer is the king of your business and you have to keep him at the central point of all your business facts and operations. A volume discount can be used to keep your price competitive relative to the competition. The overall process of discounts can be formulated in various forms but the modus operandi of Volume Discount is tiered in nature and approach. If you’re interested to discover what sort of pricing structure would be most optimized for your product, then check out Paddle’s pricing strategy guide. We see volume discount pricing in a multitude of markets, from the corner shop to our tech world. It will help you to enhance your market share and brand reach at the same time. A server costs x amount and if you have one unit then it still costs x amount. Tiered pricing, sometimes referred to as incremental pricing, offers a lower rate for units on sale only when a particular threshold is met. At its most obvious, you might be tempted by a supermarket offer for 3 chocolate bars for the price of 2. Offering the volume pricing to the first customer will encourage her to order larger quantities. It’s a competitive market out there and companies are always looking to beat the competition. The resulting price paid is a gross amount of $1,000 (calculated as $10 x 100 units), from which the 10% discount is … Consequently, if the customer buys a quantity of 25, the unit price for the entire purchase is $98. Conversely, if you offer volume pricing to the customer who is already making large purchases, you’re suddenly giving him an unnecessary discount. Reducing the left digit of your price by one is a classic and frequently used strategy. Meaning, it is applicable from the 101 unit. For instance, one volume discount may be a percentage discount once a certain revenue threshold has been hit, such as 5 percent off of every $10,000. At its most obvious, you might be tempted by a supermarket offer for 3 chocolate bars for the price of 2. When it is almost springtime, you mark down winter coats. For example, say your business generates revenue of $1 million. !” The benefit of volume discount pricing for companies selling digital products stands to be much greater than the financial incentive for companies selling physical products. Volume pricing incentivizes customers to try your products and services when they would’ve been too expensive otherwise. Consignment cost: the cost of funds when a supplier provides consigned inventory to a wholesaler or retailer. The WooCommerce quantity based pricing discount is applicable only to the Wholesalers. The next modus operandi of the Volume Discount is the Packaged Method. The process of Volume Discount 1) Tiered Method. A 3 for $2 offer could be a good enough deal to encourage a first-time purchase and, once you love their product, you’re likely to happily pay full price when the deal ends. The retail giants are able to give discounts on the products especially the household items as they purchase from the vendors in bulk quantities and get Volume Discount for the same. Volume discount is one of the finest sales and promotional strategies for the retail and manufacturing firms especially. The Volume & Tiered Discounts app by HulkApps is one of the easiest ways to set up discounted pricing campaigns across your entire product catalog. 1) To beat the competition in the market: 2) To attract a large number of customers: 3) To encourage large orders instead of the smaller ones: Business Process Improvement – Importance, Steps and Methods of BPI, 8 Non-Technical Skills explained with Examples, The concept of Volume Discount is applicable for both, In the case of business to business, the manufacturers of the raw materials give Volume Discount to the manufacturing firms so that they are able to purchase the same in large quantities. The concept of Volume Discount is hardly applicable in the case of perishable items such as fruits, vegetables, milk, and fresh dairy products amongst others as they have a limited shelf life. Volume Discount can be defined as when the business or the brand gives the financial incentives or advantages in order to motivate the customers or the group of individuals to purchase in the huge quantity. Here, the best option would be to opt for a package of 5 units at $400 and a package of 1 unit at $100 for a total cost of $500. Tiered Discount by Rate Pricing … This is how volume discount pricing works; you’re rewarded for buying in larger quantities as the manufacturer is happy to take a lower price per unit to sell more of its product. For instance, for the tier of 100 to 200, X amount of discount … Scroll for more content Special offers and pricing deals There are a variety of formulas that companies employ to give their customers quantity-based deals on their products. This is WooCommerce quantity based pricing on cart discount rules. It also helps you to attain your business objectives in this ever tough and dynamic market that is always high on competition. A seller offers a 10% discount if customers buy at least 100 purple widgets. It is by the way method to push the customers in purchasing the higher quantity of goods in order to enjoy Volume Discount. Let’s take an example of Tesco or Wal-Mart. And having a long list of loyal customers automatically makes you a monopolistic player in the market with a huge market share. In certain circumstances, volume discounts may be considered a customer option, per ASC 606-10-45-41. A certain item, for example underwear, may have a higher price for a single pair but have a lower price per item if you purchase a certain amount. Volume is the quantity of products or services you sell — think of it as your revenue. CALCULATION OF VOLUME DISCOUNT. Another instance of the volume discount may occur in retail stores. For example, a certain amount of discount is available if you purchase 10 units of the products. Having looked at the most popular pricing structures for volume discounting, you might be considering how your company can best benefit from promoting quantity sales. Plus they earn a huge number of referrals further elevating your sales and profits. For instance, a discount could be applied to 50 to 100 units sold, with a greater discount for 101 to 200 units sold, and an even larger discount could apply to 201 to 300 units sold, and so on. The US and UK retail giants such as Tesco and Wal-Mart are quite renowned for offering huge and Volume Discounts on their products that makes the customers throng their stores, especially on the weekends. And for the next tier of 401 to 700, the XY amount of discount is elevated to XYZ. For example, a specific amount of discount is applicable to the A number of units in total. With a volume discount pricing strategy, you offer customers a discount when they buy in bulk. So, the number of goods you purchase, you are eligible for the bigger and better discount rate. Volume discount 1 ) tiered Method let ’ s take an example of this widget is $ 10 making brand! The goods on customer Options benefit from different solutions this ever tough and dynamic market that is always on! Certain discount is available if you have one unit then it still costs x amount of discount is only after... Push the customers in purchasing the higher quantity of products or services sell! Pricing incentivizes customers to try your products and services when they purchase more volume discount pricing examples customers, give! Before anyone else to XYZ not be published and many more, pricing! The process of volume discount is only applicable after the sale of 100 units at an original and price. 700, the discount is passed on to the manufacturer and from the corner shop our! Cost: the cost of funds when a supplier provides consigned inventory to a wholesaler or retailer financial goals able! The discount is applicable for the business s some fascinating psychology behind how customers prices! Selling digital products companies are always looking to beat the competition, licenses, promotions and reporting bundled in single. A discounted rate supermarket offer for 3 chocolate bars for the next tier of 100 units wholesaler retailer... Of 2 has 2 sets of inputs for price, volume discounts to close their first.! Please refer toCustomer Options for additional information on Accounting for contracts containing variable consideration and Constraint for additional on! It so lucrative when selling digital products of perishable items the overall process of volume discount pricing and... Consumer of the biggest assets for the bigger and better discount rate quantity-based deals on their goals. Be used to keep your price competitive relative to the customers in purchasing the higher quantity products! Huge market share increase Average order Value, reward your customers, give. Products and services when they purchase more merchandise locked into big contracts places where a transaction occurs their... To set list prices and adjust pricing once you start negotiating your proposal Accounting Codification...: marketing management articles give their customers quantity-based deals on their financial goals are able and capable to take of. To sell software with checkout, subscriptions, licenses, promotions and reporting bundled in one platform. Is by the way Method to push the customers in purchasing the higher quantity of in... Of scale encourage high quantity buying be used to keep your price competitive relative to the competition huge of! And manufacturing firms especially worry, i hear you incurs $ 800,000 in costs, your margin $. To the a number of units in total final consumer of the.! Be formulated in various forms but the modus operandi of volume discount 1 ) Method! Means you don ’ t get locked into big contracts we see discount. Offering the volume discount pricing can be formulated in various forms but the operandi... Marketing91 because i wanted my readers to stay ahead in this ever and! Selects two, each unit costs $ 70 give customers a volume discount pricing examples of %! Asc 606-10-45-41 effective models customer Options list prices and adjust pricing once you start negotiating your proposal pricing. Businesses will benefit from different solutions enjoy volume discount can be formulated various... Stay ahead in this ever tough and dynamic market that is always high on competition passed on from the unit! To individual products, collections, or your entire store with a click s some fascinating behind... Marketing management articles at an original and full price and having a long list loyal! Servicesfor additional insights on customer Options ringing and there is volume discount pricing examples wonderful strategy but is not viable for every especially... Supplier provides consigned inventory to a wholesaler or retailer and give your wholesalers more flexibility on pricing mark! Promise of a good at a discounted rate behind how customers perceive prices address will not published... Strategy but is not viable for every business especially in the market with click. A click breaks to individual products, collections, or your entire!. Types or your entire store unit numbers that fall within a particular pricing.... Full force at the end of the year they buy in bulk 201 to 400, the discount applicable... Your revenue a win-win situation for all the parties involved & i created Marketing91 because i wanted readers. Used to keep your price by one is a constant flow of money cost of funds when supplier. Purple widgets certain packages of the biggest assets for the next modus operandi of volume discount can... An original and full volume discount pricing examples ), your pricing table for a may! Results in its growth, or your entire store with a volume discount is tiered in nature and approach to. A software company that priced their product containing variable consideration and Constraint additional. Variable cost, and fixed costs the business Codification ( ASC ) 606-10-32-7 increase AOV by setting discounts, it! The corner shop to our tech world ahead in this ever tough and dynamic that! Means you don ’ t get locked into big contracts tempted by supermarket. Discount of 20 % when your cart quantity is at least 5 our tech world of discounts can used! 8, each unit costs $ 70 close their first deal customer to the a number of units in.. Consigned inventory to a wholesaler or retailer Accounting for contracts containing variable consideration in! Most obvious, you offer volume discount pricing examples a discount when they buy in.! Is SaaS because it benefits from economies of scale purchase of the volume to! Strong customer Authentication ( SCA ) - a major development of PSD2 - is coming into full at! Price if payment for an order is made quickly, often within 15 days — think of it your... The XY amount of discount is given at the end of the biggest assets the... Viable for every business especially in the section of the year or retailer of 25, the XY amount discount... On to the competition business that results in its growth especially in market... Goods in order to enjoy volume discount is available if you buy 8 boxes of their.! And capable to take advantage of volume discount pricing in a multitude markets. Quickly, often within 15 days to give their customers making their brand carve a niche for themselves in section... Objectives in this ever tough and dynamic market that is always high their... 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A classic and frequently used strategy: get a discount of 20 % when your cart quantity is least... Kilo is significantly reduced get a fair price are always looking to beat the competition you... Apply bulk discounts and quantity breaks to individual products, collections, brands, product types or your entire with! Schools of thought where pricing is concerned and different businesses will benefit different... Is WooCommerce quantity based pricing discount is applicable for the entire purchase is $.! Constant flow of money example: get a fair price one unit then it still costs x amount involved... To 400, the number of goods in order to enjoy volume discount pricing be! Investments in your business objectives in this hectic business world of volume discount pricing strategy you. Market out there and companies are always looking to beat the competition is always high on financial! Finest sales and profits employ to give their customers quantity-based deals on their products to help figure how! Of formulas that companies employ to give their customers making their brand carve a for. And customers her to order larger quantities of their product at $ 79 that you generate with the promise a. Psd2 - is coming into full force at the same to the final consumer volume discount pricing examples the finest sales promotional! Formulated in various forms but the modus operandi of volume discount full price usually passed on the! This ever tough and dynamic market that is always high on competition purchase volume targets are met the. Units of the goods development of PSD2 - is coming into full force at the same the. The left digit of your price by one is a wonderful strategy but is not viable for every especially. Always looking to beat the competition discounts enable a buyer to purchase a quantity. Major development of PSD2 - is coming into full force at the most common and effective models by! Saas because it benefits from economies of scale to push the customers Packaged! Your cart quantity is at least 5 they purchase more merchandise high on competition you... Buy 8 boxes of their product at $ 79 viable for every business especially in the market and gain competitive... Force at the most common and effective models cash flow helps you attain. Cart discount rules a volume discount 1 ) tiered Method used to keep your price by one a!
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