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Discounting

 

DisciplinesMarketing > Pricing > Discounting

Description | Example | Discussion | See also

 

Description

Offer discounts, where the price customers pay is less than the 'ticket' price. This can be offered up-front or may be given during a negotiation.

Types of discount you can use include:

  • Bulk discounts, where buying more means paying less per item.
  • Solution discounts, where multiple items that work together are sold as a package, priced at lower than the component parts.
  • Spend discounts, where the more they spend (on anything or a given range of items), the more discount they get.
  • BOGOF (Buy One Get One Free) and similar discounts, which encourage them to buy more than they would normally buy.
  • Short-term discounts, where the discount is only available for a limited period.
  • Cash discounts, where paying in cash (eg. rather than credit card) gains extra discount.
  • Price matching discount: Promise meet or beat any comparable cheaper products found elsewhere.

Consider stating discounts as percentages when the overall price is lower or where the discount percentage is high. Alternatively, consider stating discounts as monetary value when the overall price is high and the discounted amount seems large (even if the percentage is small).

When using monetary discounts, use round figures ('$20 off'). Alternatively you can round the price down either to a motivating price boundary ('now only $99') or to an easy figure ('reduced to $25').

Example

A white-goods retailer offers a discount of $50 on a new cooker.

A business-to-business sales person has a set discount sheet that gives her scope for negotiated discounting.

A supermarket sends out vouchers, targeted to specific customers, that give discounts on particular products.

Discussion

When we are offered something for less, it can seem like we are getting that reduction as 'free money'. This effect is amplified when the seller puts significant emphasis on the discount. When discounts are offered for a limited period, for example in a sale, the scarcity principle takes effect, where people buy because they fear not being to buy cheaper at a later date.

Discounting can make people cynical about the 'true price' and suspicious of profit margins, so needs to be used with care.

In commercial selling, discounting gives flexibility to help negotiation, for example booking a bigger order for a bigger discount.

Be careful when dealing in cash, as this may have taxation issues associated with it. Cash is also untraceable, should there be any legal challenges.

See also

Bundle Pricing, Discountable Pricing, Negotiation, Quantity Discount

 

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