Discount pricing refers to the company’s decision to reduce the price of products as appropriate in order to encourage consumers to pay off the goods early, purchase in large quantities, or purchase in the off-season. This price adjustment is a discount pricing strategy. Discount pricing strategies mainly include: quantity discounts, cash discounts, functional discounts, seasonal discounts, and price discounts.
1. Quantity discounts
Quantity discounts refer to different discounts given according to the quantity purchased. The more the quantity purchased, the greater the discount. The purpose of this strategy is to encourage large-scale purchases or concentrated purchases. Quantity discounts include cumulative quantity discounts and one-time quantity discounts. Cumulative quantity discounts stipulate that if consumers purchase a certain number or amount of products within a certain period of time, a certain discount will be given according to the total amount. Its purpose is to encourage consumers to purchase from the company frequently and become reliable long-term consumers. It is especially suitable for perishable products (vegetables and fruits) that are not suitable for large-scale purchases at one time. One-time quantity discounts stipulate that if a certain number of products are purchased at one time or a certain amount of multiple products are purchased, a discount will be given. Its purpose is to encourage consumers to purchase in large quantities and promote more sales and faster sales of products.
2. Cash discount
Cash discount refers to a discount given to consumers who pay in advance or in cash within a specified time. Its purpose is to encourage consumers to pay as soon as possible, accelerate the company’s capital turnover, reduce sales expenses, and reduce financial risks. The cash discount strategy generally takes into account three factors: the discount ratio, the time limit for giving discounts, and the deadline for paying all the goods. In Western countries, the typical cash discount is expressed as “3/20, N/60”, which means that if the payment is made within 20 days after the transaction, the consumer can get a 3% discount; if the payment is made within 60 days after 20 days, there will be no discount, and interest will be paid if the payment is made within 60 days after 60 days.
3. Functional discount
The different links in the product distribution process of intermediaries have different functions, responsibilities and risks. The different discounts given by enterprises are called “functional discounts”. Discounts given to production suppliers are also functional discounts. The proportion of functional discounts mainly considers the position of the middleman in the distribution channel, the importance of the sales of the production supplier’s products, the purchase volume, the promotional function completed, the risks assumed, the service level, the commercial responsibility fulfilled, the level of the product in the distribution and the final selling price in the market. The result of functional discounts is the formation of purchase and sales price difference and wholesale and retail price difference.
Encouraging middlemen to place large orders, expand sales, win consumers, and establish long-term, stable and good cooperative relations with production suppliers is a main purpose of implementing functional discounts; another purpose of implementing functional discounts is to compensate the costs and expenses of the relevant products sold by middlemen, so that middlemen can have a certain profit.
4. Seasonal discounts
The production of some products is continuous, but the consumption is obviously seasonal. In order to adjust the contradiction between supply and demand, the companies that produce these products adopt seasonal discounts to give certain discounts to consumers who buy products in the off-season, so that the production and sales of the company can remain relatively stable throughout the year. For example: beer production companies give substantial concessions to customers who purchase in winter, and down jacket manufacturers provide discounts to consumers who buy their products in summer.
The seasonal discount ratio should take into account factors such as cost, storage costs, base price and interest on funds. Seasonal discounts are conducive to reducing inventory and accelerating product circulation; quickly recovering funds and promoting balanced production of enterprises; giving full play to production and sales potential and reducing market risks caused by seasonal demand changes.
5. Price discounts
Price discounts refer to discounts directly on the original price of the product. For enterprises, discounts can stimulate the purchasing power of potential target consumers and occupy a certain advantage in competition with peers. When implementing price discounts, enterprises will indicate the effective period to reduce the difficulty of price recovery. The disadvantages of price discounts are that they cannot be carried out for a long time and the discount is too small to have a significant effect. If the discount is too large, it is easy to cause consumers to doubt whether the product is reliable and the authenticity of the activity.