Discount Pricing Strategy: Structure, Simplification and Harmonization. It is a fact that any business that wants to thrive and remain in business in this cutthroat business era has to be on their toes. They have to always come up with new ways to keep existing customers, draw in new ones, and increase cash flow.
One of the ways to achieve this is by using a discount pricing strategy.
What Is Discount Pricing?
Discount pricing is a form of pricing strategy where the prices of merchandise are marked down. Generally, the goal of discounting is to increase sales, boost customer traffic, and clear out old or excess inventory from a business.
Discount pricing isn’t something you do for an extended period of time. Most businesses normally switch between different pricing strategies to achieve their sales and business goals.
There is a need to exercise some caution when utilizing a discount pricing strategy. When you frequently markdown costs, customers may likely lose that sense of urgency and value, and you could end up losing money instead.
To drive sales, it is best to not depend exclusively on discount pricing. Big corporations can afford to have lesser prices because the massive volume they buy, will get them bulk pricing.
So as a small business, it’s not viable to compete with big companies on price. A better strategy will be to emphasize your product or service uniqueness, then occasionally give discounts for the greatest effect.
Discount Strategies Simplified
There are different ways to offer price discounts – each intended to accomplish a particular purpose.
Here are some of the major types.
- Seasonal discounts
- Loyalty member discounts
- Volume discounts
- Promotional discounts
Seasonal discounts are typically offered for out-of-season stock. For example, discounting winter coats during the spring or marking down the price of snowmobiles in the summer.
The aim of these discounts is to extend demand throughout the year, which would improve cash flow and allow greater use of manufacturing facilities over the year.
Loyalty Member Discounts
This tactic involves offering a customer a discount after buying a specified number of items or after spending a certain amount.
With volume discounting, you give customers discounts when they buy more merchandise. This kind of price reduction encourages customers to buy in bulk.
These are discounts a business offers within a certain time. Typically, this type of markdown is given towards the end of the life cycle of a product.
And sometimes, business owners could offer one during big events or holidays. Some examples are:
- Cutting percentage off some items
- Buy two get one free
The discount structure system provides an extremely configurable method of offering discounts. It also allows price calculations for merchandise and clients based on a set of criteria.
The calculations from this table are used to fix the selling price of a product when the product is entered into the sales order, sales invoice, or sales quotation box.
Discount structures allow sellers to create a limitless amount of specifications. These specifications now define how the price of the merchandise should be calculated – based on the category the merchandise belongs to and the customer to who will be buying the item.
In a discount structure, you can enter an expiry date when your discount structure calculations would stop been used.
There are different types of discount structures. They include the single discount structure, corporate discount structure and the distributor discount structure.
A single discount structure table consists of at least 2 key types and the corresponding value (who items would be sold to). It also consists of 3 price types and the value (how prices would be calculated), and lastly, the code types (who items are bought from or what you’re selling).