Discount Pricing

Description of Discount Pricing. Explanation.

Definition Discount Pricing. Description.

Discount Pricing is an approach to pricing that sets artificially high prices and then offers large discounts to attract customers looking for a bargain. It is a modification to the basic price. Purposes of this approach are to increase short-term sales, move out-of-date stock, reward valuable customers, and encourage distribution channel members to perform a function.

Some regular types of discounts are:

Cash discounts.
Quantity discounts.
Trade discounts.
Seasonal discounts (Synchromarketing).
Forward dating (The date on the invoice is moved forward and the buyer doesn’t pay for the goods until well after they arrive).
Promotional allowances (Price reduction given to the buyer for performing some promotional activity).
Trade-ins (By offering more for a trade-in than it is actually worth).

The biggest advantage of this type of pricing is that it encourages additional sales without lowering the basic price or standard price or list price.

Although price discounting often results in additional sales in the short term, care must be taken not to harm the (long term) value of a brand as perceived by customers.