Four Types of Discount | Cash | Trade | Volume | Seasonal

Types of Discount

Introduction:

To encourage both members of the distribution channel (wholesalers and retailers) and end consumers and industrial users or businesses to do something they would not ordinarily like to make purchases higher than normal, pay your bill long before the date Expiration, off-season purchases or any function-marketing managers have the option of offering one or more types of discount.

For this, it is imperative that marketers know what the different types of discount are, what goals they have and what each one consists of, in order to have a basic idea about the different options that can include as part of their Price adjustment strategy.

Types of Discount

In general terms, there are four types of discount that are most frequently used:

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• What is discount 

Volume Discount:

Also called quantity discount, they aim to encourage customers to purchase larger quantities of a product or product line.

This type of discount consists of a reduction of the list price that is applied to purchases whose volumes are higher than normal, either in units or values (cash).

There are or are known two types of discount by volume:

Noncumulative : They apply to a specific purchase. Its objective is to stimulate the purchase of large volumes of a product or product line concentrated in a single order. For example Discount for purchases over 1000 units or more than 10,000.- U $ D.

Accumulative: In this case, the discount applies to the total purchases made by a buyer in a certain period of time. Its goal is to achieve frequent or repetitive purchases and customer loyalty. Some examples of this type of discount are the “frequent traveler” programs in the case of the airlines or of “frequent guest” in the case of hotels …

Cash Discount:

Also known as Early Payment discount, they aim to encourage customers to make payment of their account in a specific time period or as soon as possible.

This type of discount consists of a reduction of the list price that is applied to the payment that is made within a specific term. A typical example is “2/10, net 30” which means that it must be paid within 30 days and that the buyer can subtract 2% from the invoice if he pays it before 10 days [1].

Seasonal discount:

Also known as the seasonal discount, they aim to stimulate the purchase of one or more products in seasons of lower demand.

This type of discount consists of a reduction of the list price that is applied to the purchase of products that are out of season. For example, discount offered by travel agencies and airlines in the periods when their sales to certain destinations fall considerably.

Trade Discount:

Also known as the functional discount, they aim to encourage distribution channel members (wholesalers and/or retailers) to perform certain functions.

This type of discount consists of a reduction of the list price that is applied to the members of the distribution channel when they perform certain functions like sales, storage, and promotion, among others.