Discount

economic-dictionary

A discount is a decrease in the price of a good or a service. It is a tool used in a multitude of commercial strategies with the aim of increasing the number of sales of a certain product.

On a day-to-day basis, it is common to find offers and promotions that include a reduction in the price of a certain product. These discounts come in the form of a percentage, a fixed amount of monetary units or cumulative, among many other options.

Companies use this tool with totally different objectives depending on the situation of the company. Among them, we can highlight the interest of ending the stock of a product that is going to be discontinued, for publicizing a new product, for attracting customers from the competition or for imposing the market itself due to the behavior of other companies.

As for the taxation that we mention, we want to refer to such important dates as, for example, "Black Friday". When the majority of companies in the sector launch aggressive discounts on a certain date and manage to drag the rest of the companies. This is because the latter consider that they are lagging behind, if they do not make use of this commercial strategy.

Consequently, we could affirm that it is the most traditional and used commercial strategy. In any marketplace, we can find daily discounts on countless products that, added to this, change periodically.

Discount rates

Here is a compilation of the main types of discounts that we can find in the market:

  • Percentage on the price: In sales or web portals, among many others, it is common to find the different items discounted by a certain percentage.
  • Fixed economic amount: Many companies make a reduction of a certain amount of monetary units.
  • Accumulated discounts: In the online sector, many applications or web portals usually offer their users a discount for each friend who purchases a certain good or service, allowing the accumulation of the discounts obtained. In this case, the user who wants to get the discount acts as a commercial for the company.
  • Volume: When large quantities of a certain product are purchased, it is common for companies to offer a discount per unit of product or on the total invoice.
  • Prompt payment: This type of discount usually occurs in transactions between companies. When companies purchase the products they need to run their business, suppliers offer them the option of paying for them in the future. When the payment is made in advance, it is common to apply a discount.
  • Loyalty: Most companies reward their best customers by offering discounts on their purchases to guarantee in some way that they will retain that customer.

These are some of the most popular and widely used discount rates in companies' business strategies.

Discount example

Suppose we are the owners of a clothing brand. With the arrival of the new year, we want to finalize the stock we have of last season's garments to be able to include the new ones and have more space in our warehouse.

In addition to this, we are also going to start marketing a new product that we had not offered to our client to date. Starting next year, we will include our brand's sunglasses section in our offer.

To do this, we are going to make discounts to achieve the following objectives:

  • Finalize clothing stocks from the previous season.
  • Encourage the consumption of sunglasses from our brand.

First, we will apply a 40% discount to all those garments that are part of the previous season. In this way, as our commercial margin is 65%, we will continue to obtain profitability.

To encourage our customers to try our new product, sunglasses, we will carry out the following strategy. For the purchase of an article of clothing from our brand with an amount equal to or greater than $ 20, we will give the customer a 50% discount on our new sunglasses.

In conclusion, the discount is the reduction in the price of a good or service in order to encourage its consumption. They are also awarded on numerous occasions as a reward for large purchases or prompt payment since it is interesting to the selling company.

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