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Discount Pricing

Discount Pricing. Discounts and Allowances. Cash discounts Quantity discounts Trade discounts Seasonal discounts Special allowances. Cash Discounts. Offered to encourage quick payment Terms 2/10, n/30 means

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Discount Pricing

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  1. Discount Pricing

  2. Discounts and Allowances • Cash discounts • Quantity discounts • Trade discounts • Seasonal discounts • Special allowances

  3. Cash Discounts • Offered to encourage quick payment • Terms 2/10, n/30 means • Pay within 10 days of the date of the invoice, and you may deduct 2% off the price • Otherwise, net or n is due within 30 days of the date of the invoice

  4. Quantity Discounts • Large orders receive bigger discounts • The more you buy, the less you pay • Could be the same item or different items • Example: • 1-24 = $1.00 each • 25-48 = $.95 each • 49-72 = $.90 each

  5. Employee Discounts • Sometimes given as a perk for being employed at that business • Usually varies between 10 and 30% • Can be a certain dollar figure

  6. Assignment • Discount Pricing Worksheet 2 • Employee discount problems (marketing math workbook p. 92)

  7. Trade Discounts • Not really discounts, but a way to quote prices • Granted to wholesalers and retailers for performing for that trade or company • Multiple the price by the discount amount and subtract from the price • $40 X 10% = $4 discount; Price is $40-$4 = $36

  8. Series Discounting • Sometimes trade discounts are offered in a series. • For example, if a wholesaler was offered trade discounts of 20% and 10%, you would first determine the 20% and then take 10% off of that amount. • It would not be a 30% discount total.

  9. For example • Price of a product is $5,700 and the trade series discounts are 20% and 10% • Take 20% off • Either do 20% X 5700 = 1140, and then 5700-1140=4560 • OR 80% X 5700 = 4560 • Then, take 10% of 4560 • What is the final amount due for the product?

  10. Seasonal Discounts • Purchased outside the customary season • Reduce costs by selling at lower price instead of paying the cost for warehousing • Figured the same as a trade discount

  11. Promotional Discounts and Allowances • To wholesalers and retailers • Willing to advertise or promote a manufacturer’s product • Could be free merchandise to sell or a price reduction in the cost • For instance, a retailer offers to do an aisle display of the product in exchange for a discount or the manufacturer offers a shelving allowance. • Divide the dollar discount by the original price. The answer will be a decimal. Change the decimal to a percentage.

  12. Figuring a Promotional Discount • $10,000 Price • $250 discount • Divide the discount amount by the price • 250/10,000 • =.025 (convert to percentage) • 2.5%

  13. For example • Suppose you are a retailer, and the manufacturer offers you a 10% promotional allowance for shelving their product prominently. You buy $30,000 worth of the merchandise. What is your cost? • Suppose you are a retailer and it is cheaper to discount your valentine candy than it is to send it back to your supplier. You price candy hearts that were $1.00 at .65. What is the promotional discount you are offering?

  14. Promotional Discounts and Allowances • Offered to consumers also in the form of • Rebate • Trade Ins • Coupons

  15. Assignment • Students should complete • Practice 7 on p. 579 • Practice 8 on p. 581 • Handout Problems (from MM workbook) • P. 89 Series discounts #95, 96, 97, 98 • P. 91 Promotional discounts #103 (net amount payable only) • P. 91 #105

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