Discount pricing

Involves deduction from the published price list

Encourage customers to buy in large volumes Encourage rapid payment by customers Account for cost and benefits of dealing with different range of customers

Trade discount
Account for benefits derived from dealing with various groups of customers or middlemen Discounts afforded should cover the operating costs Must be non discriminatory and cost justified (Robinson-Patman act) Eg. Discounting in OEMs

Quantity discounts
An incentive offered to a buyer that results in a decreased cost per unit of goods when purchased in greater numbers Encourage volume purchasing and maintain brand loyalty

 Cumulative discounts:
Reducing market expense Reduce competitive pressure

Noncumulative discounts:
Encourage large individual orders Reduce costs of storage and order processing

Examples: Buy five for the price of four and buy one get one free

Cash discounts
Deduction in payable amount of debtors Encourage rapid payment Allow for a better cash flow Problem may arise when large buyers pay their bills beyond the due date and still demand the discount rates

Geographical pricing
Modifying a basic list price based on the geographical location of the buyer Important to remain competitive in market Handling shipping costs on the basis of weight to value ratio