DIFFERENT TYPE OF PRICE DISCOUNTS

THAT MAY BE OFFERED TO THE

CUSTOMER

D iscounts and allowances are reductions to a basic price of

goods or services.

The can occur anywhere in the distribution channel, modifying

either the manufacturer's list price (determined by the manufacturer
and often printed on the package), the retail price (set by the
retailer and often attached to the product with a sticker), or the list
price (which is quoted to a potential buyer, usually in written
form).

There are many purposes for discounting, including; to increase

short-term sales, to move out-of-date stock, to reward valuable
customers, to encourage distribution channel members to perform
a function, or to otherwise reward behaviors that benefit the
discount issuer. Some discounts and allowances are forms of sales
promotion.

Discount and allowance types :-

The most common types of discounts and allowances are listed
below.

Discounts and allowances dealing with payment

Prompt payment discount

Trade Discount:Deduction in price given by the
wholesaler/manufacturer to the retailer at the list price or catalogue
price. Cash Discount:Reduction in price given by the creditor to
the debitor is known as cash discount. This discount is intended to
speed payment and thereby provide liquidity to the firm. They are
sometimes used as a promotional device.

Examples
• 2/10 net 30 - this means the buyer must pay within 30 days of
the invoice date, but will receive a 2% discount if they pay
within 10 days of the invoice date.
• 3/7 EOM - this means the buyer will receive a cash discount
of 3% if the bill is paid within 7 days after the end of the
month indicated on the invoice date. If an invoice is received
on or before the 25th day of the month, payment is due on the
7th day of the next calendar month. If a proper invoice is
received after the 25th day of the month, payment is due on
the 7th day of the second calendar month.
• 3/7 EOM net 30 - this means the buyer must pay within 30
days of the invoice date, but will receive a 3% discount if
they pay within 7 days after the end of the month indicated
on the invoice date. If an invoice is received on or before the
25th day of the month, payment is due on the 7th day of the
next calendar month. If a proper invoice is received after the
25th day of the month, payment is due on the 7th day of the
second calendar month.
• 2/15 net 40 ROG - this means the buyer must pay within 40
days of receipt of goods, but will receive a 2% discount if
paid in 15 days of the invoice date. (ROG is short for
"Receipt of goods.")

Preferred payment method discount

Some retailers (particularly small retailers with low margins) offer
discounts to customers paying with cash, to avoid paying fees on
credit card transactions.

Partial payment discount

Similar to the Trade discount, this is used when the seller wishes to
improve cash flow or liquidity, but finds that the buyer typically is
unable to meet the desired discount deadline. A partial discount for
whatever payment the buyer makes helps the seller's cash flow
partially.

Sliding scale

Main article: Sliding scale fees

A discount offered based on one's ability to pay. More common

with non-profit organizations than with for-profit retail.

Forward dating

This is where the purchaser doesn’t pay for the goods until well
after they arrive. The date on the invoice is moved forward -
example: purchase goods in November for sale during the
December holiday season, but the payment date on the invoice is
January 7.

Seasonal discount

These are price reductions given when an order is placed in a slack

period (example: purchasing skis in April in the northern
hemisphere, or in September in the southern hemisphere). On a
shorter time scale, a happy hour may fall in this category.
Generally, this discount is referred to as "X-Dating" or "Ex-
Dating". An example of X-Dating would be:
 • 3/7 net 30 extra 10 - this means the buyer must pay within 30
days of the invoice date, but will receive a 3% discount if
they pay within 7 days after the end of the month indicated
on the invoice date plus an extra 10 days.

Discounts and allowances dealing with trade

Bargaining

Main article: Bargaining

Bargaining is where the seller and the buyer negotiate a price,

which the buyer hopes is lower than the marked price.

Trade discount (also called functional discount)

These are payments to distribution channel members for

performing some function. Examples of these functions are
warehousing and shelf stocking. Trade discounts are often
combined to include a series of functions, for example 20/12/5
could indicate a 20% discount for warehousing the product, an
additional 12% discount for shipping the product, and an additional
5% discount for keeping the shelves stocked. Trade discounts are
most frequent in industries where retailers hold the majority of the
power in the distribution channel (referred to as channel captains).

Trade-in discount

This can be a way of reducing the price. By offering more for a

trade-in than it is actually worth, the net effect is to reduce the
effective price earned by the seller. The advantage of this is it
encourages replacement sales without altering the list price or the
perceived value.

Trade rate discount

A discount offered by a seller to a buyer in a related industry. For
example, a pharmacist might offer a discount for over-the-counter
drugs to physicians who are purchasing them for dispensing to the
physicians' own patients.[1]

Discounts and allowances dealing with quantity

These are price reductions given for large purchases. The rationale
behind them is to obtain economies of scale and pass some (or all)
of these savings on to the customer. In some industries, buyer
groups and co-ops have formed to take advantage of these
discounts. Generally there are two types:

Cumulative quantity discount (also called accumulation

discounts)

These are price reductions based on the quantity purchased over a

set period of time. The expectation is that they will impose an
implied switching cost and thereby bond the purchaser to the
seller.

Non-cumulative quantity discount

These are price reductions based on the quantity of a single order.

The expectation is that they will encourage larger orders, thus
reducing billing, order filling, shipping, and sales personal
expenses.

Dependence of price on quantity

An extreme form of quantity discount is when, within a quantity

range, the price does not depend on quantity:

• if one wants less than the minimum amount one has to be pay
for the minimum amount anyway
• if one wants an amount between two of the fixed amounts on
offer, one has to pay for the higher amount
These also apply in the case of a service with "quantity" referring
to time. For example, an entrance ticket for a zoo is usually for a
day; if one stays shorter, the price is the same. It is a kind of pass
for unlimited use of a service during a day, where one can
distinguish whether or not, when leaving and returning, one has to
pay again. Similarly a pass can be for another period. In the case of
long periods, it is obvious that one can leave and return without
paying again.

If one has to buy more than one wants, we can distinguish between
the surplus just not being used, or the surplus being a nuisance, e.g.
because of having to carry a large container.

Discounts and allowances dealing with customer

characteristics

The following discounts have to do with specific characteristics of

the customer.

Disability discount

A discount offered to customers with a disability. Depending on

the type of business or setting, what is considered a disability may
vary.

] Educational discount (also called student discount)

These are price reductions given to members of educational

institutions, usually students but possibly also to educators and to
other institution staff. The rationale is to build brand awareness
early in a buyer's life, and/or to build product familiarity early so
that when a student graduates, he/she is more likely to buy the
same product for work at its normal price. Educational discounts
are traditionally given by merchants directly, or via a student
discount program such as NUS and Studentdiscounts.co.uk in the
United Kingdom or Edhance in the United States.
Employee discount

A discount offered internally to the employees of a company that

sell goods and/or services. This is used to entice more people
interested in the goods and/or services of the company to work for
the company to receive the discount, and then for the hired
employees to put their wages right back into the company by
purchasing the goods and/or services. Other perceived benefits of
this discount include:

• reaching out to potential employees that could be

knowledgeable in the goods and/or services the company
offers by offering a discount on what they like.
• reduce employee theft by making the hired employees feel
they are already getting the items at a great price.
• keep current employees from leaving if they cannot also
leave the discount they are receiving behind.

In 2005, the American automakers marketed an employee discount

for all promotional campaign in order to entice buyers, which saw
some success.

Military discount

A discount offered to customers who are and/or were enlisted in

military services. The rationale may be that the servicemember is
assumed to be on a limited budget, or it may be a way for the
retailer to show support for members of the military.

[edit] Senior discount

"senior discount" redirects here. For the band, see Senior

Discount (band).

A discount offered to customers who are above a certain age,

typically 50, 55, or 60; the exact age varies with the business or
setting. The rationale for a senior discount is that the customer is
assumed to be retired, and/or have a limited income, and/or living
on a budget.

Toddler discount (also known as a child discount, kid discount)

A discount offered to children younger than a certain age, very

common with regard to admission fees to entertainments and
attractions. Another form of this discount is a "kids eat free" type
of promotion. Often there is a requirement that the child must be
accompanied by an adult paying full price.

Special prices offered to friends of the seller

A discounted price offered to friends of the salesperson, an attitude

which is parodied in the stereotype of a salesman saying "It costs
such-and such, but for you..." In Australia and New Zealand,
discounts to friends are known as "mates' rates."[2] In French this
discount is known as prix d'ami.[3]

Special prices offered to local residents

Common in tourist destinations, this discount is intended to

promote local patronage. In Hawai'i, for example, many tourist
attractions, hotels, and restaurants charge a deeply discounted price
to someone who shows a Hawai'i drivers license or other proof that
they live in Hawai'i; this is known as a "Kama'aina discount," after
the Hawaiian word for an old-timer or native.[4][5]

[edit] Coupons

Main article: Coupon

A discount, either of a certain specified amount or a percentage to

the holder of a voucher, usually with certain terms. Commonly, the
terms involve the terms of other discounts on this page, such as
being valid only if a certain quantity is bought or only if the
customer is a senior. Coupons can be distributed in places like
newspapers, brochures, and the internet. See coupon.

Rebates

Main article: Rebate (marketing)

A refund of part of sometimes the full price of the product

following purchase, though some rebates are offered at the time of
purchase. See rebate.

Other discounts and allowances

• Promotional allowances - These are price reductions given

to the buyer for performing some promotional activity. These
include an allowance for creating and maintaining an in-store
display or a co-op advertising allowance.
• Brokerage allowance - From the point of view of the
manufacturer, any brokerage fee paid is similar to a
promotional allowance. It is usually based on a percentage of
the sales generated by the broker.

 EFFECT OF PRICE INCREASE :-

Day by day increase in price of necessity commodities
& services. For example :
TATA Motors hikes Nano price by INR 9000
Tata Motors is taking a minor price increase on the Tata Nano,
effective from Nov. 1, 2010, to partially neutralize the steep
increase in input costs in the last two years. The average increase is
about INR 9000 (ex-showrooms), with prices varying from city to
city and model to model.

A spokesperson from TATA Motors said that “The price increase

is applicable to both fresh buyers as well as retainees. It will be
over and above the 3% to 4% price increase announced earlier for
retainees.” He added that this in effect, would mean that a buyer
will now have to fork out a total of INR 13,000 to 14,000 extra
over the launch ex showroom price.

The Oil and Gas Regulatory Authority (Ogra) increased prices of

petroleum products on Sunday by a massive Rs4.27 to Rs7.11 per
litre or up to 9 per cent with immediate effect to offset impact of
the rise in oil prices in the international market.
According to an Ogra notification, the price of petrol has been
increased by Rs5.91 per litre to Rs72.96 from Rs66.99 per litre, up
by 8.9 per cent and that of High Octane Blending Component
(HOBC) to Rs86.67 from Rs79.56 per litre, up by Rs7.11 per litre
or 8.9 per cent.
The ex-depot sale price of kerosene oil has been jacked up to
Rs70.95 from Rs65.80 per litre, up by about 7.8 per cent or Rs5.15
per litre, and the price of light diesel oil (LDO) to Rs66.61 from
Rs62.34 per litre, an increase of Rs4.27 per litre or 6.8 per cent.
Oil marketing companies have separately been asked to increase
the price of high speed diesel (HSD) to Rs78.33 from Rs73.82 per
litre, an increase of Rs4.51 per litre or 6.11 per cent. The diesel
price is notified separately by oil marketing companies because the
product is completely deregulated.
Announcing the price revision, Ogra spokesman Syed Jawad
Naseem said the international prices of kerosene and high speed
diesel had increased by 8 and 7.4 per cent and those of petrol and
furnace oil by 9.1 and 6.1 per cent, respectively.
The prices of jet fuels have also been increased by 8 per cent to 10
per cent. The JP-1 price was increased by 8.3 per cent to Rs60.26
per litre and that of JP-4 by 10.14 per cent to Rs57.45 per litre. The
JP-8 price was raised by 7.85 per cent to Rs63.04. This is the first
price increase since July this year.
The price increase is sure to push up overall inflation rate and the
cost of industrial production that has already been under pressure
because of higher electricity and gas rates and huge energy
shortfalls.
As a result of increase in import prices, the profit margins of
dealers and oil marketing companies have increased by 111 per
cent and the rate of GST being collected by the government has
gone up by up to 9 per cent. This is because the dealer commission
and company margin are payable at the rate of 4 per cent and five
per cent, respectively, while the GST at 16 per cent results in
windfall revenue to the government.
The government will now earn an additional revenue of up to
Rs1.03 per litre with the highest GST while dealers and OMCs will
earn a higher profit of about up to 28 paisa per litre on various
products. The government will earn an additional revenue of 87
paisa on petrol, Rs1.03 on HOBC, 75 paisa per litre on kerosene
and 62 paisa on light diesel oil.
The inland freight equalisation margin has also been increased by
33 per cent on petrol, 31 per cent on HOBC, 29 per cent on
kerosene and 6 per cent on LDO
The ex-depot product prices announced by Ogra will include the
petroleum levy of Rs10 per litre on petrol, Rs14 on HOBC, Rs6 on
kerosene, Rs8 on high speed diesel and Rs3 on light diesel oil for
sales through retail outlets. In case of direct sales by oil companies,
the petroleum levy will be higher than sales through retail outlets.
As such, the government will collect Rs12.36, Rs16.79, Rs6,
Rs9.50 and Rs3 per litre on petrol, HOBC, kerosene, HSD and
LDO, respectively.
Last month, the government had reduced the prices of petroleum
products by less than 0.4 per cent.

Tighten the purse strings as a wave of price increases are headed

our way. The Autoridad Reguladora de los Servicios Públicos
(Aresep) has a series of price increase requests for November,
from increases in the price of gasoline, to bus services and water
and sewer rates.

The middle of November the approved increase of ¢16 colones for

a litre of super gasoline, ¢14 for regular and ¢21 for diesel, will
take effect.

The price of a litre of gasoline will jump from ¢573 to ¢589,

regular from ¢548 to ¢562 and diesel from ¢487 to ¢508.

Natural gas prices will also increase.

In Heredia, the price of water and sewer services will go up if

approved by the Aresep. A public hearing on that increase is
scheduled for November 23 at the Sala Magna of the Liceo
Nocturno Alfredo González Flores.

The company that runs bus service between San José and Puriscal
is looking for a fare increase. That public hearing will be held on
November 12.

Also looking for fare increases is the company operating bus

services between Cartago and El Bosque and Blanquillo in
Oreamuno de CartagRising gold prices have no impact over the
buyers ahead of the upcoming festive season of Dussera, Diwali
and X'mas across the country.
According to jeweller in Ahmedabad though the price of gold is
higher as compared to the previous year, they are still optimistic
about doing a good business.

"Last year during these days, in the month of October, the gold rate
was around 16,200 rupees for 24 carat and this year it is 19,900.
So, the prices have increased to almost 25 percent this year. And in
spite of the price rise, the demand has not been affected. Even the
demand of gold has increased in the same percentage," said Manoj
Soni, owner of a jewellery showroom.

"The buyers know that the price will increase in the coming days,
so they are buying gold in advance for the ensuing festivals. They
feel that the prices will increase in the coming days as such why
not buy now at a cheaper price than buying it later at a higher
price," he added.

Lucrative schemes offered by the jewellers are witnessing

tremendous growth during the festive season.

Meanwhile, customers in Kolkata said that the rising prices of gold

is a matter of concern for them but they have to purchase gold for
special occasions like marriages and festival season.

"We have to purchase these ornaments for our necessity such as

marriage ceremony, special occasions or some festivals like
Diwali, Durga Puja and we purchase this gold for gifting to our
friends and relatives. So, we have to purchase this gold despite the
fact that its price is increasing day-by-day," said Ruchina Khan, a
customer.

Major broking houses and investment bankers are expecting a

further 10 percent increase in prices of gold.

The Secretary of All India Council of Indian Association of

Hallmarking Centre and President of Ernakulam district of All
Kerala Gold and Silver Merchant's Association , James Jose, said
35 percent of the consumption in India is happening during the
festival period especially in north.

"35 percent of the consumption in India is happening during the

festival period especially northern India. So, the price, Indian
driven per se is not going to affect it of course because around 30,
40 or 100 tonnes don't make much difference. But the general
mood is goldish and considering the Indian of take also it will
definitely going to have a positive impact on the prices," said Jose.

"So, the prices are going to be upward but, of course, we have to

be careful that there will be some corrections, there will be some
profit taking, so you can expect a lot of volatility in the market," he
added.
o. That hearing will be held on November 16.