Sales discount
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Sales discount it is one of promotion instrument which gives consumers additional advantage (for instance reduced price, additional unit or sample etc.) in specific, temporary period of time. It is an action which give company's clients incentive to buy product or service (R. C. Blattberg, R. Briesch 2010, s.3). Usually companies use sales discount when they launch a new product and they would like to persuade and entice clients to buying or if some products need to be sale as fast as possible (J. L. Burrow, A.R. Fowler 2015, s.446).
Types of Sales Discounts
We can distinguish different types of sales discounts (R. C. Blattberg, R. Briesch 2010, s.4-5):
- Price Reduction - lower price for specific period of time.
- Retailer Coupon - specific piece of paper which gives clients the right to a discount.
- Free Goods - consumers get additional product for free. It could be one product more for instance “buy one get one free” or complementary product to main item for example shampoo and shower gel.
- Sweepstakes - consumers have a chance to win extra money or other prizes.
- Free Trial - retailer gives consumers free samples of product to encourage and enhance of buying them.
- N-for - special discount ancillary on amount of product. For instance 3 products in lower price than only one.
- Discount Card - special offers with cheaper prices for consumers who have special card.
- Rebates - clients get special offer and discount form, after their bought something they mail data and receive some money back.
- Bundled Promotion - discount only for complementary products for example fries and ketchup.
Advantages and disadvantage of sales discounts
Sales discount has both of positive and negative examples. Sometimes sales promotion make a good influence on brand and sales in general. In other hand it works in opposite way (J. L. Burrow, A.R. Fowler 2015, s.446):
Advantages:
- Fast growth of sale in specific period of time what should improve consumer to be loyal.
- Measurement of promotion - in simple way companies can measure how promotion effective was. Shops can count how many coupons distribute and how many products sale to compare it .
Disadvantage:
- Cost of implementation promotion could overrun profit of sales.
- Another disadvantage is opposite to first advantage - some clients can lose their loyalty of brand.
How promotion affects on sales
We can distinguish several effects of sales discounts (K. Gedenk, S. A. Neslin, K. Ailawadi, 2010, s.306-307):
- Brand change - this is a kind of short-term effect, customers are encouraged by lower prices, which is why they change the brand of the product.
- Product and category switching - better offer in store of similar products can improve clients to buy different one and even category.
- Purchase Acceleration and Stockpiling - some clients buy more products with discounts to make some supply to save money. When client buy regularly one product, will buy it on promotion more because they know that they have to buy it later in higher price.
- Product loyalty - some consumer when try to new product because of sales discount stay more loyal for this brand. Unfortunately, sometimes is opposite. Some of them don't buy the same product in higher price because they think it is overpaid.
- Additional purchase - sales can by only reason of visiting store then consumer buy another product not only this with discount.
Examples of Sales discount
- Cash Discounts - Cash discounts are offered to customers who pay their bills early or within a certain amount of time. This type of discount is designed to encourage customers to pay quicker, which helps the company maintain a steady cash flow.
- Volume Discounts - Companies often offer discounts to customers who purchase large quantities of a product. This is done to incentivize customers to purchase more in order to increase the overall revenue of the company.
- Loyalty Program Discounts - Loyalty programs are often used by companies to reward customers who spend a certain amount of money with them. These loyalty programs often offer discounts and other perks to loyal customers.
- Seasonal Discounts - Companies often offer seasonal discounts during certain times of the year. These discounts are designed to increase sales during the slower times of the year.
- Coupon Discounts - Companies often use coupons to offer discounts on their products. Coupons are a great way to entice customers to purchase more products, as they often offer discounts that are larger than cash discounts.
References
- Ashraf M. G., Rizwan M., (2014) The promotional tools and situational factors impact on consumer buying behaviour and sales promotion, "Journal of Public Administration and Governance", nr. 2
- Blattberg R. C., Briesch R.,(2010), Sales Promotion, "Oxford Handbook of Pricing Management", Oxford University Press, s.3
- Burrow J. L., Fowler A.R., (2015), Marketing, "Cengage Learning", s. 446
- Gedenk K., Neslin S. A., Ailawadi K., (2006),Sales promotion. Retailing in the 21st Century. "Springer, Berlin, Heidelberg", s.306-307
- Santini F. (red), (2015), Moderating Effects of Sales Promotion Types, "Brazilian Administration Review", nr. 2
Author: Karolina Knapik
