What Is a Price Discount?

Price discount is a preferential price given to customers in order to attract customers more effectively and expand sales. It includes quantity discounts, feature discounts, cash discounts and seasonal discounts. ^[1]

Price discount

Price discount is

A price discount for consumers who buy a certain product or service in bulk. Usually based on how much the consumer buys.

When consumers buy a certain amount or amount of products,

1. The price factor is the primary bottleneck for poor market sales.

2. Product is close

1. Choose the right timing for your promotion. For summer / holiday options, Pepsi and Coca-Cola launch new year promotional packages almost every year.

2. The duration of the activity is preferably 2-4 weeks. Consider the normal purchase cycle of consumers. If the time is too long, the price may be difficult to return to its original position.

3. The discounted amount should account for more than 10-20% of the selling price.

The fundamental problem of price discounts

Although the discount strategy can increase product sales and increase market share in the short term, it cannot solve the fundamental problem of manufacturers 'sales, but will also mislead manufacturers' correct understanding of the market, which is not conducive to the adjustment of product structure. This approach makes sales managers obsessed with the illusion of sales in front of them, does not think about ways to solve problems, and even relies on such promotions.

Price discount profits are difficult to make up for

Price discount It is better if the discount strategy can be implemented within the margin control. If the uncontrolled discounts caused by competition among manufacturers will deepen the sales of the enterprise, it will be difficult to clean up the loss of discounts. For example: assuming that the profit margin of the product is 20%, based on a discount of 95%, you need to increase sales by at least 33% to recover the investment; if the discount is 10%, you need to increase sales by 100%; Need to increase sales by 300%. If the discount is 20% off, it will never be profitable. Think about it now, the competition is so fierce, and the phenomenon of bargaining with each other is common. With other brands, they will put themselves in.

Price discounts hurt brands

Consumers often think that the quality of products that are often discounted will be lower than those of high-priced competing brands. They will think that the original price is unreasonable. They will think that manufacturers will lower the grade and quality of their products. The value and status of the brand itself will cause intangible obstacles to the price increase of the product. If consumers or customers are accustomed to the discounted price of a product, the status of the brand in the mind of the consumer is the grade and image of the discounted price.

Price discounts are not good for brand building

Because the discount may attract some consumers who pay special attention to the price, and these consumers are often more accustomed to those discounted products, there is not much brand loyalty. Once the product discount strategy ends, they may immediately switch to a brand with a lower product discount strategy. However, those consumers who are highly loyal to the brand often feel that the product and brand level are falling due to the discount of the product, affecting their identity and image, rather than choosing products of this brand.

Price discounts can easily lead to price wars

In 4P marketing theory, price adjustment is the simplest and most effective means of competition in the market. However, high-range and high-frequency discount strategies will trigger vicious price competition among brands, which is not conducive to maintaining the price image and reasonable price of products. Profit margins.