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Discountable Pricing

 

DisciplinesMarketing > Pricing > Discountable Pricing

Description | Example | Discussion | See also

 

Description

Price with the expectation that you will have to give a discount when you sell. Be careful not to price so high you put people off.

Find the right price points by examining the prices that competitors charge, talking with competitors, consulting with industry experts and so on.

You can also prepare for discounts if customers buy other products along with the item being priced. A way of doing this is by preparing 'kits' or 'complete solutions' that you will sell.

Include bulk discount points, for example dropping the unit price when selling 10, 50, 100 and so on. You can also set discount amounts based on pricing. This can be used for example by giving 10% off for orders over a certain value. Discounting can be applied in other ways, for example by offering free delivery above a certain order value.

If you are selling via a direct sales force, ensure the salespeople understand the discounts available and the rules around these. Remember to take into account how the sales people will think (typically balancing making the sale with the bonus they will get for selling at a given price).

Example

A major IT company sells services to customers based on a checklist of what is offered. Sales above a certain value may be negotiated by the sales person down to a fixed percentage reduction. After that they must call headquarters.

A farmer negotiates crop prices based on quantity, the proportion of total crop sold, knowledge of the general market and the costs he incurs in producing the crop.

Discussion

The price on the label, as many buyers know, is not necessarily the price that is paid. In some markets and contexts in particular, negotiation is common. This is typical in direct sales where sales people are allowed to offer discounts to encourage customers to buy (and, hopefully, buy more).

This can be a cat-and-mouse game where the buyer and seller dance around one another as the buyer tries to find the minimum acceptable price and the seller discounts slowly, hoping for agreement. Discounting may also be fixed, with visible rules for sales of more items or when prices go above a certain value.

A danger with discounting is that, if it is not managed carefully, goods may be sold at a loss. This is particularly hazardous when sales people, anxious to make their quotas, push the prices below the break-even limit. This is not always easy to determine when it is in a complex deal where it is not easy to determine what exactly is being priced and how.

See also

Value Exchange, Fixed Pricing

 

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