Marketing Management, Millenium Edition - epiheirimatikotita.gr

Adapting the Price 227Table 4.4Price Discounts and AllowancesCash Discounts:A cash discount is a price reduction to buyers who pay theirbills promptly.A typical example is “2/10, net 20,” which meansthat payment is due within 30 days and that the buyer candeduct 2 percent by paying the bill within 10 days. Suchdiscounts are customary in many industries.Quantity Discounts:A quantity discount is a price reduction to those buyers whobuy large volumes.A typical example is “$10 per unit for lessthan 100 units; $9 per unit for 100 or more units.” Quantitydiscounts must be offered equally to all customers and mustnot exceed the cost savings to the seller associated withselling large quantities.They can be offered on anoncumulative basis (on each order placed) or a cumulativebasis (on the number of units ordered over a given period).Functional Discounts:Functional discounts (also called trade discounts) are offered by amanufacturer to trade-channel members if they will performcertain functions, such as selling, storing, and record keeping.Manufacturers may offer different functional discounts todifferent trade channels but must offer the same functionaldiscounts within each channel.Seasonal Discounts:A seasonal discount is a price reduction to buyers who buymerchandise or services out of season. Ski manufacturers willoffer seasonal discounts to retailers in the spring and summerto encourage early ordering. Hotels, motels, and airlines willoffer seasonal discounts in slow selling periods.Allowances:Allowances are extra payments designed to gain resellerparticipation in special programs. Trade-in allowances are pricereductions granted for turning in an old item when buying anew one.Trade-in allowances are most common in durablegoodscategories. Promotional allowances are payments or pricereductions to reward dealers for participating in advertisingand sales support programs.Promotional PricingCompanies can use any of seven promotional pricing techniques to stimulate earlypurchase (see Table 4.5). However, smart marketers recognize that promotional-pricingstrategies are often a zero-sum game. If they work, competitors copy them andthey lose their effectiveness. If they do not work, they waste company money thatcould have been put into longer impact marketing tools, such as building up productquality and service or strengthening product image through advertising.