A deduction from the usual cost/amount of a product.
Discount
A promotional pricing strategy where the original price for a product or service is reduced with the aim of increasing traffic, moving inventory, and driving sales.
Discount pricing
Why discount a winning piece of a business?
Lower price > higher demand > higher sales > sustainability
(5) Pros of discount pricing:
- Acquiring new customers
- Earning repeat customer
- Creating exclusivity
- Codes help control discounts
- Getting rid of unsold inventory
(3) Cons of discount pricing:
- Negative expectations
- Lower reputation
- Knowing when to stop
Game of imorovement by inches that delivers miles of better performance.
Discount management
(2) Challenges of discount management:
- Disparity in incentives
- Knowledge/connection between field and centralized executives
Salespeople, marketers or employees working in the field.
They push for more discounts, to meet lofty sales goals.
Field executives
They push for higher prices.
At corporate or headquarters, product managers and other centralized executives often focus on capturing the higher price possible while expecting the volume to simply be delivered.
Centralized executives
In incentives and knowledge between field and centralized executives leads to a natural conflict between them regarding discounts.
Disparity abounds
To halt the potential downward spiral in prices through discounting, some executives take a knee-jerk response and halt all discounts.
Executives react
(2) Discounting policy is naturally dispersed through:
- Centralized senior executives
- Decentralized field executives
Knowledge that can be codified and transferred from one individual to another.
Explicit knowledge
The knower is often unaware of knowledge he or she posseses or how it can be valuable to others.
Tacit knowledge
(3) Identifying discount management oppprtunities:
- Net price band
- Net price by market variable
- Proce waterfall
One of the most basic analytical tools for developing a high-level understanding of discounts.
Net price band
This approach enables senior executives to identify quickly whether there is slack in sales management and potential to improve discounting within the firm.
Net price by market variable
The third means of aggregating data concerning discounting for senior executive review is the price waterfall.
Price waterfall
Decision-making rights will be restricted within the organization to avoid abusive discount requests.
Decision rights
An individual salesperson has the capability to grant requests up to _ . However if a discount request exceeds that is when the territory manager is authorized to approve.
2.5% only
(4) Discount decision authorities:
Salesperson - up to 2.5%
Territory manager - 2.5-5%
Sales executive manager - 5-9%
Chief executive officer - 9%
(2) Other forms of limiting discount decision-making authority:
- Dollar-based/price-based amounts
- Type-based discounts
The right incentives can help salespersons work together, force organizations to drive position change, and even help in achieving organization’s goals.
Decision incentives
(3) The dominant orientations provide performance incentives:
- Volume-based
- Revenue-bases
- Profits-based
