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Discount and Allowance Pricing - PDF

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MarketingAssignment 04Submitted to: Sir Mohammad AliSubmitted by: Rehan ullahRegistration no: SP20-BBA-022Submission date: 22 Dec, 2020Department of Management SciencesCOMSAT University Islamabad, Abbottabad CampusPrice adjustment strategiesCompanies usually adjust their basic prices to account for various customerdifferences and changing situation. Price has direct impact on the customer,
customer buying behavior, business and on the overall economy.There are sixprice adjustment strategiesoDiscount and allowance pricingoSegment pricingoGeographic pricingoPsychological pricingoPromotional pricingoInternational pricingDiscount andAllowance PricingMost companies adjust their basic price to reward customers for certain responses,such as early payment of bills, volume purchases, and off-season buying. Theseprice adjustments—called discounts and allowances—can take many forms.Cash discount:is a price reduction to buyers who pay their bills promptly. Atypical example is "2/10, net 30," which means that although payment is duewithin 30 days, the buyer can deduct 2percent if the bill is paid within 10 days. The discount must be granted to all buyersmeeting theseterms. Such discounts are customary in many industries and help to improve theseller’s cash situation and reduce bad debts and credit collection costs.Quantity discount:is a price reduction to buyers who buy largevolumes. A typical example might be "Rs10 per unit for less than 100 units, Rs9per unit for 100 or more.Functional discount:also called a trade discount is offered by the seller to tradechannelmembers who perform certain functions, such as selling, storing, andrecord keeping.Manufacturers may offer different functional discounts to differenttrade channels because of thevarying services they perform, but manufacturersmust offer the same functional discounts withineach trade channel.
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