What would be the benefits of offering a single trade discount versus series?  

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

I suppose that one benefit of offering a single trade discount is that it is much simpler to understand and to compute.  If you are the firm offering the discount, you will have an easier time calculating how much of a discount you are giving.  In addition, the customer will have an easier time understanding how much of a discount they will get.  That way, both parties can better understand whether they are giving or getting a good deal.  This might make both parties happier because they can be more certain about whether they are doing the right thing.

Sort of related to this -- the idea of series discounts seems a little like a gimmick -- it seems like a scam to me because it overstates how much of a discount the customer is really getting.  So the customer might feel cheated by such a discount.

 

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

Trade discount is a reduction in basic prices of a product a manufacturer or any other firm offers to wholesalers, retailers and other intermediaries in the distribution channel for the goods purchased by them. The trade discounts could be in the form of a fixed agreed percentage of the basic price which is not related to any specific aspect of the business transactions such as quantity purchased at a time, total turnover for a period, payment performance, and kind of services performed by the distribution channel intermediaries. Alternatively the trade discounts may be broken down in in multiple discounts, each linked to a specific aspect of the business transactions.

The only advantage of a single trade discount is the ease and simplicity of calculation and payment. In contrast, multiple or a series of discounts enable manufacturers to remunerate the distribution channel partners according to their contribution to the total sale and profit of the company, resulting in better motivation of distributional channel partners to support the marketing efforts of the manufacturers.

I believe, the statement made in the previous answer to this question that "series discounts seems a little like a gimmick -- it seems like a scam to me" is not quite justified. Trade discounts refer only to discounts given to traders and not to retail customers. Trading firms do not get fooled by the kind of gimmicks that some firms follow to show an inflated discount percentage to retail buyers than it actually is.

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