Discussion Topic

The difference and benefits of offering a single trade discount versus a series

Summary:

A single trade discount is a straightforward percentage reduction on the list price, easy to calculate and understand. In contrast, a series of trade discounts involves multiple sequential reductions, which can result in a larger overall discount. The benefit of a series is that it can appear more generous to buyers and may encourage larger purchases, though it is more complex to compute.

What is the difference between a single trade discount and a series?

A single trade discount is a single price reduction given on a product.  So, for example, if you say that you will give 50% off the price of each dozen eggs you sell, you are giving a single trade discount.  This is computed simply by multiplying the original price by the discount percentage so the discount on a \$2 carton of eggs is \$2*.5 = \$1

By contrast, a trade discount series is when a seller offers more than one discount on a product.  For example, a seller could offer three discounts on the item -- 25%, 15%, and 5% for example.

These are computed by taking each discount as a percent of the price AFTER the previous discount.  So, if a product originally sold for \$100 and had the series described above, the first discount would be \$100*.25 = \$25 but the second discount would be \$75*.15 = 11.25.

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

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.