What is a discount ?

Discounts and coupons are promotional tools used to incentivize purchases or subscriptions. Discounts reduce the regular price, while coupons provide specific monetary or percentage reductions at checkout. These tactics encourage conversions and can be used strategically to boost sales.

Example: A business owner might offer a 20% discount to new customers for the first three months of their subscription.

What are the three types of discounts?

• Trade discount: A reduction in price offered by a seller to a buyer, usually based on the quantity purchased or the relationship between the buyer and seller. This discount is often not reflected in the invoice.
• Cash discount: A reduction in the invoice amount offered to encourage early payment. For example, a seller may offer a 2% cash discount if the invoice is paid within 10 days.
• Seasonal discount: A price reduction offered during a specific season or time period to boost sales. For example, retailers may offer discounts on winter clothing at the end of the winter season to clear inventory.

Why and when should you create discounts?

Discounts are useful in competitive markets to maintain or gain market share, making your offerings more attractive compared to rivals. They can reward customer loyalty, fostering goodwill and strengthening the customer relationship.

You should consider creating discounts during seasonal sales, such as holidays or specific seasons like Black Friday, when shopping activity increases. They are effective during product launches, offering introductory discounts to entice customers to try new products. Discounts are also beneficial for inventory liquidation when stock levels are high or products are nearing expiration.

In customer acquisition campaigns, discounts can attract first-time buyers. They can be part of customer retention efforts when engagement is declining, reigniting interest and encouraging continued patronage.