Discount and allowance facility has special importance in the selling process and distribution of products. In this age of business competition, it becomes difficult to survive for the firm or companies that cannot compete in their goods services with others, cannot exist. So, business firms should provide different types of discounts and allowances to the customers to attract them towards their goods or services.
Reduction in the price of goods or services while selling them to customers by business firms is called discount. This is financial incentive given to customers. Generally, discount is given to customers for hand cash purchase, quicker payment, large quantity purchase, off season purchase etc. Such discount includes cash discount, trade discount, quantity discount and seasonal discount.
the discount given to the customers for purchasing goods or services for hand cash or quicker payment of credit is called cash discount. Quick payment of credit or for immediate cash payment reduces the collection cost of the firm and the hand-cash or quicker payment of credit helps the firm in business. So, discount has become popular in buying and selling between customers and sellers.
In the process of business, the discount given to middlemen by reducing from price list is called trade discount. Producers give this type of discount to wholesalers and retailers to encourage them in purchasing their goods or services. Middlemen or intermediaries are given such trade discounts for performing the tasks such as storing goods, keeping records, collection of market information etc.
3. Quantity discount
The discount given to customers for buying large quantity of goods at a time is called quantity discount. The more quantity of goods the customers buy at a time, the more discount is given from selling price.
4. Seasonal discount
Seasonal discount is given to encourage off-season purchase. Seasonal discount is given by reducing the price of off-season goods or services to attract customers. For example, while buying woolen garments in hot season (off season) consumers are given high discount. The companies such as hotel, air services, etc. give off-season discounts to run their business even in off-season.
Concept and types of allowances
Generally, the reduction in price of goods or services to the customers for their performance of assigned work is called allowance. There are two types of allowances:
The allowance given by producers to wholesalers and retailers for their promotional activities is called promotional allowance. Such allowance is given to them for advertising, decorating and displaying goods in their shops at local level. This type of allowance may be given in cash or reduction in price of goods.
The customers who buy goods or services regularly from a firm can return old and unsold goods back to the firm and buy new goods from the firm. This facility is called trade-in allowance. Such facility makes customers loyal to the firm permanently.
Concept and types of discounts
Reduction in the price of goods or services while selling them to customers by business firms is called discount. This is financial incentive given to customers. Generally, discount is given to customers for hand cash purchase, quicker payment, large quantity purchase, off season purchase etc. Such discount includes cash discount, trade discount, quantity discount and seasonal discount.
1. Cash discount
the discount given to the customers for purchasing goods or services for hand cash or quicker payment of credit is called cash discount. Quick payment of credit or for immediate cash payment reduces the collection cost of the firm and the hand-cash or quicker payment of credit helps the firm in business. So, discount has become popular in buying and selling between customers and sellers.
2. Trade discount
In the process of business, the discount given to middlemen by reducing from price list is called trade discount. Producers give this type of discount to wholesalers and retailers to encourage them in purchasing their goods or services. Middlemen or intermediaries are given such trade discounts for performing the tasks such as storing goods, keeping records, collection of market information etc.
3. Quantity discount
The discount given to customers for buying large quantity of goods at a time is called quantity discount. The more quantity of goods the customers buy at a time, the more discount is given from selling price.
Seasonal discount is given to encourage off-season purchase. Seasonal discount is given by reducing the price of off-season goods or services to attract customers. For example, while buying woolen garments in hot season (off season) consumers are given high discount. The companies such as hotel, air services, etc. give off-season discounts to run their business even in off-season.
Concept and types of allowances
Generally, the reduction in price of goods or services to the customers for their performance of assigned work is called allowance. There are two types of allowances:
1. Promotional allowance
The allowance given by producers to wholesalers and retailers for their promotional activities is called promotional allowance. Such allowance is given to them for advertising, decorating and displaying goods in their shops at local level. This type of allowance may be given in cash or reduction in price of goods.
Also Read:
2. Trade-in allowance
The customers who buy goods or services regularly from a firm can return old and unsold goods back to the firm and buy new goods from the firm. This facility is called trade-in allowance. Such facility makes customers loyal to the firm permanently.
