functional discount

Examples of functional discount in the following topics:

• Discounting

  • An example would be a discount on snowmobiles during the summer.
  • For example, a 2% discount on bills paid within 10 days is a cash discount.
  • Trade discounts, also called functional discounts, are payments to distribution channel members for performing some function.
  • Examples of these functions are warehousing and shelf stocking.
  • Trade discounts are often combined to include a series of functions, for example 20/12/5 could indicate a 20% discount for warehousing the product, an additional 12% discount for shipping the product, and an additional 5% discount for keeping the shelves stocked.

• Objectives of a Sales Promotion

  • Trade discounts (also called functional discounts) - Payments to distribution channel members for performing certain functions.

• Sales Promotion

  • The primary objective of a sales promotion, a catch all marketing function, is to stimulate market demand, improve product availability and to coordinate public selling, advertising and public relations.
  • They are used to lower prices, for discounts, free goods and value added giveaways.
  • Wholesalers, retailers and other organizational groups are offered a wide array of sales promotion devices such as trade allowances or short term incentives to encourage retailer to stock up on a product, dealer loaders incentivizing product purchase and display, trade contests for selling the most product, point-of-purchase displays to create impulse buying and spiffs or bonus commissions on certain products and trade or functional discounts paid to distribution channel members for conducting sales and special events.
  • For example "buy one, get one free, three for two, buy quantity and receive a lower price or percentage discounts on specific days of the week.

• Trade Allowances

  • For instance, hairdressers can go to the manufacturer to get a discount for buying in bulk.
  • Such a discount might also be used to gain shelf space or a preferred position in the store.
  • Trade discounts are often combined to include a series of functions, for example 20/12/5 could indicate a 20% discount for warehousing the product, an additional 12% discount for shipping the product, and an additional 5% discount for keeping the shelves stocked with the product.
  • The larger the purchase, the larger the discount.
  • Hairdressers can go to the manufacturer to get a discount for buying in bulk.

• Distribution Centers vs. Direct Store Delivery

  • Chain Stores - Chain stores are able to buy a wide variety of merchandise in large quantity discounts.
  • The discounts substantially lower their cost compared to costs of single unit retailers.
  • Discount Houses - Discount houses are characterized by an emphasis on price as their main sales appeal.
  • This includes manufacturers who operate sales offices to perform wholesale functions and retailers who operate warehouses or otherwise engage in wholesale activities.
  • Wholesalers perform a number of useful functions within the channel of distributions.

• Cash Flow

  • One way to get cash flow quickly is through seasonal discounts .
  • An example would be a discount on snowmobiles during the summer.
  • The intention of such discounts is to spread demand over the year.
  • Another option is cash discounts.
  • A quick way to generate cash flow is to offer seasonal discounts.

• Price Competition

  • For example, if a firm could replace its sales force in the field with telemarketing or online access, this function might be performed at a lower cost.
  • A retailer such as K-mart, known as a discount chain, found it impossible to reposition itself as a provider of designer women's clothes .
  • Other companies are reducing rebates and discounts in favor of stable, everyday low prices (ELP).
  • In all cases, these companies are seeking shelter from pricing pressures that come from the discount mania that has been common in the US for the last two decades.

• Online Sales Promotion

  • For software free trials, users often have to give payment or credit card information and other demographics before the download is allowed and the software is functional.

• Purchase Influences

  • For example, sales and marketing professionals may implement promotional initiatives such as appreciation events, product discounts, and free upgrades to prompt word-of-mouth referrals.
  • To facilitate the evaluation and selection process, B2B customers specifically look for product attributes such as economy in cost and use, productivity, and functionality.

• Price Discrimination

  • Airlines use several different types of price discrimination, including: bulk discounts to tour operators, incentive discounts for higher sales volumes to corporate buyers, seasonal discounts, etc.
  • The airlines enforce the scheme by making the tickets non-transferable thus preventing a tourist from buying a ticket at a discounted price and selling it to a business traveler (arbitrage).
  • Airlines must also prevent business travelers from directly buying discount tickets.
  • An example is student discounts.
  • Price discrimination is very common in services where resale is not possible; an example is student discounts at museums.