Discounts and allowances
Discounts and allowances are reductions to a basic price of goods or services. They can occur anywhere in the distribution channel, modifying either the manufacturer’s list price, the retail price, or the list price. Many are price discrimination methods that allow the seller to capture some of the consumer surplus. The most common types of discounts are listed below.
About Discounts and allowances in brief
Discounts and allowances are reductions to a basic price of goods or services. They can occur anywhere in the distribution channel, modifying either the manufacturer’s list price, the retail price, or the list price. There are many purposes for discounting, including to increase short-term sales, to move out-of-date stock, to reward valuable customers, to encourage distribution channel members to perform a function, or to otherwise reward behaviors that benefit the discount issuer. Some discounts are forms of sales promotion. Many are price discrimination methods that allow the seller to capture some of the consumer surplus. The most common types of discounts are listed below. Cash discounts are reductions in price given to the debtor to motivate the creditor to make payment within specified time. A partial discount for whatever payment the buyer makes helps the seller’s cash flow partially. More common with non-profit organizations than with for-profit retail. This is where the purchaser doesn’t pay for the goods until well after they arrive. The date on the invoice is moved forward – example: purchase goods in November for sale during the December holiday season, but the payment date on your invoice is January 27.
These are price reductions given for bulk purchasing. Cumulative discounts, also called accumulation discounts, are also called price reductions based on the quantity purchased over a set period of time. An extreme form of discount occurs when a price range does not depend on quantity, but on the expectation that they will encourage larger orders, thus reducing billing, order filling, shipping and personnel expenses. The rationale for these discounts is to obtain economies of scale and pass some of these savings on to the customer. In some industries there are co-ops have formed to take advantage of these discounts, and these discounts are called ‘co-ops’ These discounts are two types: Cumulative Discounts, also known as ‘cumulative discounts’ These are the discounts that occur when the quantity of a single order is not within a set price range, but within the price range of a set time. These discounts can be found in some industries, such as pharmaceuticals, where there is an expectation they will reduce the cost and switching cost and thereby bond the purchaser to the seller.
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This page is based on the article Discounts and allowances published in Wikipedia (as of Nov. 27, 2020) and was automatically summarized using artificial intelligence.
