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Sir I found this line in my study kit, under benefits of volume discounting, but i dont understand it. Could you pls elaborate on this with an example.
“Discounts help to sell items that are bought primarily on price”
Thanks,
I dont see it as a benefit per se. Because this seems to suggest that in worst case scenario when the company is not able to sell the product at its normal selling price then the company should offer bulk discount and get rid of the items.
No-one would ever suggest that volume discounting always gives benefits.
It is just one pricing strategy that a company might consider.
Obviously it might be beneficial if offering the discount were to result in some customers buying more as a result. (Pricing strategies are not concerned with your worst case scenario – they are looking at ways of potentially generating more profit from an existing product, and it is very common to get a cheaper price per unit if you buy large quantities).
However, it is certainly not always beneficial (and therefore is not a strategy that would always be followed) – the most obvious reason being the amount of discount being offered. A huge discount may well results in a large increase in sales, but if the amount of the discount was greater than the benefit of the extra sales then it would obviously be silly to offer such a large discount 🙂
Have you watched my free lectures on pricing where I discuss the various strategies than companies might consider? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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