Discount and allowance pricing
This is when companies adjust their price to reward customer for certain response. Such as early payment of bills and buy one get one half price or free.
The many form of discount include a cash payment discount, a price reduction to buyers who pay their bills promptly. For examples “2/10 net 30,” this means although payment is due within 30 days, the buyer can deduct 2 percent if the bill is paid within 10 days. Also buyers that purchase large volumes receive a price reduction. Such discounts provide an incentive to customer to buy more from one given seller. Functional discount also called trade discount is offered by seller to trade channels members who perform certain functions, such as selling, storing, and record keeping. A seasonal discount is a price reduction to buyers who buy merchandise or service out of season .for example, lawn an garden equipment manufacture offer seasonal discounts to retailers during the fall and winter months to encourage early ordering in anticipation of the heavy spring and summer selling seasons. Seasonal discounts allow the seller to keep production steady during an entire year.
Allowances are another type of reduction from the list price. For example, a trade-in allowance are price reductions given for turning in an old item when buying a new one “ Cable and Wireless once offer to take in old phones and get the new one for a cheaper price”. Promotional allowances are payments or price reduction to reward dealers for participating in advertising and sales support programs.
This is where price say something about the product. For example many consumers use price to judge quality. a school bag may cost $5000 and may only worth $1000 worth of value , but some people are willing to pay the $5000 because the price indicates something special . In using psychological pricing, sellers consider the psychological of prices and not simply the economic. For example, consumer usually perceives higher –price products as having higher quality. When they can judge the quality of a product by examining it or by calling on past experience with it, they use price less to judge quality. But when they cannot judge quality because they lack the information or skill, price becomes an important quality signal.
Also there is another aspect of psychological pricing, this is reference prices – prices that buyers carry in their minds and refer to when looking at given product. The price reference price might be formed by nothing current, remembering past prices, or assessing the buying situation. Sellers can influence or use these consumers’ reference prices when setting price. For example, a company could display its product next to more expensive ones in order to imply that it belongs in the same class. Department stores often sell women’s clothing in separate department differentiated by price : clothing found in the more expensive department in assumed to be of better quality .
With promotional pricing, companies will temporarily price their products below list price and sometimes even below cost to create buying excitement and urgency. Promotional pricing takes several forms. Supermarkets and department stores will price a few products as loss leaders to attract consumer to the store in the hope that they will buy other items at normal markups. For example, supermarkets often sell disposable diapers at less than cost in order to attract family buyers who make larger average purchase per trip. Sellers will also use special event pricing in certain season to draw more customers. Thus. Linens are promotionally priced every January to attract weary Christmas shoppers back into stores. Basically this is temporarily pricing a product below its normal cost price (sales).
Companies will often adjust basic prices to allow for differences in customers, product...