The true cost of discounts
What is discount pricing?
A discount is any direct or indirect action that reduces the price your customer pays per unit – it can be a sale, a coupon, percentage off, 1+1, larger packages, etc.
In short, discount pricing is when a seller reduces the price of a product or service to attract customers based on the classic law of supply and demand in Economics that states that the demand for goods will rise as prices fall. Often, discount pricing used to encourage sales, or to help new products enter the market.
The cost of discounting
Discounting the selling price to customers is quite a common business practice in today’s competitive markets. Many businesses operate under the assumption the the reduces price will automatically increase sales but even a mere discount of 10% carries cost that many businesses ignore.
This calculator is designed to help you clarify how much it truly costs you to give that discount and how much more you’ll need to sell to break even. Knowing the true cost may even discourage from take this route. Simply insert you current price and how many units you normally sell, choose the type of discount, and add your approximate budget for advertising your promotion.
The true cost of discounts is even higher
Discounting and promotions affect your business much deeper if used as a long-term strategy. Discounts create price-sensitive customers and lead to a race to the bottom price wars and as such are simply bad for business.
Read more: From priceless to replaceable: How promotional pricing devalues your brand