The pros and cons of offering discounts in a business.

Various marketing strategies have to be utilized in order to increase the profits of a business. These marketing strategies depend primarily on the customer base and the goods and services sold. Many businesses consider offering discounts an excellent way to increase sales. However, this can be a two-edged sword.

A business usually decides to offer discounts to customers for a particular reason. The old stock is sold at discounts due to the arrival of new stocks or if a business is going out of business. Whatever the reason, the business offers customers a reduction in price. Discounts can be categorized as cash and trade discounts. Cash discounts are the concessions provided by the seller to the buyer. This encourages the buyer to purchase quickly and allows the seller to get the payment soon. Trade discounts are a reduction the supplier gives to the business owner. This will happen only if the quantity of the product is over a specific figure. Advertising discounts on various products or all products will draw in the customers. A business will see more customers during this period than any other. The increase in traffic will automatically increase sales, which is the bottom line for sales.

There are a few downsides. For example, although there will be sales, the profit margin in the store will decline as the goods are sold at reduced prices. Sometimes, these prices may even be below market value. Exclusive discounts to customers may encourage them to ask for discounts all the time. Also, a shop that offers discounts always provides the reputation that the business is not doing so well. Many customers may be put off by this reputation and stop visiting the store.

Considering the above arguments, it is not an easy task deciding if offering discounts in business is the right choice or a bad one. However, a business needs to consider these factors carefully in order to run it successfully and profitably.