The term discount is the price paid for a product or service minus is its face or market value. Sellers set discounts as part of a promotion, or a savvy buyer can haggle her way into a discount.
Discounts are given by sellers several different reasons:
1. To increase total revenue.
Total revenue can increase even when the price per item goes down. In retail, for example, people see discounts as bargains. So retailers are able to sell more items at a discount than at regular price, increasing revenue through volume. Consumers also often buy products in addition to discounted items, thus increasing overall sales.
2. To get rid of outdated products.
Goods nearing their expiry date are usually sold at a discount. In the fashion industry, end-of-season sales make way for new clothing lines. This helps sellers minimize their losses, as discount sales are often more lucrative than keeping extra inventory or reselling clothes to other stores.
3. To entice consumers through introductory pricing.
Sellers often give discounts when launching new products in order to entice customers to try out a product they are unfamiliar with. After a few days or weeks, the new products are sold at a higher price.
Discount shopping is practiced by people who wish to save money on their purchases. These people are often on the lookout for bargains and usually buy in bulk when consumable items they need are on sale.