“In our view it will never be cheap enough and in Boeing’s view it is always far too cheap.”

Michael O’Leary-CEO Ryanair, after placing an order with Boeing for $40 billion -before discounts

Within any commercial environment , I don’t care what type of clients you have , they will always ask for discounts in one way or another.

It is expected . The frustration, occurs, for me anyway , when they don’t really know what they are talking about.

The conversation may go something like .

Well what sort of discount are you going to give me ? ‘cos Extra Cheap Super Supplies Ltd gives me 40% off if I buy 50 of their top of the range Super Widget.

What is the net price of their Super Widget after discount?

What do you want to know that for ?

Because 40% off Super Supplies Ltd price equals £0.90 per super widget and our Super Widget less 10% equals £0.85p

I still want me 40%

You can’t help but want to throttle them. I had a wholesale customer, a number of years ago , who was doing a seasonal promotion selling an item at a very keen net price. He had flyers printed ( as you did then) and sent them to all his client base. It did not work because a competitor was doing a promotion on exactly the same product but giving a big discount instead of a net price. The net price wholesaler abandoned this type of promotion and went back to discount only promos. The Discount wholesaler was 15% more expensive than the Net wholesaler .

At Retail the issues are a lot more complex. An independent retailer faces very different problems to that of a multiple. Invariably, the independent will have to reduce margins to offer favourable discounts. The multiple will expect the discount to be funded by the supplier. As to whether the consumer is getting a bargain is up for debate .

In May this year, Boohoo made headlines for agreeing to pay $197m (£159m) to settle a lawsuit accusing the retailer of using “deceptive” discounts across its fashion brands. 

Raconteur June 2023

In the UK there is a law in place to obviate false discounts. However, this particular law is much and easily abused . An article has to have been offered in that location for at least 28 days at a higher price before any discount is promoted. So what happens? 2 common outcomes

1. Retailer buys ‘specials’ from a supplier puts them on the shelf for 28 days at an artificial price the offers a special sale price, which is a lot closer to real price.
2. Retailer quite simple has product on shelf at inflated prices and then offers a sale price which only reflects their usual margin.

“Artificial inflation is unfortunately incredibly common in retail and not just in the fashion industry,” 

Nick Drewe, founder of discount platform WeThrift

Online is a lot more murky .

One in 10 deals on Black Friday last year was fake, she says, with 25% of products more expensive than at the start of November. 

Liisa Matinvesi-Bassett, UK country manager at price comparison platform PriceSpy.

Despite all this, discounting remains a significant tool in the commercial box. How it is used effectively is perhaps more of a dark art.

That dark art is, I believe, well practiced by Pizza Outlets. As a consumer (only very occasionally) it really annoys me. Pizza Hut, Dominoes , Papa Johns, they are all at it. Their list prices of Pizzas are exorbitant. You can buy a far better quality pizza in any supermarket chain for a fraction of the price . Worse still, you buy one in a good restaurant for less than the list price of the main Pizza franchises . They make the sale by artificial discounts. There are BOGOF’s, buy one family sized and get one free or a bottle of coke and a tub of ice cream free, The week’s special, the summer’s special , Halloween special . The variety of offer is endless . Yet none of these specials equal that of a recent Sainsbury offer

2 pizzas and a tub of Ben & Jerry’s for a fiver.

I don’t really get it. Most of the other major fast food outsets don’t use this strategy, McDonalds , and KFC sometimes do the odd major promo like lending you Florida for a day or a plastic toy but their pricing strategy is not dependent on discounting . With Pizzas it seems part of the DNA.

There are many dangers in its misuse

The devaluation of the product or service

The innate possibility of actually foregoing volume . For example within the grocery industry the ‘BOGOF’( buy one get one free) can severely negate volume if incorrectly used . If you sell a bar of chocolate and you get one free , you will probably sell more as the consumer will eat more . However , if you do the same with a box of tea they are unlikely to drink much more tea and just use it to replace a future purchase.

The postponement of stock replacements if you know the supplier regularly discounts . This can also cause lost revenue by being unnecessarily out of stock.

The customer never trusting standard pricing.

Discount expectation.

Encouraging overstocking resulting in delayed restocking at normal prices.

The Benefits of Discounting

Entry to market

Defence of market share

Winning new customers

Assisting Customer promotions

Pre-empting competitive action

Genuine customer support

Developing customer loyalty

Much of it boils down to how you manage your discount strategy . None of it is much more that a little common sense and the understanding of your market place .

Customers need to ask questions (trade and consumer) of the discount they are being offered . The biggest being

1.Is it real -see Pizzas?

2.Do I need the product ?

3.Is everyone being offered it(b2b) if they are does it give me any advantage ?

4.Is it good stock ?

5.Is it a good value discount ?

6.Might there be a better one next week ? ( I get weekly offers to subscribe to the New York Times. There will be stuff like 24 hours to claim you 25% discount. Then the following week it says the same but the discount is 50% and so it goes on).

7.Will it help my business ?

8. If I take the deal do I need the product (or service)

9. Can I buy cheaper

10. Perhaps more importantly can I buy better ?

So what to do ?

I think the above 10 points are a good starting place . Discounts are a very strong tool for the seller and can be a good opportunity for the buyer , just approach them with care.

There are no victories at discount prices

Dwight Eisenhower

I’m not completely sure I know what he means . I suspect it is something like there are no victories without a cost. It sort of makes sense but depends upon the context much like any discount .

Consumer or Business when offered a Discount ,think of it like a used car . Take a look under the bonnet (hood)first .