Discounts

A discount is a temporary reduction in the price of a product or service, given as a percentage or a fixed amount. It is a sales promotion used to encourage customers to buy.

Businesses can offer discounts through coupons, which are money-off vouchers; promotional codes, which customers enter online or at the checkout; or sale periods, such as an end-of-season sale. For example, a local bike shop might offer 15% off children's helmets during a cycling safety week using a code on its website. The offer is temporary, so it counts as a sales promotion. A permanent price cut is a pricing strategy, not a discount.

Benefits of discounts

• Increasing sales quickly: a lower price can persuade customers to buy now rather than wait, bringing in revenue fast.
• Attracting attention: a clear money-off offer can make customers notice a product they might otherwise ignore.
• Selling old or excess stock: discounts help a business clear stock so cash is not tied up in storage.

Limitations of discounts

• Reducing profit: a discount lowers the selling price, so each item sold has a smaller profit margin, and the business needs enough extra sales to make up for it.
• Damaging a premium brand image: a brand that relies on being exclusive may look less special if it discounts often, making customers less willing to pay high prices.
• Short-term effect: once the offer ends, sales may return to normal, and some customers may wait for the next discount instead of paying full price.