Discount Pricing Strategy
I am writing to describe an idea about a new discount pricing strategy which can be applied in our deli and bakery as a way of increasing sales.
We sell food-products including gourmet jams and organic raw honey all ranging from $8.00 and $18.00. After a good consideration of our prices and products, an introduction of a discount strategy can boost our sales greatly. The discount pricing strategy is on the basis of the more you buy the more discount you are allowed.
Thus a 10 percent discount will be allowed for a receipt totaling to $ 30.00, 12 percent discount for a receipt with a total between $31.00 and $40.00, and a 15 percent discount for a receipt totaling to $41.00 and above (Jin Li, 1999).
The customer who will receive the highest discount in a week will be awarded with a free lunch. The total in the receipt to receive discount excludes amounts from gourmet jams and organic raw honey.
This will encourage more sales for the shop with its modern yet very classic, and prompt service. This will not imply increased sales for any specific products. This is because this discount pricing strategy accommodates all the shop’s products. It does not also discriminate customers on basis of their preferences.
Thus it will not push away customers as whatever food-products they buy can lead to a discount. The increasing discount rate will encourage customers to buy more from the shop as the more they buy the higher the discount (Watkins, and Media, 2011).
The business will compensate for displaced sales through increased prices of gourmet jams and organic raw honey. The prices of these products will be increased by 2 percent on the initial price. The sale of gourmet jams and organic raw honey will increase due to increased number of customers for food-products.
Thus with their increased prices and sales, higher profits will be realized from them. The shop will also get compensation from increased sales which will lead to economics of scale. The more sales which will be made will imply increased production which will imply decreasing marginal cost (Shah, et al. 2005). Thus the cost of producing a food-product will be relatively low.
This means that even with the shop offering discounts, it will still be making little profits from food-products that discount is allowed on. The shop will as get compensation on sales made on receipts with totals below $30.00. This is because there no discount allowed on these receipts.
The discount pricing strategy will stimulate sales in the shop. This is because it is on the basis of the more you buy the more discount you will be allowed (Waters, 2011). Thus customers will try to maximize their buying so that they are allowed higher discounts.
The discount pricing strategy will also encourage groups or families to buy food-products using one receipt so as they receive higher discount. This will mean increased number of customers in the shop. The discount pricing strategy will also lead to a competition between customers on who will have the highest allowed discount in a week.
This is because the one with the highest allowed discount in any given week will receive free lunch. This will thus imply more sales as customers try to win the lunch. This competition will also aid in keeping customers as well as attracting new ones (Watkins, and Media, 2011).
The discount pricing strategy does not lower prices of specific food –products thus does not create the impression of low quality products among customers. This implies that no customers will be going for products form competitors rather the shop will attract new customers. The discount pricing strategy will thus increase the sales in the shop.
Jin Li, F. (1999). How to Use Discount Pricing Strategies for Best Results. Retrieved on May 11, 2011 from http://www.ehow.com/how_5618187_use-discount-pricing-strategies-results.html
Shah, N. et al. (2005). Price Discount Strategies: A Review. Retrieved on May 11, 2011 from http://docs.google.com/viewer?a=v&q=cache:sFn8LZ-n5kEJ:rev-inv-ope.univ-paris1.fr/files/26105/IO-26105-3.pdf+discont+pricing+strategy&hl=en&gl=ke&pid=bl&srcid=ADGEESiyzVOZaKfiagknb2ZWX-N08qjkrHO3r53pbrAh89L7PrRN7gLAfwBUCqLjjrc8NENJDJnfZwaYL3YdXJJnNOENRjsCEK_Zz_AZz4PD0KezTDqE_c7q3ZXN1AKJ56MjFQwpL-iS&sig=AHIEtbTmkuWMrNXxU0YdQPi2vEoYDHFHnQ
Waters, S. (2011). Retail Pricing Strategies. Retrieved on May 11, 2011 from http://retail.about.com/od/marketingsalespromotion/a/product_pricing.htm
Watkins, D. & Media. (2011). Discount Pricing Strategy. Retrieved on May 11, 2011 from http://smallbusiness.chron.com/discount-pricing-strategy-4683.html