Discount policy

The discount policy is part of the contracting policy and includes all decisions about discounts for services of the customer. It is an instrument of price variation, because the granting of discounts ultimately changes the price. With their help, sales should be increased, customer loyalty maintained and the company's image secured.

fine-tuning of pricing policy

Because the discount reduces the actual price to be paid, the buyer has the opportunity to buy cheaper. There is also a psychological effect, because the buyer feels preferred by the personal discount offer. He may see the discount as a particularly good opportunity to buy.

The offer prices of the suppliers are not endangered. The discount policy is a means of fine-tuning pricing policy, which can be particularly efficient between manufacturers and retailers. The discounts pursue different objectives and can be broken down according to different aspects.

A distinction must be made between commercial customers:

• Function discount
• Quantity discount
• Time discount

The effect of discounts depends above all on the price elasticity of demand, ie on the intensity with which they react to the structuring of the prices they demand.

Further explanation of discount policy

The discount can be defined as a price reduction compared to a fixed offer price, which differentiates it from individual customers at different times or under different circumstances. In marketing theory, the design of a discount system is therefore also referred to as price differentiation.

Numerous empirical examples show the economic compulsion to achieve a more favorable distribution of demand and thus better capacity utilization by means of price differentiation. Price differentiations to compensate for fluctuations in employment are, for example, used intensively by transport, supply and tourism companies as well as performance companies as a marketing tool.

The discount policy thus serves to fine-tune demand in terms of price policy and is intended to be tactical Pricing policy affect demand in the short term. To compensate for fluctuations in demand and to ensure that the willingness to perform more evenly, different prices are charged for the same service in practice. The following types can be distinguished as starting points for price differentiation:

• temporal price differentiation
• spatial price differentiation
• customer-oriented price differentiation (age, occupation).

Seasonally dependent service companies in particular differentiate their prices over time. The main reason is the uneven demand for the use of the service over time. From the tourism sector one knows offers with pre-season and post-season prices. Telephone companies offer different day, night, Sunday and public holiday tariffs depending on the use of their services. At times of increased demand (so-called demand peaks), numerous hotel operations demand a surcharge (e.g. hotel room surcharge during a trade fair).

Fluctuations in demand

Fluctuations in demand over the course of a day can also be compensated for by differentiating prices over time (e.g. reduced admission prices for the afternoon performance of a theater). The example of air transport companies clearly shows how existing transport capacities are offered at different prices during the day in order to utilize the capacities more evenly. For example, Lufthansa is trying to reach new target groups by means of price reductions in the midday hours, who previously used the train as a means of transport in domestic German traffic.

For numerous service sectors, the price is set depending on the period between booking the service or purchasing the service promise and using the service. Here, so-called "early bookers" are rewarded with a lower price (e.g. with transport companies and tour operators). The customer enables the service provider to plan his variable potential capacities at an early stage.

The prerequisite for such temporal price differentiations to control demand is generally the existence of a price-elastic demand. The price elasticity depends on the urgency of the respective demand needs or on the possibility of deferring the satisfaction of needs. For example, the demand for medical services in an emergency is completely inelastic.

In the case of spatial price differentiation, different prices are charged for the same service in different geographical areas (domestic - international; urban - rural) depending on the specific market structure (e.g. a hotel chain charges higher prices in all of its airport hotels for the same service than in its city hotels) .

Price differentiation

Price differentiations in terms of personnel exist when the membership of the potential customer to a specific group of people defined by the service company is decisive for the amount of the fee. This form of price differentiation is based on certain buyer characteristics.

• Age (e.g. toddler discount, senior discount)
• Professional situation (e.g. schoolchildren and student discounts, unemployment discounts)
• Occupational groups (e.g. employee discount; civil servant discount)
• Acquired access authorizations (e.g. Bahn-Card, Seniorenpass, Kurkarte).

For example, Deutsche Bahn AG very often makes price differentiated offers for seniors, juniors or families (eg "junior, senior and family pass").

Other forms of discount that reduce the price when certain conditions are met include:

Group discount

For the simultaneous sale of several service promises for different customers, the service company can grant a price discount from a specified minimum number of participants. Hotels, for example, grant group discounts for room contingents booked in advance.

Quantity discount

If a customer buys a certain pre-determined contingent of entitlements (e.g. the 10-ticket for a tennis court), one speaks of a volume discount.

Free goods

Are less common in service sales Free goods used. In 1988, for example, Deutsche Shell advertised a discount in kind in the form that every 10th car wash was free.

Discount conditions

With the specific design of the discount conditions, the service provider should try to utilize unused capacities without significant additional effort in times of low demand. This is especially possible in those service sectors where standardized services are used by several people at the same time (e.g. film theater).

The increasing exhaustion of this large room for maneuver in terms of price and terms and conditions for service offers makes it more and more difficult for consumers to carry out price comparisons. For example, the monthly basic fees for a current account vary, depending on the bank, between free account management and basic fees in the double-digit range.

In addition, the customer must also include the costs per booking, taking into account the free items, fees for standing orders, check forms, account statements (postal delivery, use of the account statement printer, collection of statements at the counter, etc.) in the price comparison (Hilke, 1989, p. 22 ). It is only possible for a customer to make an exact price comparison here with a great deal of time and effort.

Something similar can be stated in the area of package tour operators. A review of the holiday catalogs shows that identical holiday offers are being offered with price differences of up to several hundred marks.

The intensive use of the discount and special offer policy can therefore also have negative effects for the service provider. For example, the flight tariffs with numerous discount and special offer variants are currently no longer transparent for the customer. In the case of price differences of up to 50 % for the same service, the customer's uncertainty about purchasing such services is additionally increased, since one can no longer infer the quality of the service from the price.

Likewise, different price demands can have negative effects on the quality of service in collective services, because different prices are discussed through the interaction between customers and lead to annoyance among fully paying customers.