Quantity discounts Essay Example

and not make profit.

Another circumstance is when the seller aims to reduce the prices of certain products, through encouraging consumers to purchase more units of the same products. This is done through offering quantity discounts to consumers in order to increase sales. Increase in sales reduces production costs, since production costs decrease with increase in units manufactured or sold.

This in turn means that the reduced costs can be transferred to the consumers, which will attract them to the seller, due to the resultant lower costs.

Supply chain managers may offer discounts on quantity purchases in circumstances where they have market power, for instance in cases where they have copyrights or patents for their products. In this situation offering volume based discounts on quantity purchases enables the achievement of channel coordination. This involves offering discounts depending on the rate of purchases as opposed to the number of purchases for each individual order.

According to Brassington and Pettitt (2006: 499), the supply chain manager may decide to offer discounts on quantity purchases in cases where he or she deals with large clients and wants to maintain them. This happens where the manager is dealing with big companies or institutions which purchase the products in bulk.

Offering them discounts on such purchases not only helps the seller by decreasing costs, but it also makes these large clients become loyal to him or her, which is beneficial to the business (Butscher 2002: 87-88).

Conclusion and recommendation. Discounts on large purchases have been seen to be very beneficial to the supply chain manager and the sellers at large. It not only increases customer loyalty but it also reduces

the costs of the seller.

It is however important to analyze the character and trends of a consumer, as well as the favorable amount of discount to give, before deciding to offer this type of discount. This is because, if implemented haphazardly, this policy has the potential to cause a business to collapse due to financial strains.

Bibliography

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