What discount to give customers?

How to calculate a discount

Quite often, the following situation occurs with the heads of the sales department and business owners.

The seller comes and says: “I have a great customer, I’m ready to buy a shipment, but asks for a discount.” The manager, of course, understands that if he gives a discount, he will lose part of the margin. The manager has a logical question: "And how much more product is the customer willing to buy if we give him a discount?"

Under the cut is a simple formula that should be at hand in the sales and marketing department.

The formula is given in the book “Pricing” by Igor Lipsits:

Increase in sales of goods = (Discount / marginal income - discount) * 100%

Below is a table with margins up to 25% and discounts up to 10%.

Discount and margin table

How to work with a table? Suppose your margin is 4%, you want to give the customer a 1% discount - this means that you must sell 33% more goods (in monetary terms), which will be equivalent to selling the goods without a discount.

If your margin is 25%, and you are selling a batch of 100 products, you can create a beautiful tariff schedule: take 125 products and get a 5% discount; if you take 167 goods, you will get a 10% discount. At the same time, you lose nothing, and the client receives motivation in the form of a discount. Of course, it all depends on the specific case, but the table will greatly help you in determining the boundaries of the discount.

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