Definition
Discount refers to a price reduction offered by a seller to a buyer. [1]
A cash discount is a discount offered to customers for prompt payment of invoices. It’s often referred to as a sales discount by the seller and a purchase discount by the buyer. [1]
A chain discount is a series of trade discount percentages or their total. For example, if a list price (catalog price) of $100 is subject to a 40-15-15 discount to dealers, the total or chain discount equals $56.65: [2]
$100 – 40% = $60
$60 – 15% = $51
$51 – 15% = $43.35
$100 – $43.35 = $56.65
Deductions are discounts applied by a customer to an invoice, adjusting for goods damaged in shipment, incorrect deliveries, late deliveries or, in some cases, for products that did not sell as well as hoped. Deductions might not be recorded in a way that can be analyzed, and they are often the subject of disputes. [3]
An employee discount is a discount from retail price offered by a general merchandise retailer to employees. It is a kind of retail reduction from the point of view of accounting.
A quantity discount is a reduction in price for volume purchases. [2]
A cumulative quantity discount (also referred to as deferred discount or patronage discount) is a reduction in the price to be paid for purchases that exceed a given level of volume over a specified period of time. [2]
A noncumulative quantity discount is a discount granted for volume purchased (measured either in units or dollars) at a single point in time. [2]
A trade discount (or functional discount) is a discount offered to a retailer or other channel member for the functions performed in the movement of goods from the manufacturer to the consumer. [1]
References
- Govoni, N.A. Dictionary of Marketing Communications, Sage Publications. (2004)
- American Marketing Association, AMA Dictionary.
- Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; and David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (Second Edition). Upper Saddle River, New Jersey: Pearson Education, Inc.