Definition of Discount-based Pricing
This pricing strategy revolves around initially pricing an item unnaturally high just so that when the item is put on sale, it’s actually put at the price that it’s valued at, but it tricks shoppers into thinking that it’s at a discount price.
Description of Discount-based Pricing
Companies use this approach to sell lots of inexpensive items at a time. It’s profitable in short spans of time.
Advantages of Discount-based Pricing
When you discount for the sole purpose of treating your loyal customers, you’re enhancing their loyalty. Additionally, if you discount items for a bit of time, then more of them are sold off which opens up more room in your inventory and thus there’s a short-term increase in profits.
Disadvantages of Discount-based Pricing
You can’t utilize this strategy often or else consumers are going to begin to think that your company produces low quality items. You may possibly get some customers who are very price conscious, but the other ones will go off to your rivals since due to their prices, seem to have better quality items. Also, low prices don’t assist with increasing customer loyalty. You’re also bound to have some tough competition.