What is a competitive discount?

Answer 1

A lot of people I talk to think that a competivie discount is just paying less money for a particular product or service. However, are they really getting a discount? I recall a few years ago a particular retailer was going out of business and advertised that they were slashing prices by 50%. Unfortunately, for many unsavvy shoppers, it was only a marketing scheme. Before the opening day of the "Going Out of Business Sale" the retailer raised the prices 50-60% on nearly all merchandise. Consequently, many shoppers (who thought they were getting a whopping discount) actually paid the same original retail price if not more.

A competitive discount is one were the buyer can actually see more value at a lower price. This type of discount is typically either already earned or paid for. For instance, Company 1 will prepurchase (or sponsor) a specific item at Company 2 for some type of advantage, such as advertising rights. The item will be advertised as "buy one get one free." The customer receives the apparent discont on account that the free item has already been paid for by Company 1. On the other hand, a customer may receive a discont on account that they have been a loyal customer over a specific period of time, such as a "Good Driver Discount" from your auto insurance company.