Discount is considered a keyword that is very familiar to business people. So what is the discount? What types of discounts are there? How is the discount calculated? What should be kept in mind when calculating the discount to avoid making mistakes? Do not skip the following content to learn all about discounting in business.

What is discount? The most detailed discount calculation guide

What is discount?

A business discount is known as a reduction in the price of a product or service from its original list price. The discount percentage will depend on the quantity of goods that customers close the order. The more customers buy, the higher the discount rate.

What is the discount?
What is the discount?

Therefore, discounts in business always motivate customers to buy products of the business. This is one of the basic but very effective forms of marketing for businesses.

Discounts have many different purposes but generally are to entice customers, compete, promote products to consumers or clear long-term inventory.

Example: The company offers a discount of 10% on the total invoice. When customers buy clothes with a total of 5,000,000 VND, they will receive a discount of 500,000 VND. That means customers only need to pay 4,500,000 VND.

Discounts in business

After understanding the concept of what discount is? It is also important to learn about different types of discounts. Generally, business discounts are divided into three basic categories: quantity discounts, promotional discounts, and trade discounts.

Business discounts
Business discount types

Quantity discount

This is the discount customers receive when purchasing a certain quantity of goods. The larger the quantity of goods, the higher the discount rate. This discount applies to both wholesale and retail.

Promotional discount

A promotional discount is a discount that a business offers to shoppers. The purpose of this form is to hit the buyer’s psychology to quickly decide to withdraw money. This is a very effective way of discounting and extremely useful in business.

Trade discount

This is also a form of discount, but a trade discount is a discount when shoppers order in bulk. This will encourage customers to buy more quantities to receive a discount.

Manufacturers offer commercial discounts to distributors, agents, supermarkets, … to import in batches in large quantities. This both helps the buyer get a discount and makes it easier for the supplier to ship the goods.

What is the discount calculation?

In business, discounting has many different ways. However, there are two methods of calculating the most common and applied by many people: mental calculation and general calculation.

There are 2 common ways to calculate discount
There are 2 common ways to calculate discount

mental calculation

What is the calculation of the discount? This is a method by which sellers will quickly calculate the discount without using a calculator. From there, give the fastest results for customers.

To do this calculation, there are 3 steps:

  • Step 1: Know the discount rate.
  • Step 2: Determine how much discount is, then multiply by selling price without discount by discount rate.
  • Step 3: Next is to determine the price after discounting and then we take the principal minus the discounted calculation.

General calculation 

This general calculation method is a calculation method combined with mathematical formulas by rounding the digits, making the calculation extremely simple and fast.

To do this calculation, we need to apply the following four steps:

  • Step 1: The first thing we need to do is bring the original price to a round number (can be increased or decreased arbitrarily) and then we divide it by 10 to get a number C.
  • Step 2: We do the division, divide the discount rate by 10. We get the remainder and the integer part. Let’s take the integer part we get a number D.
  • Step 3: To calculate the discount amount, we just need to take: C times D.
  • Step 4: Finally, we subtract the original price from the discounted price. So we’ve calculated the discount price.

With just the above 4 steps, you can calculate the general discount very easily. However, in the process of entering the calculation number, you need to pay attention to enter the correct number and do it step by step to avoid confusion.

How to calculate discount percentage?

Calculating the discount percentage is very simple, but if you do not know how to calculate it, please refer to the following steps.

How to calculate discount percentage?
How to calculate discount percentage?
  • Step 1: Take the pre-discount price (original price) minus the post-discount price.
  • Step 2: Divide that result by the pre-discount price.
  • Step 3: Multiply the received result by 100. How much the result is the discount percentage.

For example: A product is sold for 200,000 VND, the price after discount is 180,000 VND.

We take (200 – 180): 200 = 0.1. Then take 0.1 x 100 = 10. So the product has a 10% discount percentage.

Thus, the way to calculate the discount percentage is very easy to understand, for round numbers, you can completely calculate it mentally.

Should I abuse discounting?

In business, the concept of discount is certainly not strange anymore. When applying this method, users will feel that they can buy goods at a lower price than usual. Thereby stimulating customers to buy more, but if we apply it incorrectly, it will backfire. So what are the consequences if we abuse the discount?

What is the reason not to abuse the discount?
What is the reason not to abuse discount?</ td>

Losing trust from customers

When a product is introduced on the market but is always in a discounted condition, customers will doubt the quality of the product and gradually lose trust in the business. Therefore, it is necessary to use discount wisely and flexibly in business.

Creating boredom from the customer

A well-known business unit that only offers one discount date per month will certainly attract more customers’ expectations.

Because if businesses apply discounts every day, customers will have the mentality that if they don’t buy today, buy tomorrow. Because tomorrow will be applied a separate discount rate.

This makes the business less attractive to the discount program, customers no longer expect the seller’s discount percentage.

Business prone to loss

What are the consequences of abusing discounts? If offering discounts in attracting customers, of course, businesses will close more orders. However, you need to calculate the discount rate carefully to avoid capital loss. Therefore, to be successful when using a discount strategy in business, it is necessary to reduce prices in the most flexible way.

Experience with effective discounting

What is the experience of using discount to bring high efficiency? You should not ignore the following suggestions.

What is the experience of applying discount to be effective
What is the experience of applying discount to be effective

Specify the product to be discounted

Before applying the discount, you need to consider what your product is? Why should apply discount on this item? If it’s newly launched products, retail sizes, inventory, highly competitive products,… And you are looking to sell these items quickly, you should offer attractive discounts to make customers happy. Looks and feels good to buy.

Products that are selling well, are not competitive with other brands, should not apply a high discount. With such items, it only takes a few months to apply the discount.

Affordable discount time

In addition, the timing of the discount is also very important in business. Plan a suitable discount period to stimulate customers to come to you to shop.

Also need to determine how much discount is reasonable?
Also need to determine how much discount is reasonable?

For example: Discount on the middle of the week will have fewer customers than on the weekend. Because weekends are always the time when customers are free and easy to go shopping. If the discount during the week is certain, some potential customers will be missed due to the nature of the work.

Focus on potential customers

Focusing on customers to apply discounts is also a valuable experience in business. Because not all customers enjoy high discounts. For example, let’s attract buyers with some of these tips:

  • Discount is only applied to customers who buy invoices over 5,000,000 VND.
  • Apply discount on birthdays to loyal customers.
  • High discount for customers who buy in bulk during the month.
  • High discount when you invite more friends to shop.

To understand more about the concept of “What is a discount?” Let’s answer some frequently asked questions below.

Should I regularly apply promotional discounts ?

As explained in the previous section, the consequences of overusing discounting are to easily lose product value and lose trust from customers. Because an item is discounted too much, of course, customers will be skeptical about the quality of the product. Therefore, the promotional discount should only be applied at the right time.

What's the reason not to regularly apply discounts?
What’s the reason not to apply discount often?

Is the interest rate and discount rate different?

The discount rate and interest rate are both related to the currency of the transaction. However, these two concepts differ in that:

  • Discount rate is a known number used to represent the present value of an amount.
  • Interest is the percentage of money left over when you invest in something.

Does discounting help increase profits?

When businesses use discounts when selling, consumers will be more interested in your products. Thereby, stimulating buyers to choose the company’s products because of the preferential prices.

In particular, when they come to buy goods, they are not only interested in discounted products but other items will also be widely promoted. So, applying the right discount and the right way definitely helps to increase the sales.

Above is information to answer the question “What is discount? The most detailed guide to calculating the discount”. Discount is always an indispensable business strategy for every business. However, it is necessary to apply discounts flexibly for each product and suitable for the time.