It is a great promotional strategy adopted by both brick-and-mortar and online sellers. And the extra incentives influence customers emotionally, and they feel an irresistible attraction.
But, sometimes, people get confused because of the different discount offers.
What are the different types of sales discounts?
Sales discounts are an integral part of sales promotions. These are basically of the following types:
1. Percentage discounts
These are x% discount offers. The sellers offer these as 20%, 30%, or 50% discounts on their sale price depending on the product and their promotional strategy. It is one of the most popular types of sales promotions.
2. Dollars off
This is an alternative to percentage discounts. It involves a flat discount offer of $ 20, $ 30, or $ 50 on the products.
How to calculate discounts?
Stores often offer discounted sales, on occasions, for a specific period. Typically, they announce the discount in the form of a percentage. You can find out the discount amount and the net sale price as below:
Suppose an item that sells for $ 30 is marked 20% off.
To calculate the amount of discount, convert the % in the form of decimals. Calculators have a function for this.
Or, you can also do it manually by shifting the decimal point to two places on the left.
So, for our example, the 20% discount will be 0.20.
Next, multiply the original price by this fraction. In this example, we must multiply $ 30.00 by 0.20. It comes to $ 6.00.
Now, subtract the amount of discount from the original price to get the net sale price.
The original price $ 30.00
Less: Discount @ 20% $ 6.00
Net sale price $ 24.00
It is simple, and one can apply this formula for any percent discount offer.
But prices and discounts offered may not be that simple in reality. And, it may not be possible to calculate the exact discount amount on the go.
In such cases, you may estimate.
Let’s say that the original price of an item is $ 56, and the discount offered is 25%.
Round up the original price to the nearest tens place. Here it will be $ 60.
Then find out 10% of the rounded price. It is easy. Just move the decimal to one place on the left.
Here it will be $ 6.0.
Since there are two 10s in 25, add 6.0 with 6.0. It will come to $ 12.0.
And divide $ 6.0 by 2 to account for the balance 5% in 25%. It comes to $ 3.0.
So, total estimated discount amount is $ 12.0 + $ 3.0 = $ 15.00.
Now, calculate the estimated sale price by subtracting the estimated discount from the rounded-off price. Here, it will be $ 60 – $ 15 = $ 45.00.
Let’s check now.
The exact discount is $ 56 x 0.25 = $ 14.00
The exact net sale price is $ 56.00 – $ 14.00 = $ 42.00
So, the out-of-the-hat approximation is fairly okay.
Do percentages discounts better deal than dollar discounts?
Offering discounts is common to almost every brand and retailer for promoting sales. Successful promotional offers create a stimulus for making purchase decisions by buyers.
But buying decisions are always an outcome of psychological and emotional reactions.
So, whatever sounds to be more attractive to the buyers, they fall for that. And it might be independent of which option entails higher savings.
Suppose there are $50 discounts and 15% discounts on $350 products. It is observed that the buyers consider $50 discounts better offer.
But the reality is different.
For the $50 discount offer, a customer has to pay $350 – $50 or $300.
And, for the 15% discount offer, a customer has to pay $350 – $52.50 or $ 297.50.
It means that the percent discount saves more than the dollar discount.
But as the customer perceives dollar discounts better deal, they opt for them.
Again suppose that there are two offers for $5 discounts and 10% discounts on a $50 product.
Buyers tend to opt for the percent offer, although both offers yield the same savings.
Which is better a 50% discount or a $ 50 discount?
“Get 50% off!”
“Get $50 off!”
You must have seen such discount offers. Both of these two statements seem equally attractive to the customers.
So, here the question arises. Which one is better percent off or dollar off?
It is a riddle and no one can give a cut-and-dry answer to this. That is because the original price of the item will come into play for such a decision.
Let’s check it through some examples:
Suppose the original price of the item is $80. So, for $50 discounts a customer has to pay $80 – $ 50 or $ 30. And for 50% discounts, the customer has to pay $80 – $40 or $40. So, the dollar discount s is better than the percentage.
If the price of the item is $100, both $50 discounts and 50% discounts yield equal savings.
When the original price of an item exceeds $100, the 50% discounts give more savings than $50 discounts.
Let us suppose that the original price is $120. Then for 50% discounts, one has to pay $120 – $ 60 or $60. And for $50 discounts he has to pay $120 – $ 50 or $70. So the first is better.
Do this simple math when sitting on the fence between the above. It will help you accept a better offer.