The following points depict the disadvantages, which are associated with random discounting.
Probable exploitation of the customers – It might lead to some disastrous effects on the part of customers and producers. The utmost disadvantage of this strategy is that the firm sometimes might exploit the customers by attracting them for purchasing goods at lower prices. And the goods which they sold also could be defective in nature. The sellers do not assure the customers to get optimal qualitative goods.
Inability of attainment of real discounts – The major disadvantage of this strategy is that the customers purchase these goods at standard price first, and then make purchasing in the discounted prices. Initially, a higher price is paid by the consumer, and then later, he pays the lower prices. The standard price of the good seems much higher. In this scenario, the customers are unable to get the real discounts, as they cannot get the due advantages of purchasing these goods at lower prices.
Harmful to the brand image â€“ lowering the prices of the product may harm the image of the company in the market, which will in turn lowers its market share and profit margins in the future. It is because the customers would make a perception that low price means the quality of the product would be low as well. Thus, the overall sales of the firm would get impacted.
Advantages of Periodic Discounting
The firm and the customers exhibit various benefits of the periodic discounting. The following points highlight the benefits:
Increment in the larger savings of customers – The periodic discounting enables the consumers and producers to get benefits as the consumers get greater extents in purchasing power, whereas the producers get benefit by clearing their stocks. The foremost advantage is that the customers radically get the increments in the savings while purchasing these goods by following this strategy.
Increment in the customersâ€™ purchasing power – These consumers tend to fill the basket of goods with more quantities. Even, the firm attracts the customers to attract the major extent of footfall. It strives the firm to make clearance of the stocks on some occasions.
Stock clearance â€“ When the seller intends to clear the stocks of his shop. It is not possible for the seller to sell these goods at the prevailing prices. If the firm adopts random discounting, then the seller could sell all goods at lower prices. It would be feasible for the customers to purchase the goods as well as the firm, also could earn enough profits.
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