How to Manage Discounts: Quantitative Methods in Discount Management
PPS 2nd Annual Latin America Pricing Workshops & Conference
Research shows that a 1% improvement in price yields a 10-12% improvement in profits, but where can we find the low-hanging fruit of a 1% price improvement: usually in discount management.
Immediately after the moment when prices have been set, executives are faced with the challenge of discounting. Discount decisions can chew up more resources and cause more organizational strife than any other pricing decision. While some executives would like to eliminate all discounts, discounting is a form of price segmentation and can actually improve profitability when properly managed. Yet, without proper management and oversight, discounts will spread like a virus infecting every transaction and wreak havoc on profits.
In this workshop, we will look at the three commonly used tools for analyzing firm-specific discounting practices, and the four commonly used tools executives have to restrain them. We will also use economic models to show the value of discounting and the influences of Prospect Theory and Competition on discounting policy.
Delegates will be required to bring a laptop with Microsoft Excel for this workshop. This workshop consists of in-class exercises applying quantitative approaches to monitoring discounts, enabling participants to apply these techniques to the datasets of their own companies.
Delegates will learn:
- How discounting can simultaneously lower market entrance prices, increase volumes, and improve profitability
- Quantitative methods for measuring and monitoring discounting policy
- Quantitative and managerial tools for restraining discounts
- Implications of Prospect Theory and the Nash Equilibrium on discounting policy
Speaker: Tim J. Smith, PhD is the founder and Managing Partner of Wiglaf Pricing, an Adjunct Professor of Marketing at DePaul University, Academic Advisor to the PPS CPP program, and the author of Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures.