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Distributors discounts can be classified under the following three categories:
(i) Different net prices for different distributor levels: Net prices are commonly used as the device for quoting differential prices to distributors. A list of such prices is given to authorised dealers by manufacturers to facilitate their task of billing.
(i) Different net prices for different distributor levels: Net prices are commonly used as the device for quoting differential prices to distributors. A list of such prices is given to authorised dealers by manufacturers to facilitate their task of billing.
(ii) A uniform list price modified by a structure of discounts, each rate so determined is applied to a different level of distributor : This method is commonly used as it is easy to deal with its use in diverse trade channels. By merely varying the discounts it facilitates cyclical and seasonal adjustments in prices also. Its use helps in keeping actual prices a secret not only among distributors but also among competitors and customers. This method gives to manufacturers greater control over the realised margin of different categories of distributors.
(iii) A single discount combined with differing supplementary discounts to different levels of distributors: Supplementary discount gives clear cut picture about the trade channel structure or the suggested resale prices. These discounts reflect distributors cost at different stages and competition between different kinds of distributors. These discounts are often very elaborate and are in use due to tradition in the industry.
• Pre-requisites for determining Distributors’ Discounts: The economic function of distributors discounts is to induce different categories of distributors to perform nicely, their respective marketing functions. As such, to build up a discount structure on sound economic lines, it is essential to know about :
(i) The services to be performed by the distributors at different levels.
(ii) Knowledge about distributors’ operating costs.
(iii) Discount structure adopted by competitors.
(iv) Effect of discounts on distributor’s population.
(v) Costs of selling to different channels.
(vi) Availability of opportunities for market segmenta
