What Is Discount: Meaning, Types & Use In Pricing Strategy

When a seller reduces the price to make products or services more attractive to customers. This way, sellers sell the commodity and customers get it at a reduced price. 

For example, Riya, a college student in Delhi, wanted to buy sneakers worth ₹3,000. The store offered her a 20% student discount, so she paid only ₹2,400, saving ₹600. 
 

With ₹600, she can order a new leggings from Myntra. It is not only the amount, but also the customer satisfaction that makes discounts even more ‘eventful’. Let’s know more about it and its types, and use them in this blog. 

What Is a Discount?

Do you know that during a recent “Black Friday in Summer” promotion (July 8-11, 2025), U.S. online spending surged by $24.1 billion? That was a 30.3% increase in online retail sales, made possible by discounts. 

Discounts are widely used in both B2B (Business-to-Business) and B2C (Business-to-Consumer) markets. Discounts can take the form of percentage cuts (e.g., 15% off), fixed-amount reductions (e.g., ₹500 off), or non-cash benefits like free shipping or buy-one-get-one offers.

Why Sellers Give Discounts?

We know how discounts are given, but why do sellers give discounts? What are its uses in the porcing strategy? Let’s answer these questions in the section below.

1. Discounts and The 4 Ps

Discounts are used as part of a broader marketing strategy that includes Product, Price, Place, and Promotion. Before offering a discount, you should ask:

• What do I want to achieve? 

Do I want more sales, clear stock, or attract new customers? Set the goals and then decide what to do.

• How will I measure success? 

Revenue, profit margin and repeat purchases can all be used to measure success. Decide where your business lacks and target your success as per that.

By asking these 2 questions, discounts will support your goals, not hinder them. Do you know 165.5 million Americans redeemed digital coupons in 2024 ( almost 62% of adults)?
 

2. Boost Short-Term Sales
   Discounts help increase sales quickly by lowering prices and making customers buy sooner. They create urgency and often bring in higher total revenue despite lower prices.

For example, your sister wants to buy an H&M top. Its original price is ₹1,000. If the seller sells 100 units, the total revenue would be ₹1,00,000. 

However, if he gives a 20% discount (New price = ₹800), more units will be sold. Let’s say 180 gods sold. Now, the revenue will be ₹1,44,000. The seller made a huge profit, and your sister got it at a ₹200 cheaper price.
 

3. Clear Old or Extra Stock
   Discounts help businesses sell unsold or outdated products faster. This frees up storage space and reduces carrying costs.

For example, Ramesh kaka has unsold stock of 500 units of MDH masala. Normally, he sells 50 units/month. At this rate, the clearance would take 10 months. If he gives a discount, more units will be sold. Let’s take the new rate to be 300 units/month. The stock will be cleared in less than 2 months. 
 

4. Charge Different Prices to Different Buyers
   Not all customers are willing to pay the same price for a product. Discounts help target specific groups while keeping sales high.

For example, Riya, a student in Bengaluru, buys movie tickets. A normal ticket costs ₹300, but with a student discount (20%), she pays only ₹240. Meanwhile, her uncle buys 5 tickets together with bulk pricing (10% off), paying ₹270 each.
 

This shows how the same product is sold at different prices to different buyers. 

Do you know that during Instamart’s “Quick India Movement 2025” sale, discounts ranged from 50% to 90% across over 50,000 products?

What are the Types of Discounts?

As you have seen in the above section, there are different reasons sellers give discounts as per their customers. Discounts are strategies to increase sales, and they come in many types, depending on customer behaviour, cash flow, and other factors. Let’s see the types in the table given below:

Do you know that promotional digital coupons achieve a redemption rate of around 7%? This shows how these discounts influence customers. Similarly, other types of discounts target different audiences.

Conclsion

Discounts are not charity. They are a part of strategic marketing. If applied with a proper strategy, it can increase sales, clear inventory, reward partners, and attract new customers. Without harming the brand value, the seller sells more units at a lower price and increases revenue. Without harming their pockets, customers get the commodity at a lower price and also have a chance to experience new products. 

Frequently Asked Questions

Are there legal limits on running discounts?
Yes. Laws ban deceptive pricing and false scarcity, show genuine original prices and honest terms to avoid penalties.

How should discounts be recorded for accounting and tax?
Record discounts as contra-revenue (reduces sales). Follow local tax rules when computing taxable value and VAT/GST adjustments.

How can businesses prevent coupon or promo abuse?
Use one-time codes, account/link restrictions, minimum spends, expiry dates, and monitor redemption anomalies to detect fraud.

Do discounts work the same across countries?
No. Account for local taxes, currency, buying power, and cultural expectations; localise promos and test market response.

How to forecast demand impact from a discount?
Use past promo lift, price elasticity estimates, A/B tests, and scenario modelling to set inventory and avoid stockouts or overstock.

 

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