Promotional Pricing & Discount Management Flashcards
7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Promotional Pricing & Discount Management flashcards as text
Which type of discount is granted to a buyer who purchases a large quantity in a single order?
Answer: Non-cumulative quantity discount
A non-cumulative quantity discount is applied to a single large order, incentivizing larger individual purchases rather than total volume over time.
A company offers a 10% price reduction during off-peak months to stimulate demand. This is best described as a:
Answer: Seasonal discount
Seasonal discounts are used to shift demand from peak to off-peak periods, helping balance production and inventory loads.
The 'waterfall effect' in pricing refers to:
Answer: The cumulative impact of discounts, allowances, and concessions eroding the invoice price
The price waterfall illustrates how list price is eroded by successive discounts, allowances, and off-invoice items to reach the actual pocket price.
A 'pocket price' is defined as:
Answer: The actual revenue received after all discounts and concessions are deducted
Pocket price is the true net revenue a seller receives after subtracting all discounts, rebates, freight, and other off-invoice items from the invoice price.
Which discount structure is most effective at locking in long-term customer volume commitments?
Answer: Cumulative quantity discounts
Cumulative quantity discounts reward total purchases over a period, encouraging customers to consolidate buying with one supplier to reach threshold tiers.
A 2/10 net 30 cash discount term means the buyer receives 2% off if they pay:
Answer: Within 10 days of the invoice date
2/10 net 30 means a 2% discount is available if payment is made within 10 days; the full invoice is due within 30 days.
From a profitability standpoint, why are off-invoice discounts often considered more problematic than on-invoice discounts?
Answer: They are harder to track, leading to underestimation of true price erosion
Off-invoice discounts (rebates, freight allowances, co-op funds) are often not fully captured in pricing systems, making it difficult to measure true profitability and pocket price.