Promotional Pricing: Markdowns

The most common method for stimulating customer interest using price is the promotional markdown method, which offers the product at a price that is lower than the product’s normal selling price. There are several types of markdowns including:

  • Temporary Markdown – Possibly the most familiar pricing method marketers use to generate sales is to offer a temporary markdown or “sale” pricing. These markdowns are normally for a specified period of time the conclusion of which will result in the product being raised back to the normal selling price.
  • Permanent Markdown – Unlike the temporary markdown where the price will eventually be raised back to a higher price, the permanent markdown is intended to move the product out of inventory. This type of markdown is used to remove old products that: are perishable and close to being out of date (e.g., donuts); are an older model and must be sold to make room for new models; or are products that the marketer no longer wishes to sell.
  • Seasonal – Products that are primarily sold during a particular time of the year, such as clothing, gardening products, sporting goods and holiday-specific items, may see price reductions at the conclusion of its prime selling season.
Step 4: Determine Promotional Pricing
Promotional Pricing: Loss Leader