Discounts in Business Marketing Management zyxwvutsrqponm K. J. Blois In spite of the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA frequency with which they are used and their apparent importance to manyjirms’marketing activi- ties, discounts receive little attention in the academic liter- ature. Furthermore, their potential complexity receives limited comment and their strategic possibilities are most ofren ignored. This paper draws attention to these issues and indicates the needfor the development of discount struc- tures to be managed with care. INTRODUCTION Examination of business practice indicates that most firms offer discounts’ to their business customers. Fur- thermore, it would appear that for many firms discounts are important components of their pricing policies. This view is supported by a range of evidence. For example, a very large number of the United Kingdom Monopolies and Mergers Commission’s* reports contain discussion of the role of discount structures in the business practices of the firms being investigated. Address correspondence to K. J. Blois, Templeton College, Oxford OX8 6SZ, United Kingdom. ’ The term “‘discounts” is used throughout to encompass discounts, rebates, and bonuses. * Hereafter abbreviated as MMC. In comparison, however, the academic marketing liter- ature pays minimal attention to this topic. For example, among well-known texts on industrial or organizational mar- keting Hutt and Speh [5] allocate three pages to the topic; Webster [16] three pages; Reeder et al. [13] two pages; and, Hill et al. [3] five pages, Each of these books basically sim- ply describes some of the most common types of discount such as cash; quantity; functional or trade; seasonal; and, geographical. Even books on the specific issue of pricing pay little or no attention to the topic. Thus, Simon [14] has no entry in his index for “discount” or “rebate” and makes only slight mention in the text. A search of marketing jour- nals also shows that little has been written on the topic though there is more, but still not a lot, to be found in the management science, buying and accounting journals. This lack of attention is surprising when there are at least five issues that a supplier should consider in relation to discounts. These are: 1. 2. 3. 4. 5. Why use discounts? Are discounts being used as a strategic and/or a tac- tical weapon? What are the costs of using a discount? What will be the customers’ response? How will the discount structures available be com- municated to customers? Industrial Marketing Management 23, 93-100 (1994) o Elsevier Science Inc., 1994 655 Avenue of the Americas, New York, NY 10010 93 0019.8501/94/$7.00