A decision rate depends on the retailer’s patient towards his or her business. Discount rate builds the connection there is between the future dollars and the todays dollars. With low discounts such as 35% off pet magazine rawhide chips for dogs, the more patient the retailer needs to be and the higher the discount rate is, the more impatient the salesperson becomes. Most retailers or salespersons ask for guidance when it comes to choosing a discount rate for their products. They seek guidance so they can be able to choose a discount rate that will be acceptable by the customers and that will not lead the business in a harm’s way.
When discounting items, you need to choose a rate that goes hand in hand with the condition of the market today. The way to account for the time value of money is by discounting the flow of the costs and evaluate them according to their current value. The current value expresses the money to be paid in the near future. Usually, a dollar today is worth much more than a dollar in some years to come.
The right discount rate should be the one that generates profits for your business. Do not focus more on giving discounts without focusing on your margins. Give discounts from time to time but not frequently. Frequent discounts will be predictable and when shoppers discover this, they will never pay full price for your products at any particular time.