Coupons & Markdown

Clip a Coupon

MARKDOWNDISCOUNTS

Coupon: a voucher entitling the holder to a discount off a particular product.

Consumer View

• How many of you have actually used a coupon?• How many of you would cut coupons out?• Can these discounts add up to anything?• If an item is 20% off, how would you figure this?• If a clearance item is already 50% off and you get an additional 20% off, is that 70% off?

•Why Do Companies Develop them?•To get consumers’ attention

•steer consumers toward your product instead of a competitor's

•Advertise a New Product•Buy Customer Loyalty

•How do you feel when you get a coupon from your favorite store

•To Get repeat Business•To advertise you have a markdown!

•http://www.investopedia.com/financial-edge/0911/why-do-companies-print-coupons.aspx

Why Coupons!!

Formula:Discount Amount = Reg. Price * discount rate Net Price = Reg. price – Discount amount

If 34% discount off $40, what is the discount amount?

Discount amount = X =

Net Price = - = • $40 x .34 = $13.60• $40 – 13.60 = $26.40

Coupons!!

•You get a coupon in the mail for 25% off of a pair of jeans. The jeans you want are $85. What would your final cost (net price) for the Jeans be?

Discount amount = X =

Net Price = - =

Coupons!!

Short Formula: • Reg. price X percentage you have to payNet Price = Reg. Price * (1-discount rate)

If you get a 35% discount off a $600 TV, what is the net price paid?Net Price = X (1-discount rate)=

Net price = $600 x (1-.35) = $390 $600 x .65 = $390 paid

Coupons!!

•You get a coupon in the mail for 25% off of your entire purchase. You buy $195.00. What would your final net price be?

Net Price = X (1 - ) =

Coupons!!

• A markdown is the term used by the business or marketing personnel to reduce the price of a product to increase the sales volume

• A discount term used by a business or marketing personnel to express in a percentage markdown to the consumer to show the sale

Markdown VS Discount

•Why do businesses mark items down? • Sales of that item are slow• Seasonal Item• Item that will be discontinued• Going out of business• Introduction of an item

WHY MARKDOWN?

1. Temporary Markdown – Reduction in price for a specified period of

time - will raise back to the normal price after the sale expires

– Most familiar pricing method used to generate sales

2. Permanent Markdown– used to remove old products that: are

perishable and close to being out of date (e.g., donuts);

– Remove older model to make room for new models

– products that the marketer no longer wishes to sell

Three Markdown Types

3. Seasonal – see price reductions at the end of prime selling

season– Products primarily sold during a particular time

of year– Ex: clothing, gardening products, sporting

goods and holiday-items

Three Markdown Types

• Retail Price: Original selling price of the product

• Dollar Markdown: amount off of the retail price

• Sales Price (Net Price): final price you pay

Markdown Steps Include

Formula:Dollar Markdown = Retail Price x % MarkdownSales Price = Retail Price – Dollar Markdown

Dollar Markdown& Sales Price

• Our school store sells an MHS Sweatshirt that retails for $60.00 and you want to markdown the product by 25% to increase sales. What is the amount of the mark down?

• Dollar Markdown = x = $60 X .25 = $15.00 Markdown

What is the Sale Price?• Sales Price = - =

Net Sales Price = $45 net price

Practice

LET’S PRACTICEWhat is 25% of 100?Dollar Markdown = x = Sale Price = -

=

What is 15% of 50?Dollar Markdown = x = Sale Price = -

=

What is 50% of 75?Dollar Markdown = x = Sale Price = -

=

What is 30% of 60?Dollar Markdown = x = Sale Price = -

=

• Net Price : The price you actually pay for the item (after discount)

• List Price: The price the business pays, often expressed in a catalog (catalog price)

More Terms….

Short Formula: Net Price = Retail Price x (1 – markdown %)

For Business Discount:Net Price = List Price x (1-

markdown%)

Alternative Method

• You have a new item of clothing with a 40% discount for April 3 – April 6 that sells for $75.00, what is the net price?

– Net Price = X (1- ) =

Alternative Method

• Retail price: $380 for a last years TV Model with a discount Rate: 30%Find the net price you pay:

Net Price = X (1- ) =

Example

The winter season is about halfway complete and we have a large quantity of MHS mittens. We need to increase the sales of the mittens. What would the sale price of the mittens be if the retail price is $15 and a markdown of 25%.

Net Price = X (1- ) =

PUT IT ALL TOGETHER

• The Sports Shop purchases running shoes from wholesalers for a list price of $119.50. Sports Shop receives a discount of 20%. What is the net price?

• Net Price =

Put it All Together

• A sports stadium sold a total of 15,125 tickets and 25% of those tickets were children. How many tickets were sold to children?

» Remember to round to a whole number!

• Total =

– 15,125 x .25 = 3782 tickets

Figure this…

• Please show me that you understand the concepts to this point.

WORKSHEET