Bilkul Bazaar | Sunday Special

Why Do Businesses Give Discounts?

“20% OFF”, “Buy One, Get One Free”, “Flat ₹500 OFF” or “Limited-Time Offer” — discounts are everywhere.

At first glance, a discount appears to mean that a business is simply giving up part of its earnings. But in business, a discount is often a calculated strategy, designed to attract customers, increase sales, clear inventory or encourage repeat purchases.

1. Attracting New Customers

A discount can make a customer try a product or service for the first time.

For example, a new restaurant may offer 20% off on the first order. The restaurant earns less on that particular order, but the aim is to introduce the customer to its food and potentially turn them into a regular customer.

2. Increasing Sales

Sometimes businesses use discounts to encourage customers to buy more.

Suppose a shop offers:

₹100 OFF on purchases above ₹1,000.

A customer who originally planned to spend ₹800 may add another ₹200 worth of products to qualify for the offer.

The customer gets a discount, while the business increases the size of the sale.

3. Clearing Old Inventory

Products don’t remain equally valuable forever.

Fashion retailers, for example, may reduce prices at the end of a season to sell remaining stock.

A ₹2,000 shirt sold for ₹1,400 may generate less profit per item, but selling it is often better than keeping unsold stock occupying valuable shelf or warehouse space.

4. Promotional Offers Can Be Different

Not every offer is a simple price reduction.

Businesses may use:

• Buy One, Get One
• Cashback
• Free Delivery
• Loyalty Points
• Bundle Offers
• First-Purchase Offers
• Festival Discounts
• Limited-Time Offers

Each is designed to influence purchasing behaviour in a different way.

5. Who Pays for the Discount?

This is where the business side becomes interesting.

The discount may be funded entirely by the seller, shared between a seller and a platform, supported by a brand, or structured in another way depending on the promotion.

For example, in an online marketplace, a promotional offer may involve several participants — the seller, platform and brand — rather than coming entirely out of the seller’s pocket.

6. The Psychology Behind “Limited Time”

“Offer ends tonight!”

“Only 2 days left!”

“Last chance!”

Such messages create a sense of urgency. The idea is to encourage customers to make a purchase sooner rather than postponing the decision.

For businesses, faster purchases can mean faster sales and improved inventory movement.

7. A Discount Doesn’t Always Mean a Loss

Consider a product priced at ₹1,000.

If its cost to the business is ₹600, selling it at ₹800 still leaves ₹200 before other expenses.

The important question is therefore not simply:

“How big is the discount?”

It is:

“What does the business gain from offering it?”

The answer could be a new customer, a larger order, faster inventory turnover, repeat purchases or increased visibility.

BILKUL SIMPLY

A discount is not necessarily money thrown away.

For the customer, it means paying less.
For the business, it can be a strategy to sell more.

Behind every “20% OFF” may be a carefully calculated business decision.

That is the business behind discounts and promotional offers.

Note: We seek Sponsors for this column. Please connect with us at editorbilkul@gmail.com