Economic Wisdom to Apply in Your Twenties

Chapter 21

Chapter 3 Section 2

Among today's market promotion methods, the word "discount" is the most eye-catching.Every holiday, shopping malls come in an endless stream of promotional methods, which is dazzling.We are usually busy with work or school, so holidays are not only a good time to visit relatives and friends, but also an excellent time to go shopping in the mall.

Merchants also seem to have formed a tacit understanding of holiday promotions with consumers.Smart merchants are always well versed in the psychology of consumers who are greedy for small and cheap things. Various discounts and promotions have become the most effective marketing methods, such as "buy one get one free", "spend 200 get 100 free", "big sale", "jump price " and other eye-catching advertisements are full of eyeballs.The long and small holidays of the year have become festive days for merchants to promote sales. When there are no holidays, the first, fifth, and tenth anniversary of the store will be celebrated, with the slogan "Thank you for the care of new and old customers", tempting consumers to be generous Unpack.

Young people in their twenties are often the group targeted by merchants for "discount promotions".We are young, we like to join in the fun, and our consumption power is quite limited compared to our unlimited consumption desire.Therefore, the merchants have reached a good "tacit understanding" with us - you are doing a lot of promotions, and we are rushing to buy them like crazy.

However, after enjoying the frenzy of "discounts", when the novelty of "discounts" fades, rational consumers will inevitably have doubts.There are one after another discount advertisements in shopping malls, and the discount patterns are constantly refurbished. Sometimes there are discounts for the whole store, sometimes for some products, sometimes for different floors, sometimes for special counters, discounts for new year and festivals, discounts for festive events, and special discounts for a certain product... It seems that there is no one that does not have a discount when.When did the merchants become so generous and "give up profits" all year round?

Economics tells us that there is no free lunch in the world, and businesses will not do business at a loss.The sensitivity of merchants to profits is like the bloodthirsty nature of flies. Behind every discount is a shrewd calculation.

In shopping malls, merchants attract consumers with a wide variety of products, and then use expensive prices to obtain profits. In order to obtain more trading opportunities, they will give consumers appropriate discounts.Because of these discounts, consumers will feel more comfortable.Gradually, we also accepted this sales model.This is the so-called discount effect.

Further analysis, the cost of the merchant is composed of two parts: fixed cost and variable cost.Fixed cost is relative to variable cost, which refers to the total cost within a certain period of time and within a certain range of business volume, which is not affected by changes in business volume and can remain unchanged, such as plant construction, mechanical equipment, stores, etc. rent etc.In contrast to fixed costs, variable costs refer to costs in which the total amount of costs changes linearly with changes in production or business volume, such as wages for workers.These two make up the total cost required to produce the product, and the average total cost shared by each product is the average total cost.

Under the condition of market economy, product cost is the measure of compensation for production consumption. Enterprises must use product sales revenue to offset various expenditures in the process of product production in order to determine profits.Therefore, as long as the selling price of the commodity is higher than the average total cost, the merchant can make a profit.Merchants use careful calculations so that the discounted price can still be higher than the average total cost.In addition, the increase in sales can even enable them to obtain higher profits than usual.

From the merchant's point of view, it is the merchant's freedom to decide how to price and release products. Discounts are just a means of promotion for merchants and do not infringe on the vital interests of consumers.Therefore, we cannot influence the behavior of merchants. We can only stay awake behind the intensified discounts and be a rational consumer.When merchants blow the horn of "discount" again, please remind yourself before "shopping": stay rational!Don't fall into the "discount" trap again!

Wisdom Trivia: Discounts of all kinds
1. Quantity discount: A discount given by the manufacturer to distributors, retailers or large customers for purchasing large quantities.

2. Cash discount: A price discount for buyers who pay in full on time.

3. Functional discount: It is a discount provided by the manufacturer to trade channel members who perform certain functions, such as sales promotion, storage and accounting records.

4. Seasonal discount: A discount offered by sellers to buyers of goods or services that are not in season.

5. Discounts for online ordering: discounts given to customers who place orders online.

(End of this chapter)