Price Differential Policy : This policy is useful in providing incentive to customers, to meet competitive pressures and to achieve the financial objectives of the firm.The differentials which lead to price reduction are as follows : (a) Discount : These are the reduction in the quoted price. The reduction in the quoted price is advantageous for the buyer as they will have to pay less price. Discount count be either in the form of trade discount and cash discount.
(b) Rebate : It is also a deduction from the quoted price due to loss of some value satisfaction to the buyers. The rate of rebate varies from customer to customer depending upon the loss of value of satisfaction.
(c) Premium : discount and rebate lead to reduction in the price differential where as premium leads to higher prices on increased prices in price differentials. Thus, in the case of premiums the actual price paid will be more than the cuted price. A customer to pay premium to avail the warranties, special after sales service and extra durability.
