In the world of retail, promotions are a common strategy to attract customers and boost sales. Discounts, whether offered as a fixed amount or a percentage, play a crucial role in influencing purchasing decisions. This article explores the concepts of absolute and relative discounts, using a real-world scenario to ill...
Absolute Discounts
An absolute discount is a fixed amount of money deducted from the original price of a product. For instance, "Buy One Get One Free" offers and "10% off" deals fall under this category. In our scenario, Annie's Attic offers an absolute discount of $10.00 on any purchase.
Calculating Absolute Discounts
Calculating absolute discounts is straightforward: you simply subtract the discount amount from the original price.
Promotional Price = Original Price - Discount Amount
Relative Discounts
A relative discount, also known as a percentage discount, expresses the reduction in price as a proportion of the original price. For example, "30% off" and "20% off" promotions represent relative discounts. In our case, Betty's Breakables offers a 35% relative discount on all items.
Calculating Relative Discounts
Calculating relative discounts involves multiplying the original price by the discount percentage. The result is then subtracted from the original price to determine the promotional price.
Promotional Price = Original Price - (Original Price * Discount Percentage)
Applying the Concepts to Our Scenario
Let's apply these concepts to the two stores in our example.
Annie's Attic
Annie's Attic offers a $10.00 discount on a music box priced at $60.00.
Promotional Price (Music Box) = $60.00 - $10.00 = $50.00
For a faux Ming vase priced at $30.00, the promotional price is:
Promotional Price (Faux Ming Vase) = $30.00 - $10.00 = $20.00
Betty's Breakables
Betty's Breakables offers a 35% discount on a music box priced at $60.00.
Discount Amount = $60.00 * 0.35 = $21.00
Promotional Price (Music Box) = $60.00 - $21.00 = $39.00
For a faux Ming vase priced at $30.00, the promotional price is:
Discount Amount = $30.00 * 0.35 = $10.50
Promotional Price (Faux Ming Vase) = $30.00 - $10.50 = $19.50
Comparing Discounts
It's evident that the same discount amount can lead to different promotional prices depending on the original price. For instance, both stores offer a discount on the music box, but the promotional price at Betty's Breakables is significantly lower ($39.00) compared to Annie's Attic ($50.00). This difference arises from the fact that Betty's Breakables offers a relative discount (35%) while Annie's Attic offers an absolute discount ($10.00).
Advice for Your Friend
In the case of your friend wanting to buy a crystal candlestick, you cannot provide concrete advice without knowing the original price at both stores. If you recall that the price at Annie's Attic is lower than the price at Betty's Breakables, then it would be better to suggest that your friend buys it from Annie's Attic. However, if you recall that the price at Betty's Breakables is lower than the price at Annie's Attic, then it would be better to suggest that your friend buys it from Betty's Breakables. But if you cannot recall the original price, it's essential to inform your friend about the different discount structures and encourage them to visit both stores to compare the final promotional prices. This will enable them to make an informed purchase decision.
Conclusion
Understanding the differences between absolute and relative discounts empowers consumers to make more informed buying decisions. While absolute discounts offer a fixed monetary reduction, relative discounts express the reduction as a percentage of the original price. The best choice often depends on the specific product and the original price. By comparing prices across different stores and considering both absolute and relative discounts, consumers can find the best deals and maximize their savings.