Sweet Tooth

Introduction

One of my customers is interested in buying the candies from my company which is Sweet Tooth Candy. The candies will be given to the members of a high school Substance Abuse Awareness Club. The club members will distribute the candy to the children who are watching the parade when they will march in a community parade.

Issue

I am a sales representative of my company and my customer has asked me to discount the normal selling price of the candy to be given to the club by 30% but the contribution margin ration of the candy based on the regular price is 40%.

Problem

What are the pros and cons of complying with the customer’s request? That’s mean what are the pros and cons if I follow the demand of the customer. A discount is a reduction of the price of a particular services or products. A discount can either bring great returns or create misconceptions that put your work in danger.

For starters, we should know that customers should never feel comfortable enough to demand a discount. If we accept the customer’s request, we can certainly improve the customer’s loyalty towards my company. By granting the customer the discount that he/she requested, next time when customer wants to make a purchase, customer will hopefully return. It makes the customer feel good and build good relationship with the customer. Customer will definitely spread good things about my company and word of mouth by customer will lead to referral sales. They may repeat purchase and might be one of the loyal customers of our company in the long run. Not only can giving discounts create return business, it can also generate a good reputation of my company because our company’s candy will be distributed to the children by the Substance Abuse Awareness Club.

In other way, the disadvantages of accepting this request is our company will set up a harmful precedent. Precedent is an earlier action that is regarded as an example or guide to be considered in subsequent similar circumstances which means that the customer will use this example in dealing with next purchase from our company. If we reject next time, the loyalty to our business might prove fleeting.

If we think other way around, we do sales if we follow the demand of the customer and vice versa. Making a discounted sale is better than making no sale at all. My company may make less profit than expected but it is better than making no income. The con of this is when my company sells those candies with discounted price to the customer, company’s profit margin goes down.