Trade Allowance - Explained
What is a Trade Allowance?
Written by J. Mance Gordon
Updated at April 17th, 2024
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What are Trade Allowances?
A trade allowance is a special type of discount that we give as a producer to our wholesalers or retailers in exchange for them promoting and selling our products. In other words, we want to kind of get the wholesalers and retailers on our side to help promote and move our products. So, we give a discount on our products in order for them to advertise our particular products.
Sometimes, we also provide our retailers with an Advertising Allowance. This is simply a budget for advertising purposes.
Other times with provide them a stocking allowance. This is a kind of discount we give for them to carry a certain amount of our product and for them to display it the way we want to want them to display it.
Lastly, if we just purely want to motivate them to sell our particular product versus maybe the competition or other products that are unrelated to ours, we pay commissions. So that's another form of trade allowance where we actually pay the sales person for each unit that they sell.
All of these are effective ways to fine tune our price and to make sure that we get the sales and the market share that we desire.
Related Topics
- What is the Right Price for a Product?
- Competition-Driven Pricing
- Profit-Oriented Pricing Strategy
- Sales-Oriented Pricing Strategy
- Status Quo Pricing Strategy
- Value-Based Pricing Strategy
- Penetration Pricing Strategy
- Manufacturers Suggested Retail Price (MSRP) Definition
- Markdown
- Price Skimming
- Why Give Discounts?
- Trade Allowances
- Charging for Product Transportation
- Legal Issues with Pricing
- What is Product Dumping?
- What is Price Fixing?
- Why is Price Fixing Harmful?
- What is Price Discrimination?
- Why Pricing Discrimination is Harmful