Trade Allowances

The video tutorial discusses the complexities of setting a product price and introduces trade allowances as a strategy to fine-tune pricing. Trade allowances are special discounts given to wholesalers or retailers to promote and sell products. The video covers different types of trade allowances, including advertising allowances, stocking allowances, and commissions, each serving a unique purpose in enhancing product visibility and sales. These strategies help achieve desired sales and market share.

What is the primary purpose of setting a base price for a product?

• To ensure maximum profit

• To establish a starting point for price adjustments

• To undercut competitors

• To simplify the pricing process

What is a trade allowance?

• A penalty for not meeting sales targets

• A tax benefit for retailers

• A type of discount given to wholesalers or retailers

• A government subsidy for producers

What is the purpose of an advertising allowance?

• To increase the shelf life of a product

• To provide free samples to customers

• To encourage retailers to advertise a product

• To reduce production costs

How does a stocking allowance benefit a producer?

• By lowering transportation costs

• By reducing the cost of goods sold

• By ensuring prominent placement of products in stores

• By increasing the production volume

What is the role of commissions in trade allowances?

• To provide a fixed salary to salespeople

• To reduce the price of the product for consumers

• To motivate salespeople to prioritize selling a specific product

• To penalize salespeople for low sales