The topic discount helps understand different types of discounts applicable, their purpose, and how it is calculated. It is a critical topic in finance.

In layman’s terms, the reduction in the actual price is called the discount. It is when the price of a product or service is lower than the face value. Discount meaning and its application is crucial from a financial point of view. It is the difference between the selling price of an object or service and the market price. Most discounts on items are calculated in terms of percentage. Retail and e-commerce businesses aim to attract customers by providing discounts and offering lower prices for the product.

Discount Formula 

Before understanding the discount formula, it is crucial to know certain terms that help better understand the discount concept.

  • Marked price is the printed price of the article, and the seller or manufacturer decides it without any price deduction
  • The selling price is the actual price used for selling the article or objects
  • The article sold at a reduced price compared to the market price is called a discount

Here is the discount formula-

Discount = Marked Price – Selling Price

Hence, the discount percentage formula is

Rate of Discount = Discount % = Discount/Marked Price x 100

A discount calculator is used to calculate the % discount in terms of value. For example, if there is a 10% discount on an article with a Marked Price of 1000. Applying the discount percentage formula.

10% = Discount/1000 x 100

Discount = 100

Types of Discounts 

The topic is crucial from a financial point of view and in conducting business. Here are some of the common types of discounts-

  1. Cash Discount – This is also known as an early payment discount, and this aims to motivate the customers to make payments early by providing a discount for early birds. This lures the customers by reducing the list price when payment is made within a specific time period.
  2. Trade discount – This discount calculator is only valid for retailers provided by the distributors and not customers. The distributor is responsible for distributing large quantities of products, and the retailers who sell the products are offered discounts. This helps bring the products to the market and make them retail available.
  3. Promotional Discount – This is a strategic type of discount normally offered to attract customers. Everyone loves sales and discounts, and it is provided to promote the increase in sales of a product. These types of strategic discounts are even used in clearance sales. Common examples are Buy 2 Get 1 Free or Flat 50% off.
  4. Seasonal Discount – The discounts are mostly offered during a specific season to increase the purchase when demand is low. For example, a heavy discount is provided on the remaining stock of winter wear during spring and summer. The tactics are even used by travel agencies or hotels, or resorts during low tourist season.

Common Discount Strategies: Examples

There is significant use of discount calculators in various domains of businesses and retail. Most sellers, stores, and even restaurants use various price reductions to attract customers and increase sales. Here are some of the most common types of discounts seen and observed in day to day life.

  1. Buy one get one free is one of the most lucrative ways of selling things. It allows the buyer to buy two items at one rate and is a great promotional tactic. It is used in all types of businesses, including e-commerce, restaurant, retail etc.
  2. Percentage discount like 25% off on X-product or 70% discount on online purchases is quite an effective tactic to increase sales.
  3. Overstock sales are quite common in which the business has a surplus stock of the product. The stocks do not generate income and occupy storage space, and hence it is more like a clearance sale.
  4. Price bundling – The discount meaning here is slightly different as it is not defined as % but in terms of bundles. This is commonly used by service providers like telephone or internet providers where several services are bundled in the same plan.
  5. A wholesale discount is provided to customers or buyers who buy the products in bulk. Wholesalers, distributors or manufacturers mostly provide these.

Discount and Its Applications

  • It is majorly used for increasing the sales of a product
  • Clear the old stock or increase sales of overstock products
  • Attract more customers and buyers
  • Encourage distributors, sellers, and wholesalers
  • Help retail store sell end to end to customers


Discount is of different types, and businesses or stores need to attract customers. Discount meaning is the difference between the market price and the selling price. There are different types of discounts which are widely used for various purposes. It is easy to calculate the % value with the help of a discount calculator and discount formula. The article lists various types of discounts along with some prominent examples.


Frequently Asked Questions

Get answers to the most common queries related to the K-12 Examination Preparation.

What are the two most common types of discount in retail stores?

Answer: The two most common ones in retail stores include the Buy 1 Get 1 free and 50% off (however, the value can g...Read full

What is the main goal of using the discounts?

Answer: The main purpose or goal of providing an item or service at a reduced price compared to the marked price is ...Read full

What is the importance of trade discounts?

Answer: This type of discount is not provided directly to the customers but is provided only to the retailers by the...Read full

What is the difference between the marked price and the selling price?

Answer: The marked price is the actual price of the item the manufacturer provides and is printed on the product. Th...Read full