Following can be the major reasons that a Company gives trade
discounts:
- To increase
sales: The primary reason of giving trade discount is to
rise up the sales volumes, customers get attracted when the vendors
are giving discount products and they buy more quantity from such
vendors.
- Improve customer
relationship: Few organizations find it as strategy to
build strong relations with customers in initial period they give
trade discounts so the customers come to them and over the time
passes they become loyal to vendors.
- To hide true prices
from competitors: The Company shows the prices of products
after different rate of trade discounts for different products it
helps them to hide the original price of products from
competitors.