When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution,the compensation,usually in the form of a discount from base price,is called which of the following?
A) a functional (or trade)discount
B) a rebate or refund
C) a promotional allowance
D) a cumulative or noncumulative quantity discount

Question

Quizplus · Accepted Answer

A functional discount is specifically designed to compensate intermediaries for performing their regular distribution tasks, such as ordering, inventory management, and shipping. This discount is usually a percentage deducted from the list price or base price of the product. It reflects the intermediary's contribution to the channel by performing routine functions that add value to the product. Therefore, Option A is the best choice.

B) A rebate or refund is a type of pricing tactic in which the amount paid by the customer is partially or fully returned to them after the purchase. This is not compensation for intermediaries.

C) A promotional allowance is provided by manufacturers to intermediaries for undertaking promotional activities such as advertising or providing shelf space for their products. This is not compensation for regular services provided by intermediaries.

D) Cumulative and noncumulative quantity discounts are given to customers who buy large quantities of goods or services. They are not related to compensating intermediaries for their services.

When a Channel Intermediary Is Compensated for the Ordinary Services