Posted in Marketing and Strategy Terms, Total Reads: 945
Definition: Advance Purchase Rate
Advance purchase (or advance selling) refers to trading of goods or services before the actual time of consumption. In highly competitive industries like the service sector, price discrimination is often used as a tool to attract buyers and thwart competitors. Advance purchase rate is the price of a good or a service before its consumption or delivery. Advance purchases are very commonly used in the e-retail market with consumers possessing the option of either paying for goods or services beforehand through their debit, credit cards, net banking or the option of shelling out cash on delivery of the same product or service.
In order to lure consumers, several retailers or service providers often offer certain discounts on advance buying. Several e-retailers and banks have collaborated in this space, where consumers are offered discounts on their purchases if they make advance payment through a specific bank’s debit/credit card or net banking facility.
Advance purchase is not only profitable to consumers at times, it also gives competitive advantage to provider companies. The feature is a plausible profit maximizing method that provides companies a method to avoid demand uncertainty. This helps companies save on high inventory costs even in the absence of monopoly or market power. Firms try to segment and attract customers with more certain demands by determining their willingness to pay and thus, are able to reduce the cost of holding unutilized capacity or excess inventory.