← All terms·Buying and negotiation
Reference library · Buying and negotiation
Discount Stacking (Multiplicative Discounting)
Discount stacking is applying several seller discounts (volume, agency, early-booking, loyalty) sequentially to the price remaining after each prior discount, not by adding the percentages together. Multiplying the remaining factors always yields a smaller effective discount than the sum of the individual rates.
Formula
Worked example
A TV campaign has a gross rate card value of EUR 200,000. The seller grants a 12% volume discount, a 15% agency discount, and a 5% early-booking discount. Net = 200,000 x 0.88 x 0.85 x 0.95 = EUR 142,120, an effective discount of 28.94%. Adding the three rates (12+15+5=32%) would suggest EUR 136,000, understating the invoice by EUR 6,120.
How it is used
Buyers use this when a rate negotiation involves multiple discount layers from the same seller, applying each one to the running net figure inside the plan's cost model so the forecast matches the eventual invoice. The recurring mistake is summing the percentages during a fast verbal negotiation because it feels equivalent, then discovering at reconciliation that the actual net is higher than budgeted.
The common mistake
Sum the percentages and the effective discount is overstated; multiply the remaining factors sequentially instead.