Discounts in Select Plus

Select Plus eliminates purchase forecasting in Select, instead basing prices on actual purchase volumes.

This example compares discounts for the same purchases under Select and Select Plus agreements. For Select Plus (solid line), a customer who does not have a current Select or Enterprise Agreement initiates a new Select Plus agreement in 2009 with a purchase that earns 5,000 points, putting it at a level B discount. A subsequent purchase of 23,000 points drops the price to the Level D discount level, which carries over to 2010. That year’s purchases, only 1,000 points, are not sufficient to sustain the Level D discount, so in 2011, the discount is reduced one level, to level C, raising the customer’s net price. A purchase of 28,000 points early in 2011 brings the discount back to Level D for the remainder of the year and for the following year (not shown).

With a standard Select agreement (dashed line), the customer forecasts 75,000 points over a three-year agreement, or 25,000 points each year, earning the Level D discount. Although the first purchase is only 5,000 points, it still receives the level D discount. The additional 23,000 points purchased in 2009 more than meets the forecast for that year, establishing Level D as the discount level for the following year, 2010. However, the small purchase in 2010 brings the total number of points over two years to only 29,000 points, well short of the 50,000 points over two years that are required to remain on track for the Level D discount. Thus, the customer jumps to Level C pricing for the third and final year of the contract. The 28,000 point purchase during 2011 has no impact on the customer’s discount before the agreement ends.