Markdown is the method of offering a product at a price that is lower than the normal selling price.  Markdowns are used to lure customers to make immediate purchases. They are usually a large reduction in the normal price of the prduct.

There are different type of markdowns.  They are implemented to achieve specific objectives.

- Temporary Markdowns:  this is used for a specified period of time.  At the end of the period the price is raised back to the normal rate.

- Permanent Markdown:  This is used to move products that are nearly out of date or at the end of it’s lifecycle.  The markdown continues until the product has been sold out.

- Seasonal Markdowns:  This is usually used to move seasonal items at the end of the season.  At the conclusion of the prime selling season the markdown is offered to get customers to purchase and clear out the seasonal inventory.

An advantage of using markdowns is to lure high level of customer traffic to visit the store or website.  This is also referred to as a loss leader.  The expectation is that customers will purchase other items at regular price to make up for the items purchased at a reduced price.

When using discounts you should research your respective state law.  In the U.S. Many states have an Unfair Sales Act which prohibits the selling of certain products below cost.  The intent of these laws is to protect small businesses from below-cost pricing activities of larger companies. 

These are some states with Unfair Sales Act:

Connecticut

Florida
Minnesota
Idaho
Ohio
Oklahoma
Pennsyvania
Virginia