How many percent more do you have to sell during a discount?
A discount does not take a slice off the price - it takes a slice off the profit. And that slice is far bigger than it looks.
The calculation assumes the cost price stays the same. If your supplier contributes to the campaign, enter the margin including that support.
Why does -10% off the price mean -33% off the profit?
If your margin is 30% and you give a 10% discount, you do not lose 10% of the profit. A product that used to give 30 € of profit per 100 € of sales now gives 20 € per 90 € of sales. Profit per sale dropped by a third - to make that up you have to sell 50% more units.
Required volume increase % = discount ÷ (margin − discount) × 100
The same logic as a table - pick the row for your margin and see what each discount percentage demands in volume:
| Your margin | -5% | -10% | -15% | -20% | -25% | -30% |
|---|---|---|---|---|---|---|
| 20% margin | +33% | +100% | +300% | ±0 | loss | loss |
| 30% margin | +20% | +50% | +100% | +200% | +500% | ±0 |
| 40% margin | +14% | +33% | +60% | +100% | +167% | +300% |
| 50% margin | +11% | +25% | +43% | +67% | +100% | +150% |
| 60% margin | +9% | +20% | +33% | +50% | +71% | +100% |
±0 means the discount equals the margin - you sell at cost and the profit is zero.
When is a discount still worth it?
- When the supplier covers part of the discount, or you buy the campaign batch in cheaper.
- When you free up slow-moving stock that would otherwise lose value - see also the inventory turnover calculator.
- When the campaign brings in repeat customers whose next purchases are at full price. That is worth measuring, not assuming.
The most expensive discount is the one you did not need to give - for example when the competitor was actually more expensive than you, or their "campaign" was already over. Before cutting your price, look at what is really happening in the market.
Before you cut your price - see what your competitors are doing.
Look360 shows the price competitors really sell the same goods at, and when they change it. That way you know whether a discount is needed at all.