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Discount Impact Calculator

Updated .

A 20% discount doesn't cost you 20% — because it comes off price but your costs don't move, it's taken entirely out of margin. This calculator shows the share of profit a discount gives away and the extra sales volume you'd need to break even on it.

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    Send me the promo maths

    Useful to have in writing before the next sale planning meeting.

    How this is calculated

    A discount comes off your price, but your costs do not move. That means the discount is taken entirely out of margin, which is a much smaller number than price — so the percentage of margin lost is always larger than the percentage discounted.

    The break-even volume multiple is your original margin divided by your discounted margin. When margins are thin, this number rises steeply: a store keeping 45% margin needs about 80% more volume to justify 20% off, while a store keeping 25% margin would need to more than double sales.

    Two effects this does not model, both of which make discounts look worse than shown: sales you would have made at full price but now make at a discount, and the anchoring effect on customers who learn to wait for the next promotion.

    Discounted price = price × (1 − discount%) Margin before = price − variable cost Margin after = discounted price − variable cost Volume multiple = margin before ÷ margin after Extra volume % = (volume multiple − 1) × 100

    Questions merchants ask

    Why does a 20% discount cost far more than 20% of my profit?

    Because the discount comes off revenue but is absorbed entirely by margin. If you sell at $60 with $33 of cost, your margin is $27. Taking $12 off the price leaves $15 — you have given away 44% of your profit to offer 20% off.

    Is free shipping cheaper than a percentage discount?

    Often yes, because its cost is capped at your actual shipping expense while a percentage discount scales with order value. Compare the two directly: enter your shipping cost as an equivalent discount amount and see which takes less margin.

    What discount can I actually afford?

    Work backwards from the volume lift you realistically expect. If past promotions lifted volume by 40%, find the discount whose break-even multiple is at or below 1.4x. Anything deeper is buying revenue with profit.

    Do discounts still make sense if they lose money?

    Sometimes — clearing dead stock, recovering cash, or acquiring customers you expect to buy again. Those are deliberate investments, not profitable promotions, and they should be budgeted and measured as such.

    Estimates only. Enter your own processing rates and costs — nothing here is pulled from a platform price list, so it stays accurate as fees change.