Discount Impact on Margin
Before you run that promotion: how much more do you have to sell just to end up where you started?
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How it works
A discount comes entirely out of profit. Cut the price 10% on a product carrying a 30% margin and you have surrendered a third of the profit on every unit — the cost has not moved, so the whole reduction lands on the margin.
The number that decides whether a promotion is worth running is the break-even volume increase. At a 30% margin, a 10% discount needs 50% more units sold simply to make the same profit. The lower the starting margin, the more brutal the arithmetic becomes.
Volume needed = margin ÷ (margin − discount) − 1
- Starting margin — gross margin percentage before the discount
- New margin — what remains once the discount is applied to the price
- Break-even volume — the extra units needed to hold gross profit flat
Worked example
1,000 units at 500 each, costing 350, with a 10% discount
Inputs
Results
Selling 1,500 units at the discounted price earns exactly what 1,000 units earned before — and costs 50% more in stock, handling and support.
Frequently asked questions
Why does a small discount hurt so much?
Because it is deducted from profit, not from revenue. On a 30% margin, a 10% price cut is a 33% profit cut per unit. The discount percentage and the profit percentage are measured against different bases, which is why the damage always exceeds intuition.
Is the extra volume ever worth it?
Sometimes — to clear ageing stock, win a customer with a high lifetime value, or fill capacity you are paying for anyway. What it should never be is a default response to slow sales, because the volume needed is usually unattainable.
What if my margin is below the discount?
Then no volume increase can recover it: you lose more on every additional unit sold. The calculator reports this rather than showing an impossible target.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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