What does that discount
actually cost you?
A discount comes straight out of gross profit, not out of revenue. This shows how much it removes per order, how many extra orders you need just to stand still, and the return the promotion has to clear.
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Your numbers
Start with the illustrative inputs below, then replace them with your own.
This is a gross-margin model. It excludes fixed costs, shipping, payment fees and returns unless you have already included them in your margin figure. It also assumes the discount applies to the whole order and that your unit cost does not change with volume.
What the discount does
Gross profit per order — before
Gross profit per order — after
Profit retained
Extra orders needed to break even
Break-even ROAS while discounting
Extra orders are expressed against your normal volume: +100% means you need twice as many orders to make the same gross profit.
The discount ladder
The same order value and margin at every discount level, so you can see where the promotion stops being worth running.
| Discount | Customer pays | Gross profit / order | Profit retained | Extra orders to break even |
|---|
How to read your results
A discount is not a percentage of revenue
20% off a €80 order removes €16, and that €16 comes entirely out of gross profit. At a 60% margin you had €48 of profit; now you have €32. You gave away a third of the profit for a fifth off the price.
Volume has to do the work
To make the same gross profit you need the extra orders shown above. If the promotion does not produce them, it was a transfer from your margin to customers who would very likely have bought anyway.
Below your margin, nothing helps
Once the discount reaches your gross margin, each order makes nothing, and past it each order loses money. No amount of extra volume fixes that — more orders simply lose more.
Put your plan into practice
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