Calculate how much extra volume you need to sell to break even after a discount — most stores underestimate it.
Regular selling price
Margin at regular price (revenue minus COGS)
Discount you're planning to offer
Units sold per month at regular price
Volume Needed = (Original Margin$ ÷ Discounted Margin$) − 1 × 100In plain English
Volume increase needed = (original margin / discounted margin - 1) × 100.
Worked Example
$100 price, 50% margin, 20% discount. New price $80. COGS $50. New margin $30 vs original $50. Need: ($50/$30 − 1) = 67% more volume.
The math is brutal: a 20% discount on a 50% margin product requires 67% more sales volume to break even. Most promotions don't come close to generating that lift, meaning most discounts are margin-destructive.
Better alternatives to blanket discounts: limited-time bundles (add value without reducing unit price), loyalty-exclusive early access, tiered quantity discounts ("buy 2, get 10% off"), and gift-with-purchase (perceived value is high, COGS is low).
| Discount | 30% Margin | 50% Margin | 70% Margin | Status |
|---|---|---|---|---|
10% off | +50% | +25% | +17% | |
20% off | +200% | +67% | +40% | |
30% off | Below cost | +150% | +75% | |
50% off | Below cost | Below cost | +250% |
Source: Internal calculation from standard contribution margin formula
Offering large discounts without calculating the required volume lift
Most retailers run 20–30% off sales without ever calculating that they need 67–300% more sales to break even. Always do this math before launching a promotion.
Using discounts to acquire customers who only buy on sale
Discount-seekers have lower lifetime value — they only return when you run another sale. Segment customers acquired through promotions vs organic and track their LTV separately.
Not including ad costs for the promotion
Promotional periods require extra ad spend to drive traffic. Add the incremental ad cost to get a complete picture of promotion profitability.