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Profitability

Discount Margin Calculator

Calculate how much your sales need to increase to maintain profit when offering discounts. Understand the real impact of promotions on your bottom line.

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0%50%100%
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0%50%100%
Original Margin60.0%
New Margin After Discount40.0%
Sales Volume Increase Needed
50.0%

What this means: To maintain the same total profit when offering a 20% discount with 40% COGS, you need to sell 50.0% more units. Your margin per unit drops from 60.0% to 40.0%, so higher volume is required to compensate.

How the Calculator Works

1

Calculate Original Margin

Your original profit margin = 100% - COGS%. For example, if your COGS is 40%, your margin is 60%.

2

Calculate New Margin After Discount

When you offer a discount, your new selling price = 100% - Discount%. Your new margin = New Price - COGS. A 20% discount on an item with 40% COGS means you sell at 80% price, leaving 40% margin.

3

Determine Volume Increase Needed

To maintain the same total profit with lower per-unit margin, calculate: (Original Margin / New Margin - 1) x 100. With 60% original margin and 40% new margin, you need (60/40-1) x 100 = 50% more sales.

4

Make Informed Decisions

Use this data to decide if the discount makes sense. Can you realistically achieve the required volume increase? Will the discount drive enough new customers or larger orders to hit the target?

Why This Matters

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Protect Your Profit Margins

Discounts can feel like "free" marketing, but they directly cut into your bottom line. A 20% discount doesn't mean 20% less profit - it often means 40-50% less profit per sale.

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Set Realistic Growth Targets

Before running a promotion, know exactly how much more you need to sell. If you need a 67% sales increase to break even on a 25% discount, is that realistic?

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Optimize Discount Strategy

Not all discounts are created equal. A 10% discount with 30% COGS requires 14% more volume. A 30% discount requires 75% more volume. Find the sweet spot.

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Understand True Cost of Acquisition

When you discount to acquire new customers, factor in the margin erosion. Your effective CAC is higher than you think when discounts are involved.

When to Use This Calculator

Planning Seasonal Sales & Promotions

Before launching Black Friday, flash sales, or clearance events, calculate how much volume you need to hit to maintain profitability.

Evaluating Email Campaign Discounts

When planning promotional email campaigns, test different discount levels. A 15% discount might require 21% more sales while 25% requires 50% more.

Wholesale & Bulk Order Pricing

When offering volume discounts or wholesale pricing, ensure the lower margin is offset by higher order quantities.

Influencer & Affiliate Discount Codes

Before giving influencers 20% discount codes, calculate if their audience size and conversion rate can drive enough volume.

Customer Retention & Winback Offers

When creating winback campaigns for lapsed customers, balance discount depth with expected response rate.

Related Tools

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Contribution Margin Calculator

Calculate your true profit margin after all variable costs

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LTV Calculator

Calculate customer lifetime value to optimize acquisition spend

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Churn Calculator

Measure and understand your customer churn rate

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