Discount Impact Calculator
A 20% discount does not cost you 20%. It costs you a share of your margin, and the honest question is how much extra volume it has to generate just to leave you where you started.
Result
$0.00
Where the money goes
Saving keeps your figures on this device only — nothing is sent anywhere.
Why a 20% discount is not a 20% cost
The discount comes out of margin, not out of price, and margin is the smaller number. Take the defaults: a $40 product costing $26 all-in earns $14 of contribution. Discount it 20% and you sell at $32 — the cost has not moved, so contribution falls to $6.
That is a 57% cut in what each sale contributes, produced by a 20% cut in price. This ratio is the whole subject. The thinner your margin, the more violent the effect: on a 25% margin product, a 20% discount removes most of the profit, and on a 15% margin product it removes all of it and starts eating into cost recovery.
The break-even lift
So the real question is never "how much will this discount cost me" — it is how many more units do I have to sell to end up no worse off. The arithmetic:
Break-even lift % = (Old contribution ÷ New contribution − 1) × 100
With the defaults that is $14 ÷ $6, or 2.33 — a required lift of about 133%. You must sell well over twice as many units during the promotion simply to match the profit you would have made without it. If your realistic lift is 35%, the sale loses money even though revenue goes up and the month looks busy.
Why revenue going up is not evidence the sale worked
This is the trap the annual figure above is built to expose. Discounts reliably increase units and revenue. Neither is what you bank. A promotion can raise revenue 25%, feel like a clear success, and reduce profit — and because most sellers judge a sale by how busy it was, the same promotion gets repeated every year.
When a discount is genuinely worth it
There are sound reasons to sell below your normal price, and they are not about the margin on that order:
- Clearing stock that is costing you money to hold — dead inventory in a warehouse has a storage cost and ties up cash you cannot reorder with. Recovering some of it beats holding it.
- Acquiring a customer who will buy again — a first-order loss is an acceptable acquisition cost if repeat purchase actually happens. Check that against your own data rather than hoping.
- Raising average order value instead of cutting price — a bundle or a threshold offer ("free shipping over $50") lifts the order without discounting the item. This is nearly always the better instrument, and it is why the bundle calculator exists.
What is not a sound reason: a competitor discounted, so you did too. That is a race in which the winner earns least.
Questions
How do I calculate the break-even sales lift for a discount?
Divide your normal contribution per unit by the discounted contribution per unit, subtract one, and read it as a percentage. Contribution is price minus every variable cost. If a $40 item with $26 of variable cost is discounted to $32, contribution goes from $14 to $6, so you need $14 ÷ $6 − 1 = about a 133% lift in units to stand still.
Is it better to discount or to add value?
Adding value almost always protects margin better, because a discount cuts the price on every single unit sold while a bundle or a free-shipping threshold raises the order value instead. The exception is genuinely stale stock, where recovering cash from inventory that is costing you storage beats holding it.
Does this apply to Black Friday?
Yes, and the annual view above is the reason to run it before committing. Deep seasonal discounting is a customer-acquisition expense, and it is only profitable if those customers come back at full price. Set the months field to how long the promotion really runs — most sellers discount for considerably longer than they intend to.
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