Why discounts cost more than they look
A discount comes straight out of your profit per unit, not your price. On a product with a 40% margin, a 10% discount cuts the profit on each sale by a quarter, so you need about a third more sales just to stay even.
Units needed = Current units × Old profit per unit ÷ New profit per unit
Example
A $100 product costs $60, so each sale earns $40. At 10% off, each sale earns $30. To keep the $40,000 of gross profit from 1,000 units, you need to sell 1,334 units, a 33% increase. Raise the price 10% instead and you'd earn $50 a sale, so you could lose up to 200 units (20%) and still make the same profit.
Making the call
- Low-margin products are the most sensitive. Small discounts require large volume increases.
- Price increases often lose fewer customers than owners fear, especially when they come with clear communication.
- See how pricing affects margin in the markup and margin calculator.
Frequently asked questions
Does this include fixed costs?
No. It compares gross profit (price minus variable cost). Fixed costs usually don't change with a price change, so they don't affect the comparison.
What if the discount brings in new long-term customers?
Then the real payoff can exceed what this calculator shows. Treat the result as the short-term hurdle the promotion must clear.
What counts as variable cost?
Anything you spend per unit sold: materials, packaging, shipping, card processing fees and commissions.