How does a discount campaign affect profit?
The discount is deducted from the sale price but your unit cost stays the same; so the whole discount comes out of unit profit, and profit falls much faster than the price. Whether a campaign is profitable is determined not by the discount rate but by how much sales increase after the discount.
The formulas used by the calculator, in plain text, are as follows:
- Discounted price = List price × (1 − Discount rate ÷ 100)
- Unit profit = Price − Unit cost
- Required sales multiple = Unit profit without discount ÷ Unit profit with discount
- Highest discount without going into a loss = (List price − Unit cost) ÷ List price × 100
Enter the price and cost on the same basis: both excluding VAT or both including VAT. The unit cost must cover all expenses per sale; if only the purchase price is entered, the highest discount comes out wider than it really is and the required sales increase smaller than it really is.
Example: how much must a 15% discount increase sales?
Consider a coffee maker sold on your own site for ₺3,000. The unit cost, including product, shipping and payment fee, is ₺2,100, and 60 units a month are sold in the non-discount period.
The results of different rates for the same product:
| Discount | Discounted price | Unit profit | Monthly sales for the same profit |
|---|---|---|---|
| %5 | 2.850 ₺ | 750 ₺ | 72 units (+20%) |
| %10 | 2.700 ₺ | 600 ₺ | 90 units (+50%) |
| %15 | 2.550 ₺ | 450 ₺ | 120 units (+100%) |
| %20 | 2.400 ₺ | 300 ₺ | 180 units (+200%) |
| %25 | 2.250 ₺ | 150 ₺ | 360 units (+500%) |
| %30 | 2.100 ₺ | 0 ₺ | Not possible |
Which campaigns can be considered instead of a percentage discount?
For products with thin margins, campaigns that increase the basket value or do not spread the discount to a single product protect profit better than a flat percentage discount. What they all have in common is that the discount is given in return for a larger basket.
- Free shipping above a set amount: Set the threshold slightly above your average basket; find the shipping cost with the shipping cost calculator.
- Discount on the second product: The discount applies only to the additional sale, protecting the profit on the first product.
- Coupon code: It limits the discount to the audience and period you target; its setup is explained in the discount coupon guide.
You can find out in which periods of the year to plan campaigns in the e-commerce campaign calendar article.
What should you check before a campaign?
Before launching a campaign, know three figures: the highest discount you can offer without going into a loss, the number of sales needed to keep the same profit, and whether your stock is enough for that number. The calculator gives you the first two directly.
- Add shipping, the payment fee and the advertising share per sale to the unit cost; a campaign calculated with the product cost alone looks profitable.
- If the required sales increase comes out high, lower the rate or tie the campaign to a basket condition.
- After the campaign ends, compare the actual sales with the calculated target.
To break down your unit cost item by item, use the profit margin calculator; to measure the return of campaign ads, use the ROAS calculator.
Updated: · Calculations are for information only; consult your accountant for official transactions.