Discount Break-Even Calculator
How many more units you must sell to earn the same total margin after a discount.
A discount is only free if the extra volume covers it. Most promotions that feel successful on revenue lose money on margin.
- Formula
- Discount % ÷ (Margin % − Discount %) × 100
- Benchmark
- A 20% cut at 50% margin needs 67% more units
Worked example
- Current margin
- 50 %
- Discount
- 20 %
- Result
- 66.7%
- Note
- Extra units needed just to stand still
How to read it
This answers one question: how much extra volume a discount has to generate before it has paid for itself. The defaults — a 20% discount on a 50% margin — return 66.7%, meaning you need to sell two-thirds more units just to make the same gross margin riyals you would have made without the promotion. Work it through on a hundred units at SAR 100 with a SAR 50 cost: SAR 5,000 of margin before, SAR 30 a unit after the discount, so SAR 5,000 now takes 167 units. The discount comes out of margin in full, which is why a cut that sounds small needs an uplift that is not.
Common mistake
Judging the promotion on revenue or on units sold. Both will look good — that is what a discount does — while gross margin riyals, the only figure that pays the rent, has gone backwards. The second and larger error is counting all the extra volume as incremental. Much of it goes to customers who were going to buy anyway at full price, so the uplift you need from genuinely new demand is higher than the number on this page, often far higher on a line that was already selling.
What to do about it
Run this calculation before the promotion, then ask whether the line has ever achieved that uplift in its history. If it has not, change the mechanic rather than the answer: a bundle, a spend threshold or a loyalty offer gives something away without cutting the price of every unit sold. When the discount equals or exceeds the margin, no volume whatsoever makes it work — you are selling at or below cost, and the only honest reason to do it is clearing terminal stock for cash, which is a different decision measured against the markdown you would take later rather than against this break-even.
Questions
Why does a 20% discount need 67% more units?
Because the discount comes entirely out of margin, not out of cost. At a 50% margin, SAR 100 of price carries SAR 50 of margin. Cut the price to SAR 80 and the cost is still SAR 50, so the margin is SAR 30. To rebuild the same total you need 50 ÷ 30 — about 1.67 times the units.
Does this work for buy-one-get-one-free?
Yes, and it is sobering. Giving the second unit away is a 50% discount across the pair, so at a 50% margin the pair makes no gross margin at all and no amount of volume changes that. BOGO only works where the margin is well above the effective discount, or where the second unit is a genuinely cheaper item.
What if the promotion brings in new customers?
Then judge it as acquisition spend rather than as a margin decision, and compare the margin given up against your normal cost of acquiring a customer. That argument is only honest if you can show the customers were actually new — otherwise it is a discount to your existing base with a better name.