What a discount really costs you
A 20% discount does not need 20% more sales. On a typical margin it needs far more than that.
Discounts come entirely out of margin, and margin is a fraction of price. That is why the required uplift is so much larger than the discount.
Step-by-step
- Enter your normal price and cost.
- Enter the discount.
- Read the extra volume needed to make the same profit.
The arithmetic
Sell at £100 with £60 cost: margin £40. Discount 20% to £80 and margin falls to £20 — halved. You now need twice the volume to make the same profit.
A 20% discount on a 40% margin requires 100% more sales. Promotions are routinely run without anyone checking this, and routinely reduce profit while increasing activity.
Thinner margins make it worse
At a 25% margin, a 10% discount needs 67% more volume. At 60%, the same discount needs 20% more. The lower your margin, the less discounting you can afford — which is precisely the opposite of what struggling businesses tend to do.
What discounting also costs
- Customers who would have paid full price get the discount too.
- Purchases are brought forward rather than added, so next month is weaker.
- Expectations shift. Regular discounting teaches customers to wait.
- Positioning erodes, and it is difficult to recover.
Better options
Adding value costs less than cutting price: a bundle, free delivery, an extended guarantee, a bonus item. Each preserves the price point while improving the offer, and none teaches customers that your prices are negotiable.
Frequently asked questions
How much more do I need to sell to cover a 20% discount?
On a 40% margin, twice as much. The discount comes out of margin, so cutting price 20% halves the profit per sale.
Why is discounting worse on low margins?
Because the discount consumes a larger share of a smaller margin. At 25% margin a 10% discount needs 67% more volume; at 60% margin the same discount needs 20%.
What can I do instead of discounting?
Add value — bundles, free delivery, extended guarantees. These improve the offer without cutting margin or teaching customers to wait for a sale.
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