Pricing guide
How Discounts Affect Profit
Calculate how many extra units a discount must sell before it is worth running.
Discounts come directly from contribution
Most variable costs do not fall when price falls. If a $100 product has $60 of variable cost, it contributes $40 before the discount. A 20% discount reduces price to $80 and contribution to $20, cutting profit per unit in half.
Calculate required extra volume
Divide original contribution by discounted contribution. In the example, $40 divided by $20 equals two, so the promotion must sell twice as many units to produce the same total contribution. This excludes extra support, fulfillment pressure and return risk.
Test the purpose of the offer
A promotion can still make sense for customer acquisition, inventory clearance or repeat purchase. Define that purpose before launch, set a minimum acceptable contribution and compare the result with a bundle, gift or shipping offer that may protect price perception.
Test the numbers
Use your own current costs and keep a dated note for every marketplace fee, carrier rule or operating assumption that may change.