Discount Calculator

How to calculate a discount and its impact

Sale price = Original price × (1 − Discount % ÷ 100)

Customer savings = Original price − Sale price

Margin after discount % = (Sale price − Cost) ÷ Sale price × 100

Extra units needed % = (Original profit per unit ÷ Discounted profit per unit − 1) × 100

The last formula is the one most people skip. It tells you how much your sales volume must rise just to stand still on gross profit.

Worked example

You sell a jacket for $80. It costs you $40. You are considering a 25% off sale.

Profit per unit halves, from $40 to $20. To earn the same gross profit, you need to sell twice as many jackets:

($40 ÷ $20 − 1) × 100 = 100% more units

If you normally sell 200 jackets a month, the sale must move 400 just to match your usual gross profit. At a 10% discount instead, the sale price is $72, profit is $32, margin is 44.4%, and you need only 25% more units. The relationship is not linear: deeper discounts get disproportionately expensive.

Interpreting your result

Whether a discount is worth it depends on what it achieves beyond the immediate sale:

• Low starting margin = dangerous discounts. On a product with a 30% margin, a 20% discount leaves only 12.5% margin and requires 150% more units to keep gross profit flat. On a 70% margin product, the same discount requires about 40% more.
• Customer acquisition. A discount that brings in first-time buyers who come back can be worth a thin first order. Check that with the customer lifetime value calculator.
• Clearing inventory. For aging or seasonal stock, comparing against the full-price profit is less relevant than comparing against the cost of holding or writing off the goods.
• Ad costs. If the discounted sales come through paid ads, your ad cost per order now comes out of a smaller margin. A product that was profitable at a 3.0 ROAS may not be after the discount.

Discounts and Google Ads

Sales change the math your campaigns run on:

• Your break-even ROAS rises. Dropping from a 50% to a 33.3% margin moves break-even ROAS from 2.0 to 3.0. Use the break-even ROAS calculator with your post-discount margin before setting targets.
• Conversion rate usually rises too, which helps offset the thinner margin. Watch both together rather than reacting to ROAS alone.
• Use Merchant Center promotions or sale price attributes so the discount appears in Shopping ads. A visible sale price can lift click-through rate without changing bids.
• Do not leave ROAS targets unchanged across a big sale. Some stores lower targets to capture volume, others raise them to protect profit; either way it should be a deliberate choice based on the new margin.

Tips for discounting profitably

1. Discount fewer products, not everything. Target slow movers or high-margin items instead of a sitewide cut.
2. Prefer thresholds ("$15 off orders over $100") that raise order value instead of percentage cuts on every item.
3. Set an end date so discounts do not train customers to wait for sales.
4. Measure gross profit, not revenue. A sale that doubles revenue but needs 100% more units can still lose money.