A 10% discount can need 33% more sales just to stand still

In short: a 10% price cut does not cost you 10% of your profit, it cuts the margin you keep on every single unit. At a 40% gross margin that discount needs roughly a third more volume before you earn the same money you earned last week. Run the number before the sale, not after it.

Most owners treat a discount as a marketing decision. It is an arithmetic one. The sticker comes off the top line, but the cost of goods does not move at all, so the entire cut lands on the thin slice you actually keep.

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Take a product that sells for 100 and costs you 60. You keep 40. Knock 10% off the price and you now sell at 90 against the same 60 cost, so you keep 30. That is a 25% cut to your gross profit per unit, from a discount that looked like 10%. To bank the same total profit you have to move 33% more units.

The table every promotion should start with

The thinner your margin, the more brutal the trade. Here is what a flat 10% discount demands in extra unit sales, just to break even on gross profit.

A grocery or hardware shop running on a 20% margin has to double its sales to survive a 10% discount. Almost no promotion doubles anything. A service business at 60% can afford the same offer with a 20% lift, which is realistic. Same discount, completely different decision, and the only variable is a number sitting in your own books. If you are not sure what yours is, the definition of gross margin is simple enough to calculate from one month of invoices.

The volume rarely shows up

The break-even lift assumes new buyers. In practice most of the extra volume comes from people who were going to buy anyway, at full price, next week. You did not win a sale. You moved one forward and paid yourself less for it.

That is why discounts feel busy and land badly. The till is loud, the bank balance is quiet, and a month later the same gap appears between the profit on your report and the money in the account. It is the same mismatch that turns a shop that is profitable on paper into one that cannot cover payroll.

There is a second leak. Discounts are usually paid for with card transactions, and the fee is charged on the discounted price, which sounds like a saving until you notice the fee is a fixed percentage of a now smaller margin. Shops that have never audited their card processing costs are often giving away two margins at once.

Cheaper ways to move the same stock

You can create urgency without repricing your whole catalogue. Each of these protects the per-unit margin that a straight discount destroys.

• Bundle instead of cutting. Two items at a combined price keeps the headline price intact and raises the basket.
• Discount the slow mover only. Tie it to a full-price item so the average margin on the transaction holds.
• Add value, not subtraction. Free installation, an extra month, a small accessory. The cost to you is usually well under 10% of revenue.
• Make it conditional. A code for buyers who return within 30 days costs nothing on the first sale and buys a second one.
• Raise the threshold. Free delivery over a set spend lifts order value rather than shrinking it.

The last one works because it targets the customers you already have. Selling again to an existing buyer is far cheaper than acquiring a stranger, which is why the arithmetic of keeping the customers you already won beats almost any discount campaign.

When a real discount is the right call

Sometimes cutting price is correct. Clearing seasonal stock before it becomes dead weight is a cash decision, not a profit one, and getting 70 today for something that will fetch nothing in March is a win. Launch pricing on a new line, where you are buying reviews and habit rather than margin, is defensible for a fixed window.

What is not defensible is a recurring monthly sale. Customers learn the cycle and stop buying between sales, so your full price quietly becomes a fiction and your average margin settles at the discounted level permanently.

Do this before your next promotion

Open last month’s numbers and calculate one figure: revenue minus cost of goods, divided by revenue. That is your gross margin. Find the row it matches in the table above, read the extra volume the discount demands, and ask whether your shop has ever hit that number in a single week. If the answer is no, the promotion is not a growth plan, it is a donation. Pick a bundle instead and keep the margin.