Tool
Discount Profit Calculator
A discount comes out of margin rather than revenue. This works out how many more orders the promo has to produce before it earns that money back.
A discount comes out of margin rather than revenue. This works out how many more orders the promo has to produce before it earns that money back.
A twenty percent code on a $72 order is $14.40. If that order leaves $35 behind after product cost, shipping, processing, and fulfillment, the code took 40 percent of the profit and none of the cost.
That is the trade every promo makes. The discount is certain and the extra volume is a forecast, and the two rarely meet before the email goes out.
Put your order economics and the code you are planning below. The calculator returns the volume lift the promo has to produce before it earns the discount back, what one order contributes while it runs, and the discount level where margin reaches zero.
Everything runs in your browser. Nothing you type is stored or sent anywhere.
Enter your average order value to start.
We open the accounts, work out what your promos have earned against what they gave away, and send you the findings.
Divide contribution margin at full price by contribution margin during the promo, then subtract one. On a $72 order that leaves $35.36 behind, a 20 percent code drops contribution to $21.38, so the promo needs 65 percent more orders to end the period level. The figure climbs steeply as the discount approaches your margin rate, because the divisor shrinks while the numerator holds still.
It costs 20 percent of price and a much larger share of profit. Product cost, shipping, and fulfillment do not fall when you discount, so the whole reduction comes out of what was left over. On a $72 order keeping $35.36, a 20 percent code takes $14.40, which is 40 percent of the contribution. Payment processing is the one cost that scales down with the lower price, and it is worth about 42 cents here.
The ceiling is your contribution margin rate, and it sits lower than most owners expect. A $72 order carrying $34.55 of variable cost reaches zero contribution at about 51 percent off. That is the point where the order ships for nothing, rather than the point where discounting stops being sensible. Anything close to it needs volume that no promotion reliably produces.
A sitewide banner is redeemed by nearly every order, including the ones already on their way. A code sent to one segment reaches far fewer, so the average order during the window keeps more margin. The same 20 percent code that needs 65 percent more volume at full redemption needs 19 percent at 40 percent redemption. Narrowing who receives the code moves the math more than trimming the discount by a few points.