Connect ShopifyThe 12-month view
The number that makes discounting scary
Discounts don't cost you the discount. They cost you a share of your margin, and the share is always bigger than the number on the banner. Take an $80 order at 50% margin: you keep $40. Offer 20% off and the customer pays $64, your costs don't move, and you keep $24. The banner said 20%; your margin fell 40%. To make the same profit you now need 67% more orders. That's the arithmetic almost nobody runs before a sale, and it's why so many stores post record revenue in November and worse profit than October.
How it's calculated
We derive your cost per order from AOV and margin, then recompute margin at the discounted price. Break-even volume multiplier = full-price margin per order / discounted margin per order. Everything else follows: expected promo orders x discounted margin, compared against what you'd have made at full price. Example: $80 AOV, 50% margin, 20% off, 500 baseline orders. Full margin $40, discounted margin $24, break-even multiplier 1.67x — you need 67% more volume. Expecting 50% more, you'd sell 750 units for $18,000 of margin versus $20,000 doing nothing. The promo loses $2,000.
The part most stores forget
Discount-acquired customers usually repeat less than full-price customers. They came for the price, so they wait for the next sale — or buy from whoever discounts next. The 12-month view above applies your repeat haircut to the extra customers a promo brings in, and it changes the verdict in both directions. A promo that loses money in the window can be worth running if those buyers genuinely come back, and a promo that looks fine on the day can be a slow leak if they don't. The only way to know which is true for your store is to track discount cohorts separately over time. To see what those repeat differences are worth, run the LTV & CAC payback calculator.
Better levers than a sitewide discount
If the goal is a bigger cart rather than a cheaper one, thresholds and bundles do the job without repricing your catalogue — set the number with the free shipping threshold calculator. If the goal is more revenue from the same traffic, fixing conversion keeps the full margin on every incremental order, which is what makes it compound. Discounts are the fastest lever and the most expensive one; they earn their place when you're clearing inventory, buying trial on a genuine consumable, or matching a competitor in a window you can't sit out.
Frequently asked questions
Compare the volume lift you need against the lift you realistically expect. Break-even lift is your full-price margin per order divided by your discounted margin per order, minus one. If a 20% discount needs 67% more volume and your best promos move 40%, the promo loses money before you account for anything else.
Far more than 20% of profit. Your costs per order don't change, so the entire discount comes out of margin. At a 50% margin, 20% off cuts margin per order by 40%. At a 30% margin, the same discount cuts it by 67%.
Your gross margin is the hard ceiling — at or beyond it, every unit loses money regardless of volume. The practical ceiling is much lower, because you also need the promo to cover fixed costs and to beat what you'd have earned selling at full price.
Usually, yes. Customers acquired on discount tend to repeat less often and to wait for the next promotion when they do, which compresses lifetime value on both frequency and margin. The size of the effect varies enormously by category, so measure your own discount cohorts rather than assuming a rule.
Clearing inventory that's costing you cash or storage. Buying trial on a genuinely consumable product where repeat purchase is the real business. Competitive windows like Black Friday where absence has its own cost. What rarely works is discounting to hit a revenue number, because it borrows margin from a future period at a poor exchange rate.
More free tools
LTV & CAC Payback Calculator
What a customer is really worth, your LTV:CAC ratio, and how many months until ad spend pays back.
Break-Even ROAS Calculator
The exact ROAS where your ads stop losing money — after COGS, shipping, fees, and refunds.
Free Shipping Threshold Calculator
The threshold that lifts AOV without eating your margin.