Discount Campaign Margin Case Example

The problem

Discounts boost sales volume but reduce profit per sale. The campaign is only worth it if the extra volume more than offsets the lost margin.

A small business example

Normal: 200 sales/month at $50 each, cost $35 → profit per sale $15 → monthly profit $3,000.

Promotion: 20% off → price $40, cost still $35 → profit per sale $5.

To match $3,000 profit at $5/sale, the business now needs 600 sales — 3× the normal volume.

What the numbers mean

A 20% discount on a 30% margin item requires 3× the volume just to break even on profit, not just sales.

Practical interpretation

Most promotions don't triple volume. Most promotions therefore reduce profit even when sales clearly rise.

Action points

• Calculate break-even volume for every promotion in advance.
• Measure post-campaign profit, not revenue.
• Limit discount depth — 10% on a thin margin is already aggressive.
• Use bundles or added value instead of straight price cuts when possible.