Discount cost calculator

A discount pays off only if it brings enough extra orders to replace the margin you give away. Take your costs per order from the discounted price to get the new margin, then divide the old margin by the new one. With a 60% margin, 20% off needs 50% more orders just to earn the same.

More orders needed: +50%
Margin per order now: $30
Margin per order with the discount: $20

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The formula

Margin now = order value − costs per order
Margin with the discount = order value × (1 − discount) − costs per order
Orders needed = margin now ÷ margin with the discount
More orders needed = orders needed − 1

Rates are shares between 0 and 1: 30% is 0.3.

Worked example

An order is worth $50 and costs $20 in product, shipping, fees and packaging.

You're thinking of 20% off.

The margin falls from $30 to $20, so you need 1.5 times the orders, 50% more, just to earn the same. At 30% off you'd need twice as many.

Questions

Does a discount ever pay?

Yes, when it brings new buyers who come back at full price, clears stock you'd otherwise write off, or lifts orders by more than this shows. Measure the extra orders against a period without the discount.

Should costs per order include ads?

Leave ad spend out if the discount runs without extra ads. If you pay for ads to promote the sale, add the ad spend per order to costs, which raises the bar.

What does a dash mean?

The discount is so deep that each order loses money before ads, so no number of extra orders can make up for it.

Should I enter order value with or without sales tax or VAT?

Use order value after the tax is taken out, because it isn't yours to keep. Counting it makes every ROAS look better than it is. Keep product cost, fees and ad spend on the same basis.

The full guide

Discount Cost Calculator: How Many Extra Orders a Sale NeedsA discount comes straight out of margin. Calculate how many extra orders a sale needs to break even, including ad costs, returns and buyers who'd pay full price anyway.