Marketing Blog & Tools

What discount can I safely offer without hurting profit, given my margin?

Short answer:

  • A discount is “safe” when the extra conversion it creates offsets the lower price.

  • Break-even rule: (1 − discount) × (1 + lift) = 1 → Required lift = 1/(1 − discount) − 1.

  • Guardrails: never discount beyond your margin (or you lose money per order), and prefer bundles/bonuses if lift is uncertain.

Why this matters in El Paso

Shoppers here compare prices in English and Spanish, and many see offers in both languages across Google, Maps, and social. A quick check on profit per visit helps you avoid “race-to-the-bottom” promos. If a discount won’t realistically create the needed lift, switch to smarter offers (bundles, add-ons, financing, ES/EN messaging) that protect margin and still move volume.

How the calculator works (101)

Inputs:

  • AOV ($) – average order value.

  • Gross Margin (%) – profit after variable costs.

  • Discount (%) – planned price reduction.

  • Baseline Conversion Rate (%) – your current conversion.

  • Lift in Conversion (%) – expected relative increase (e.g., +10%).

  • Monthly Sessions (optional) – to estimate total $ impact.

Logic (per visit):
Δ = AOV × (1 − disc) × CR_new × margin − AOV × CR_old × margin,
where CR_new = CR_old × (1 + lift).
Break-even when Δ = 0 → (1 − disc) × (1 + lift) = 1.

👉 Notice margin cancels in the break-even math (it still matters for how much you make, but not for the lift required). However, discount must never exceed your margin or you’ll have negative profit per order.

Quick break-even cheat sheet (no other changes)

Discount Required lift to break even
10% +11.1%
15% +17.6%
20% +25.0%
25% +33.3%
30% +42.9%

If you can’t realistically get that lift, the discount isn’t “safe.”

Apply it to your business (step-by-step)

  1. Enter reality: AOV, margin, baseline CR.

  2. Test a discount (e.g., 10–20%) and look at “Lift Needed to Break Even.”

  3. Compare to your real lift from past promos (or run a small A/B).

  4. If the required lift is higher than you can achieve, don’t discount—use:

    • Bundles / value adds (keep price, add items/services).

    • Tiered offers (small discount with minimum spend).

    • Financing or pay-over-time (raises conversion without slashing price).

    • Bilingual landing and ads (EN/ES) to raise conversion instead of cutting price.

  5. Re-run the calc after each test; keep what produces positive Δ per visit.

One-week action plan

Day 1: Pull AOV, margin, baseline CR (last 30–90 days).
Day 2: Model 10%, 15%, 20% discounts; note required lift.
Day 3: Pick the lowest discount that your traffic can realistically lift to break even (or better).
Day 4–5: Ship a tiered offer or bundle + EN/ES page and ad copy.
Day 6: Track CR and profit per visit; compare to the calculator.
Day 7: Keep the winner; retire anything that doesn’t hit positive Δ.

FAQ

How do I know the biggest discount I can offer?
🔹 Never more than your gross margin per order, and only if you can achieve the required lift from the table/calculator.

Does margin affect the break-even lift?
🔹 The break-even lift formula cancels margin, but margin still affects how much you make and the maximum discount you can physically offer.

What if I don’t know my lift?
🔹 A/B test a small audience for 3–7 days; measure CR change, then scale only if Δ per visit is positive.

Are bundles better than discounts?
🔹 Often yes—bundles keep price integrity, raise AOV, and can lift conversion without slashing margin.

Should I always advertise discounts in Spanish too?
🔹 If you serve Spanish-first buyers, yes. Matching ad language to landing language usually lifts CR, making smaller discounts viable.

What’s a smart starting discount?
🔹 Start at 5–10% with a minimum spend or limited category, and layer a bundle/bonus; only go deeper if data shows a strong, profitable lift.

Use the Discount Profit Impact Calculator

It shows:

  • Δ Profit per Visit (change in profit from the promo)

  • Total Δ Profit (with your monthly sessions)

  • Lift Needed to Break Even (the key decision number)

Subscription / Repeat LTV (Churn Model)

Estimate lifetime value using ARPU, margin, and monthly churn.

LTV–
Expected Tenure (months)–
Rule of Thumb–
Formula: LTV = ARPU × margin ÷ churn. If churn is 0, LTV is undefined (very long tenure).

(Tap EN/ES to switch languages.)

Book A Free Consultation

Other questions this article asnwers

  • “If I run a 15% off sale, will I make more money or lose profit?”

  • “How much profit (or loss) per visitor will this discount create at my AOV and margin?”

  • “What total profit change will I see this month with ~5,000 sessions?”

  • “What conversion lift do I need for a 15% discount to break even?”

  • “At 60% margin and 2.5% baseline CR, what happens to profit if conversion lifts by 10%?”

  • “What discount can I safely offer without hurting profit, given my margin?”

  • “If I raise margin (or AOV), how does that change the break-even lift for a sale?”

  • “Should I push a discount or focus on conversion instead to grow profit per visit?”

Main takeaways

 

  • A discount is only “safe” when conversion lift offsets the lower price.

  • Use Required lift = 1/(1 − discount) − 1 to sanity-check any promo.

  • Never discount beyond margin; consider bundles/bonuses/financing instead.

  • Improving conversion (EN/ES alignment, offer clarity) is often more profitable than deeper cuts.

  • Re-run the calculator after each test and keep the positive Δ offers.