How do I calculate the actual Return on Investment (ROI) for my discount campaigns? Does the tool help with this?

Calculating ROI for Discount Campaigns

Discount ROI is harder to calculate than it looks. The simple version (revenue from discount orders / cost of discounts) overstates ROI because it includes sales that would have happened anyway. True ROI requires estimating incrementality - how much of that revenue was actually caused by the discount.

ROI Calculation Framework

Step 1: Total discount cost
Sum of all discount amounts applied across all redemptions. Example: 200 redemptions of 15% off an average $60 order = 200 x $9 = $1,800 discount cost.

Step 2: Estimate baseline revenue
What would these customers have spent without the offer? Use your normal conversion rate for that audience segment x their typical AOV. If 200 converted with discount but only 120 would have converted at full price: 120 x $60 = $7,200 baseline.

Step 3: Calculate incremental revenue
Discount campaign revenue - baseline revenue = incremental revenue. (200 x $51) - $7,200 = $10,200 - $7,200 = $3,000 incremental.

Step 4: ROI
($3,000 - $1,800) / $1,800 = 67% ROI on the discount investment.

When to Consider a Campaign Profitable

A positive ROI means the discount generated more incremental revenue than it cost. But also consider LTV impact: if discounted customers repurchase at full price, the ROI calculation improves further over time. Track 90-day post-campaign revenue from first-time discount buyers to see the full picture.