How do I calculate the maximum discount I can offer while staying profitable?

Calculating Maximum Discount While Staying Profitable

Every discount has a profitability limit - a depth beyond which you're selling at a loss. Knowing your maximum discount before you set campaign parameters prevents the common mistake of running attractive-looking promotions that erode rather than build the business. Here's how to calculate it precisely for your products.

Maximum Discount Formula

Worked Examples by Beauty Product Type

The True Minimum Margin

Your minimum acceptable margin should include not just COGS but also variable fulfillment costs (pick/pack, shipping label, packaging) and proportional overhead. A product with 65% GM on COGS might have 52% "fully-loaded" margin once fulfillment costs are included - meaning your max discount is lower than the COGS-only calculation suggests.

For behavioral discount campaigns targeting only walk-away visitors, your effective discount cost is lower than the headline rate because you're not giving it to 60-70% of buyers who would purchase at full price. Growth Suite's targeting means a 20% offer triggers for approximately 30-40% of visitors - your blended discount cost is 20% × 35% = 7% reduction in effective revenue, well within most brands' margin floors.