Compare contribution profit before and after the discount. Divide the current contribution total by the discounted contribution per sale to find the volume required to stay even. Then ask whether the offer can create that volume without adding hidden costs.
Measure contribution, not revenue alone
Contribution per sale is the selling price minus the variable costs caused by that sale. It is the amount available to pay fixed costs and produce operating profit.
Total contribution = contribution per sale × units sold
Variable cost can include materials, direct labor, packaging, fulfillment, card or marketplace fees, shipping support, and other costs that rise with volume. If a discount changes order size, channel mix, return rates, or staffing, update those costs too.
Find the volume needed to protect current contribution
First calculate the discounted selling price and discounted contribution per sale. If the discounted price is at or below variable cost, no amount of added volume can recover the current contribution under this model.
Required lift = required discounted units ÷ current units − 1
Round required units up to a whole sale for an operating target. A calculated requirement is not a forecast; it is the hurdle the promotion must clear.
Walk through the default example
| Input or result | Default example | Decision meaning |
|---|---|---|
| Current price and variable cost | $100 and $60 | $40 contribution per sale |
| Current volume | 100 units | $4,000 current contribution |
| Discount | 10% | New price is $90 |
| New contribution | $30 per sale | Each sale contributes $10 less |
| Required volume | 134 units | About 33.3% exact lift; whole units round up |
| Expected 20% lift | 120 units | $3,600 contribution, down $400 |
In this example, discounted revenue rises from $10,000 to $10,800, but contribution falls by $400. Revenue alone would make the offer look successful.
Test whether the added volume is truly incremental
Some buyers would have purchased at full price. Some may shift a purchase forward and disappear from the next period. Others may buy only the promoted item. Separate new demand from discounted demand you already had.
- Use a control group, coupon code, or channel comparison where possible.
- Measure contribution after returns, refunds, and fulfillment problems.
- Watch the following period for demand pulled forward.
- Check whether repeat buyers return only when another discount appears.
Include capacity and brand costs
Added volume can trigger overtime, rush freight, stockouts, longer service times, mistakes, and customer-support work. Those costs can make the required lift larger than the simple model shows. A broad, repeated discount may also train customers to wait.
Set a test period, target contribution, stop condition, and review date before launch. The U.S. Small Business Administration's guidance on calculating a break-even point uses the same core distinction between price, variable cost, and contribution toward fixed costs.
This guide is educational planning information, not accounting, tax, legal, financial, marketing, or pricing advice.