A discount feels like it costs you the percentage you've taken off the price. It doesn't — it costs you that percentage off your margin, which is a much bigger bite. Most discounting decisions get made on gut feel rather than this maths, and the volume increase needed to break even is almost always bigger than people expect.
Your product
Current margin
0%
Extra volume you need to sell, just to break even
0%
Break-even volume increase = current profit per unit \u00f7 new profit per unit, minus 1.
| Price | Profit / unit | Units to match current profit |
|---|
| Before discount | £0 | £0 | 100 (baseline) |
| After discount | £0 | £0 | 0 |
How this works: if you sell 100 units at full price and full margin, then discount the price, your profit per unit shrinks — sometimes drastically, depending on how thin your margin already is. To make the same total profit, you have to sell proportionally more units. The formula is simple but the result is rarely intuitive: the thinner your starting margin, the more brutal the volume increase needed for the same discount. This assumes your cost per unit stays flat as volume increases, which is the standard simplifying assumption — in reality, higher volume can sometimes reduce your cost per unit too, which would soften the result slightly. It's a planning tool to sense-check a discount decision, not a guarantee of what will actually happen once real customer behaviour is involved.
Thinking through pricing or margin strategy properly?