Pricing
How a discount changes profit and margin
A percentage discount reduces revenue. It does not reduce the cost unless the supplier’s price changes too. That is why a sale can show a loss even when the original price looked profitable.
Start with an $80 cost and a $100 price. Profit is $20 and the margin is 20%. Apply a 25% discount and the buyer pays $75. Profit becomes 75 − 80 = −$5. The margin is 100 × (−5) ÷ 75, which is −6.67%.
| Original | After 25% off | |
|---|---|---|
| Revenue | $100.00 | $75.00 |
| Profit | $20.00 | −$5.00 |
| Margin | 20% | −6.67% |
| Markup | 25% | −6.25% |
The markup moves too
Markup after the discount is 100 × (−5) ÷ 80 = −6.25%. Quote the margin if you are talking about the discounted price, and the markup if you are talking about the cost. They will not match.
A 100% discount leaves zero revenue. Margin is then undefined, because there is no revenue to divide by. Profit is the cost as a loss. A discount above 100% is rejected.
Compare the promotion before you publish it
Put the original price and the discount in the margin calculator and read the discounted profit before you set the promotion. Save up to three of those results in the browser if you want them side by side. The save stays on that device until you delete it. It is not a cloud price list.
Sources and tools
Related guides
Common questions
The cost stayed $80. Why did the margin go negative?
The price fell to $75, which is less than the cost. Negative profit divided by the new revenue is a negative margin.
Should I enter the discounted price instead of the discount percent?
You can enter $75 as the selling price. The discount field is there so the original price and the reduced revenue stay visible together.