Use the output as a threshold, not a forecast.
A promotion can increase revenue and reduce profit at the same time. The relevant question is not merely how much unit sales rise, but whether the extra contribution from those units replaces the margin surrendered on every discounted unit.
This model compares a baseline period with a promotional period. It calculates the unit uplift required to preserve baseline profit and reverses the equation to estimate the deepest discount supported by your own volume forecast.
Promotion break-even formula
Baseline unit profit equals regular price after variable fee, minus fixed fee and unit cost. Promotional unit profit applies the discount to price and uses the same costs unless you change the inputs.
Required promotional units equal baseline total profit plus incremental campaign cost, divided by promotional unit profit. Required uplift compares those units with baseline volume. Maximum discount solves for a promotional price that preserves baseline profit at projected volume.
A 20% price discount does not require only 20% more units. Because the discount removes contribution from the original baseline units as well, the required sales lift is often much larger.
Limitations to keep visible
- The model assumes the promotion does not change returns, basket mix, repeat purchase, inventory carrying cost or customer acquisition beyond the entered campaign cost.
- A promotion that makes unit contribution zero or negative cannot be repaired by selling more units.
- Use incremental unit lift, not total sales attributed by an ad platform, when judging causality.
Frequently asked questions
Why is required uplift larger than the discount?+
The lower margin applies to every promotional unit, including sales that would have happened at full price. Extra units must replace that lost contribution.
Should I include advertising spend?+
Include campaign spend above the baseline in incremental marketing cost. Keep ordinary always-on acquisition in unit cost only when you are consistently allocating it there.
Can this evaluate bundles?+
Yes. Treat the bundle as one unit, enter its combined selling price, product/fulfillment cost and expected baseline volume.