A 20% price discount usually requires more than a 20% increase in unit sales because the discount reduces contribution on every promotional unit. In the illustrative example below, regular contribution is $28.70 per unit and promotional contribution is $19.30. Preserving the original $2,870 contribution therefore requires about 149 units instead of 100—approximately 49% more units. Any extra campaign cost raises the requirement further.
Required promotional units = (baseline contribution + incremental campaign cost) ÷ promotional unit contributionCalculate contribution before and after the discount
Assume an illustrative product with:
- regular price: $50.00,
- product and variable fulfillment cost: $18.00,
- variable transaction fee: 6% of revenue plus $0.30,
- baseline volume: 100 units,
- promotion: 20% off.
Regular unit
6% × $50.00 + $0.30 = $3.30$50.00 − $18.00 − $3.30 = $28.70100 × $28.70 = $2,870Promotional unit
$50.00 × 80% = $40.006% × $40.00 + $0.30 = $2.70$40.00 − $18.00 − $2.70 = $19.30The price falls by $10, but unit contribution falls by $9.40 because the percentage fee also declines. The relevant comparison is contribution dollars, not discount percentage alone.
Required sales lift to preserve contribution
$2,870 ÷ $19.30 = 148.7149 units(149 ÷ 100 − 1) × 100 = 49%That 49% lift preserves baseline contribution before any extra campaign expense. If the promotion also costs $500 in incremental creative, placement or media:
$2,870 + $500 = $3,370$3,370 ÷ $19.30 = 174.6 → 175 units75%How the required lift accelerates
The same illustrative cost structure produces the following break-even unit requirements. The table assumes no incremental campaign cost.
| Discount | Promo price | Contribution / unit | Units required | Required lift |
|---|---|---|---|---|
| 10% | $45.00 | $24.00 | 120 | 20% |
| 15% | $42.50 | $21.65 | 133 | 33% |
| 20% | $40.00 | $19.30 | 149 | 49% |
| 25% | $37.50 | $16.95 | 170 | 70% |
| 30% | $35.00 | $14.60 | 197 | 97% |
Required lift is nonlinear. As promotional contribution approaches zero, the volume needed to preserve profit rises rapidly. If promotional unit contribution is zero or negative, no finite unit lift can preserve contribution under the same assumptions.
Attributed sales are not necessarily incremental sales
A promotion can show 175 orders without creating 75 additional orders. Some buyers may have purchased at full price anyway, some may bring purchases forward from the next week, and some may switch from another product. Measure the promotion against an appropriate baseline or control rather than treating every order using the code as incremental.
Baseline demand
Estimate what would probably have sold without the promotion during the same period.
Pull-forward
Check whether sales fall below normal immediately after the promotion.
Cannibalization
Track whether discounted units replace higher-contribution products or full-price purchases.
Customer quality
Compare return rate, repeat contribution and support cost by promotional cohort.
The economic question is not “How many orders used the discount?” It is “How much incremental contribution did the promotion create after all associated costs?”
Set promotion stop rules before launch
- Minimum promotional contribution per unit.
- Maximum incremental acquisition cost.
- Required order lift versus a documented baseline.
- Inventory floor that prevents stockouts on full-price demand.
- Maximum acceptable return or cancellation rate.
- Maximum share of sales coming from customers who would likely have bought anyway.
- A review date after delayed returns and repeat purchases mature.
Stop rules reduce the temptation to extend a promotion merely because revenue looks strong. Revenue can rise while contribution falls.
Limitations
- The example assumes a stable product mix and variable cost per unit.
- Real promotions can change return rates, shipping mix, payment methods and support workload.
- Inventory constraints and stockouts can transfer demand across periods.
- Repeat customer value should be evaluated as contribution, not revenue, and may take time to observe.
- Taxes and platform-specific fee rules may alter the promotional contribution calculation.
Frequently asked questions
Why does 20% off require about 49% more units in this example?
Because contribution per unit falls from $28.70 to $19.30. The percentage reduction in contribution is much larger than the percentage price discount.
Should I use orders, units or revenue for the lift calculation?
Use the unit that matches the contribution model. For a single product, units are clear. For mixed baskets, model contribution per order or by product mix.
Can repeat purchases make the promotion worthwhile?
Yes, but only when incremental repeat contribution is measured by cohort and exceeds the first-order sacrifice and campaign cost.
What if promotional contribution is negative?
Higher volume increases the loss. Change the discount, price, cost stack, bundle or offer before scaling the promotion.