Discount Profitability Calculator
A discount is paid entirely out of your contribution. Enter the price your customer pays, your variable costs and the discount you are considering to see what happens to contribution per order and how much extra volume the promotion has to generate.
€79.00 including 21% VAT = €65.29 net revenue.
Per-order app fees, inserts, returns provision.
Your average effective transaction rate.
Payment cost: €1.44 per order.
Payment fees vary by payment method, Shopify plan, country, card type and payment provider. Use your average effective transaction fee for the most realistic estimate.
At this discount, you need approximately 60% more orders to generate the same total contribution profit.
- Discounted price
- €63.20
- Discounted net revenue
- €52.23
- Contribution before discount
- €34.15
- Contribution lost per order
- 37.5%
- Discounted contribution margin
- 40.8%
- Maximum discount at break-even
- 53.3%
Volume uplift assumes per-order costs stay the same at higher volume, and excludes advertising.
How we calculated this
- Selling price incl. VAT
- €63.20
- VAT
- − €10.97
- Net revenue
- €52.23
- COGS
- − €24.00
- Shipping
- − €4.50
- Packaging & handling
- − €1.20
- Payment fees
- − €1.20
- Other variable costs
- − €0.00
- Contribution before advertising
- €21.33
Payment fees are charged on the full amount collected from the customer, VAT included. Fixed costs such as salaries, rent and software are not part of this calculation.
What is discount profitability?
Discount profitability compares the contribution you earn per order before and after a price reduction, then works out the sales uplift needed to end up in the same place. It turns “let's run 20% off” into a number you can judge.
How is it calculated?
Discounted price = price × (1 − discount)
Discounted contribution = discounted net revenue − COGS − shipping − packaging − payment fees − other variable costs
Required volume uplift = contribution before discount ÷ discounted contribution − 1
VAT and the percentage part of the payment fee scale down with the price; every other variable cost stays exactly the same, which is why the contribution falls faster than the price.
Example
A €79.00 product including 21% VAT leaves €65.29 net revenue and €34.15 of contribution before advertising. At 20% off, the customer pays €63.20, net revenue falls to €52.23 and contribution drops to €21.33 — a 38% cut. Keeping total contribution flat would require about 60% more orders. The largest discount this product can absorb before contribution turns negative is 53%.
Why this matters for ecommerce stores
Promotions look successful on a revenue chart and often fail on a profit one. Doing this arithmetic before Black Friday, not after, is one of the cheapest improvements a store can make.
Frequently asked questions
- Why does a 20% discount cut profit by far more than 20%?
- Because the discount comes entirely out of your contribution, not out of your costs. If your contribution margin before advertising is 40%, a 20% price cut removes half of it — the price falls by a fifth, the contribution by a half.
- How much extra volume do I need to break even on a discount?
- Enough to make the smaller per-order contribution add up to the same total. This calculator shows the required uplift; deep discounts on thin margins often need volume increases that are unrealistic.
- Does a discount change VAT and payment fees?
- Yes, and this calculator accounts for it. A lower price means less VAT collected and a smaller percentage payment fee, while COGS, shipping, packaging and the fixed payment fee stay the same.
- How should I model free shipping?
- Free shipping is not identical to a price discount, so model it directly instead. If you previously charged for shipping, dropping that charge reduces the amount the customer pays: net revenue falls by the shipping charge excluding VAT and the percentage payment fee falls slightly, while your actual shipping cost stays where it was. If shipping was already free and you are only absorbing more of the carrier cost, revenue does not change at all — your shipping cost per order simply rises, and contribution falls by that exact amount. Either way, enter the change in this calculator's shipping cost or price field rather than treating it as an equivalent percentage discount.
Know what a promotion really costs before you launch it.
Connect Shopify to understand how discounts affect your actual store profitability.
Connect ShopifyRelated calculators
- Contribution Margin Calculator — what's left per sale after variable costs
- Ecommerce Profit Calculator — your store's contribution profit for a period
- Break-even ROAS Calculator — the ROAS you need before ads become profitable
- All free ecommerce calculators