Free tool
Discount Margin Calculator
See what a markdown takes from each sale.
A discount reduces the revenue from a sale while many product and order costs stay in place. This discount margin calculator shows the effect on one sale: the discounted price, the money left after product cost and the change in gross margin.
Use it before applying a markdown or comparing offers. If you need to know whether additional orders could compensate for the lower contribution per sale, move to the Promotion Margin Calculator. That wider question needs an explicit assumption about purchases that would have happened anyway. The Product Profit & Pricing Calculator helps place the markdown alongside the rest of the order cost stack.
Per-sale markdown · Same cost basis · No demand forecast
Per-unit economics
Use a consistent scope and cost basis for every figure.
The example is illustrative. Replace it with your own figures; results update as you type. Your entries stay in this page until you choose to copy them.
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Included costs
How this tool works
How the discount changes margin
Multiply regular price by one minus the discount rate to find the discounted selling price. Subtract product cost at each price to compare gross profit. Divide each gross profit amount by its own selling price to calculate the before-and-after margins.
The contribution comparison deducts the entered variable costs and applies the same percentage-fee rate to each price. When both regular and discounted contribution are positive, dividing regular contribution by discounted contribution gives the volume ratio needed to preserve total contribution. It is an arithmetic threshold, not an estimate of demand. At a zero selling price, gross margin has no positive revenue denominator.
Discounted price = regular price × (1 − discount rate). Gross profit after discount = discounted price − product cost.
Why a 20% discount can halve gross profit
An item priced at $100 with a $60 product cost leaves $40 gross profit. A 20% discount takes the price to $80 and gross profit to $20. Gross profit falls by 50%, and gross margin moves from 40% to 25%, before other selling costs.
Your full calculation
| Measure | Result · USD |
|---|---|
| Regular selling price | $100.0 |
| Discounted selling price | $80.0 |
| Gross profit before discount | $60.0 |
| Gross profit after discount | $40.0 |
| Gross margin before discount | 60% |
| Gross margin after discount | 50% |
| Contribution before discount | $47.0 |
| Contribution after discount | $27.6 |
| Change in contribution per unit | -$19.4 |
| Volume ratio to preserve contribution | 1.7× |
| Additional volume required | 70.3% |
| Contribution decrease | 41.3% |
Questions & answers
Understanding your result
How do I calculate margin after a discount?
Calculate the discounted selling price first. Subtract product cost, then divide that difference by the discounted price. Use the actual price received rather than the original list price as the margin denominator.
Does a 20% discount reduce profit by 20%?
Usually the percentages differ because the price cut is taken from revenue, while profit is a smaller amount. With a $100 price and $60 cost, a $20 discount halves the $40 gross profit. The effect depends on the starting cost stack.
Can a discounted sale have a negative margin?
Yes. If the discounted price is below product cost, gross profit and gross margin are negative. Contribution can become negative earlier when fulfillment, fees and other variable selling costs are included.
How many extra orders would make the discount worthwhile?
This calculator shows the sales-volume ratio needed to preserve positive contribution when the before-and-after unit economics support that comparison. It does not predict those orders. Use the Promotion Margin Calculator to separate genuinely additional orders from discounted baseline purchases and include campaign costs.