Discount profit-impact calculator
A discount does not come off the top, it comes straight out of your margin, because your costs do not drop with the price. Enter your margin and the discount to see the margin you are left with and how much higher your break-even ROAS climbs.
Using typical funnel assumptions, to show that the metric above can’t tell you if you’re winning. Your real numbers live in the full calculator.
Drop in one product and the Target ROAS calculator works your whole P&L backwards to the number that actually decides it, free, no signup.
What a discount really does to profit
A discount does not come out of revenue evenly; it comes straight out of margin. Because your costs do not fall when you cut the price, every point of discount is a point of profit gone. A 20% discount on a 45% margin product does far more than trim 20% of profit.
How a discount moves your margin
Dollar-fixed costs like shipping and payment fees do not shrink with the discount, so margin collapses faster than the discount percentage. A deep enough promo can push break-even ROAS from around 2.5x to 7x or more, meaning the same campaign that was profitable is now underwater.
How to discount without bleeding margin
- Discount the highest-margin SKUs, where there is room to give.
- Use thresholds and bundles (spend $X, save Y) instead of blanket percentage off, so AOV rises with the discount.
- Pair promos with a contribution check: know the break-even ROAS at the discounted price before you run ads to it.
The operator’s playbook
How a paid-media operator reads this number, not a glossary definition.
Discounts are margin, not price+
Cut price 20% and you do not lose 20% of profit, you lose far more, because product cost, shipping and fees do not shrink with the discount. A 45% margin with a 20% discount drops to about 31%, and the break-even ROAS your ads must clear jumps with it.
Discount with eyes open+
Sometimes the volume, the new customers, or the cash is worth it. But price the ad target off the discounted margin, not the full one, or you will scale spend that looks fine and quietly loses money.
Frequently asked questions
How much does a discount cost in margin?
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More than the discount itself, because costs are fixed in dollars. New margin = (margin - discount) / (100 - discount). A 45% margin with a 20% discount falls to about 31%.
Why does a discount raise the ROAS I need?
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Break-even ROAS is 1 / margin. A discount shrinks margin, so the break-even ROAS rises. Your ads have to return more just to stand still.
How do I calculate the real cost of a discount?
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Subtract the discount from price, keep your cost the same, and recompute margin. The profit lost is far more than the discount percentage, because your costs do not fall with the price.
Are discounts bad for my business?
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Not always, but a blanket percentage off comes straight out of margin and can flip a profitable campaign to a loss. Thresholds and bundles that lift AOV are usually healthier.
How big a discount can I afford?
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Only as deep as your margin allows while ads still clear the higher break-even ROAS the discount creates. Check the break-even at the discounted price before you promote it.
Built by Yehonatan Tav, paid media for ecommerce brands spending $50k to $500k a month. Figures are illustrative; run the logic on your own numbers.