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Pricing & deals
Discount impact on margin
A discount comes straight off the margin: 10% off a 40%-margin sale removes a quarter of the profit and needs about 33% more volume to compensate.
Owned by: Sales analystTest band: Sales analyst
The formula
Volume needed to hold profit = Margin % ÷ (Margin % − Discount %) − 1
In practice
Put the break-even volume on the discount approval. Most discounts fail that test and get approved anyway; at least make it visible.
The kind of thing the test asks
- A product has a 40% margin. A 10% discount requires how much more volume for the same profit?