The discount that has to sell twice as much to stand still

Discounts feel generous and they sell themselves: knock a fifth off, the customer's happy, the tills are busier. But a promotion is a maths problem dressed up as a marketing one. The question that decides whether it works isn't "will it shift more stock" — it almost always will. It's whether the extra stock you shift makes up for the money you've quietly handed back on every single sale, including all the ones you'd have made anyway.

The discount comes out of your margin, not your price

Here's the trap. A discount is a percentage off the price, but it lands as a much bigger percentage off your contribution — the slice you keep after the item's own cost. If a £10 dish costs you £6 to put on the plate, you keep £4. Take 20% off and the price drops to £8, but your cost is still £6, so now you keep just £2. The price fell by a fifth; the money you actually keep fell by half. Every sale at the new price does half the work the old one did.

Why "20% off" needs far more than 20% more sales

Because each discounted sale earns so much less, you have to make up the gap with volume — and the volume needed is almost always far bigger than the discount itself. In the example above, halving your contribution means you need to double your sales just to bank the same money you made before. Twenty percent off the price quietly asks for a hundred percent more covers. Run that promotion expecting a modest lift and you've engineered a loss while feeling busy.

Where the gap hides

A few things make the real number worse than the back-of-a-napkin guess:

• The item's own cost — the thinner your margin to begin with, the more violently a discount eats into it. A low-margin line can need an impossible amount of extra volume.
• The customers who'd have paid full price — a blanket discount also applies to the people already walking through the door. You're paying them to do what they were going to do anyway.
• Royalty or commission — if your business pays one, it bites harder on a discount, because there's less left per unit for it to come out of.
• VAT — your contribution is worked out on the price after VAT comes off, not the headline ticket, so the slice you're cutting into is smaller than it looks.

None of this means discounting is wrong. It means a discount has a number attached to it — a real volume it must hit to stand still — and that number is the thing to know before you print the poster.

Know the break-even before you run it

The one figure that settles it is your break-even volume: how many units the discounted price has to sell to make the same money as the full price made. Put it next to what you actually sell today and the promotion either looks achievable or it doesn't. A shallow cut is usually recoverable; a deep one rarely is. As a rough guide, ten percent off is plausible, thirty percent is a stretch, and beyond that you're often chasing a volume the room can't physically deliver — and if a discount pushes your contribution to zero, no amount of extra sales can rescue it, because every additional unit only loses you more.

Why it matters for your business

Promotions are won and lost before they launch, not at the till. Doing the maths first tells you the lowest price you can afford to offer, stops a "busy" weekend from quietly costing you money, and lets you choose the discounts you can back with confidence — and walk away from the ones that only look generous. The honest version of "20% off" is "we need to sell twice as many." Once you can see that number, the decision makes itself.