Keep the recovery result inside its feasible boundary
A discount-recovery result is the extra volume required to preserve baseline contribution under stated cost assumptions. It is not evidence that demand, inventory or delivery capacity can supply that volume.
| Step | Calculation | Decision check |
|---|---|---|
| Baseline contribution | Baseline units × (baseline price − unit variable cost) | Price and cost use the same unit and tax basis |
| Discounted unit contribution | Discounted price − unit variable cost | Stop when contribution is zero or negative |
| Recovery volume | Baseline contribution ÷ positive discounted unit contribution | Round up only after the full calculation |
Use the Discount Profit Impact Planner for the exact input/output scenario, then test the required volume against real capacity and demand evidence.
Set a reproducible baseline
- Use the same product, period and cost boundary before and after the discount. (not complete)
- Record baseline price, unit cost and baseline units. (not complete)
- Apply the discount to price without silently changing other inputs. (not complete)
- Stop if discounted price is at or below variable unit cost. (not complete)
required discounted units = ceil((baseline price - unit cost) × baseline units / (discounted price - unit cost))
- baseline price
- Undiscounted selling price (currency per unit) — user input
- unit cost
- Variable cost inside the decision boundary (currency per unit) — user input
- baseline units
- Units in the comparable baseline period (whole units) — business record or user input
- discounted price
- Selling price after the proposed discount (currency per unit) — calculated or user input
Worked example: a 10% price discount
| Measure | Baseline | Discounted |
|---|---|---|
| Price per unit | 100 | 90 |
| Variable cost per unit | 60 | 60 |
| Contribution per unit | 40 | 30 |
| Units | 100 | 134 required |
| Total contribution | 4,000 | 4,020 at 134 units |
Baseline contribution is 40 × 100 = 4,000. Discounted contribution is 90 - 60 = 30. The exact quotient is 133.33 units, so operational recovery requires 134 whole units.
Decide whether the threshold is usable
- Compare 134 units with the same-period baseline and credible demand range.
- Check whether capacity and stock can serve the extra units.
- Run a lower- and higher-cost sensitivity case.
- Define an end date, eligible products and a measurement plan before launch.
Methodology used
- Discount Profit Impact methodology — Margin101
Related tools
- Discount Profit Impact Planner
Find whether added volume can recover profit after a discount
- Break-even Sales Planner
Find the units and revenue needed to cover costs or reach target profit