Thinking to discount? Think twice…

Thinking to discount? Think twice…
July 9, 2011 Dmitri Stern

The table below will explain to you how the discounting vs. volume of sales works.
In my opinion – it’s better to give your customers an add-on item of good value, then to discount the original item.

For example:

1. With every purchase of the trousers – get a FREE belt value $X;

2. With every purchase of 2 business shirts – get 1 absolutely FREE (effectively 30% discount of RRP – recommended retail price);

3. With every purchased [item X] receive another [item Z] absolutely FREE – this is a good way to move obsolete stock or increase the value of the item X while giving them some promotional item Z, that you got from the suppliers for FREE.

If your Profit Margin is…

If you discount by…

20% 25% 30% 35% 40% 45% 50% 55% 60%

The amount you need your sales volume to increase by to maintain your current profitability level

2% 11% 9% 7% 6% 5% 5% 4% 4% 3%
4% 25% 19% 15% 13% 11% 10% 9% 8% 7%
6% 43% 32% 25% 21% 18% 15% 14% 12% 11%
8% 67% 47% 36% 30% 25% 22% 19% 17% 15%
10% 100% 67% 50% 40% 33% 29% 25% 22% 20%
12% 150% 92% 67% 52% 43% 36% 32% 28% 25%
14% 233% 127% 88% 67% 54% 45% 39% 34% 30%
16% 400% 178% 114% 84% 67% 55% 47% 41% 36%
18% 900% 257% 150% 106% 82% 67% 56% 49% 43%
20% 400% 200% 133% 100% 80% 67% 57% 50%
25% 500% 250% 167% 125% 100% 83% 71%
30% 600% 300% 200% 150% 120% 100%
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