{
  "slug": "markdown-margin-impact",
  "title": "Markdown & Discount Margin Impact Calculator",
  "heading": "Markdown Margin Impact Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/markdown-margin-impact",
  "summary": "How much extra volume a discount needs to generate to break even on margin dollars.",
  "description": "A 20% discount doesn't just cut your margin by 20 percentage points — the volume needed to make up for the lost margin dollars per unit is often larger than sellers expect, especially at lower starting margins. This calculator shows exactly how much unit volume increase is required to keep total gross margin dollars flat after a markdown, given your current price, cost, and the proposed discount percentage. Enter your regular price, cost of goods, current units sold at full price, and proposed discount percentage. The output shows margin dollars per unit before and after the markdown and the exact percentage volume increase needed to break even on total margin dollars, which routinely surprises sellers running clearance or promotional discounts without checking the math first, since at a 50% starting margin, a 20% discount requires roughly 67% more units sold just to match prior total margin dollars.",
  "formula": "Margin/unit after = (price × (1−discount%)) − COGS; Breakeven volume increase% = (margin/unit before ÷ margin/unit after) − 1.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=markdown-margin-impact",
  "inputs": [
    {
      "id": "price",
      "label": "Regular price",
      "kind": "number",
      "hint": null,
      "default": 50,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "cogs",
      "label": "Cost of goods",
      "kind": "number",
      "hint": null,
      "default": 22,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "unitsFullPrice",
      "label": "Units currently sold (full price)",
      "kind": "number",
      "hint": null,
      "default": 200,
      "unit": null,
      "min": 0,
      "max": null
    },
    {
      "id": "discountPct",
      "label": "Proposed discount",
      "kind": "number",
      "hint": null,
      "default": 20,
      "unit": "%",
      "min": 0,
      "max": 90
    }
  ],
  "outputs": [
    {
      "id": "breakevenVolumeIncreasePct",
      "label": "Volume increase needed to break even",
      "format": "percent",
      "hint": null,
      "primary": true
    },
    {
      "id": "marginAfter",
      "label": "Margin $ per unit after discount",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "marginBefore",
      "label": "Margin $ per unit before discount",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "unitsNeeded",
      "label": "Units needed at discounted price",
      "format": "number",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Regular price: 50 $",
      "Cost of goods: 22 $",
      "Units currently sold (full price): 200",
      "Proposed discount: 20 %"
    ],
    "outputs": [
      "Volume increase needed to break even: 55.6%",
      "Margin $ per unit after discount: $18.00",
      "Margin $ per unit before discount: $28.00",
      "Units needed at discounted price: 311"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter regular price ($).",
      "Enter cost of goods ($).",
      "Enter units currently sold (full price).",
      "Enter proposed discount (%).",
      "Read your volume increase needed to break even on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "price": 30,
        "cogs": 13,
        "unitsFullPrice": 120,
        "discountPct": 12
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "price": 50,
        "cogs": 22,
        "unitsFullPrice": 200,
        "discountPct": 20
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "price": 80,
        "cogs": 35,
        "unitsFullPrice": 320,
        "discountPct": 32
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why does a small discount require such a large volume increase?",
      "a": "Because the discount hits margin dollars, not revenue, and margin is usually a much smaller number than price. At a 40% margin, a 20% price cut removes half your margin dollars per unit, so you'd need double the volume just to stand still on total margin dollars, not just 20% more."
    },
    {
      "q": "Does this account for the discount driving new customer traffic?",
      "a": "No, this is a pure like-for-like volume breakeven on existing demand. If a discount also pulls in shoppers who wouldn't have bought otherwise, or clears aged inventory that would otherwise become a total write-off, the discount can still be worth it even below this breakeven line."
    },
    {
      "q": "When does a markdown make sense even without hitting breakeven volume?",
      "a": "When the alternative is unsold inventory becoming a total loss (obsolete, out of season, or taking up warehouse space you need for new stock), recovering even partial margin below the breakeven threshold is better than a 100% write-off."
    },
    {
      "q": "How should I set discount depth for clearance versus promotion?",
      "a": "Promotional discounts on healthy-margin, in-demand products should stay shallow enough to hit near breakeven volume increases (10-20% off at 40%+ margin). Clearance discounts on aging or discontinued stock can go much deeper since the real alternative is often zero recovery."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/sell-through-rate",
    "https://www.revenuelab.fyi/toolbox/contribution-margin-sku",
    "https://www.revenuelab.fyi/toolbox/wholesale-msrp-keystone"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Markdown & Discount Margin Impact Calculator (https://www.revenuelab.fyi/toolbox/markdown-margin-impact)"
}