What a Discount Really Costs You
A discount reduces your profit by more than the discount percentage, because it comes entirely out of your margin. A 10% price cut can mean a 50% profit cut.
Direct answer
A discount reduces your profit by more than the discount percentage, because the discount comes entirely out of your margin, not out of the cost. A 10% discount on the price can mean a much larger cut to what you actually take home per sale.
The padlock again: cost ₵80, normally sold at ₵100 (₵20 profit, 20% margin). Now offer a 10% discount.
| Original price / profit | ₵100 / ₵20 |
| Discounted price (10% off) | ₵90 |
| Cost (unchanged) | ₵80 |
| New profit | ₵10 |
| New margin | 11.1% |
The price dropped by 10%. The profit dropped by 50% — from ₵20 to ₵10. That's because the entire ₵10 discount came directly out of the ₵20 profit; the ₵80 cost didn't change at all.
What this means for volume
To make the same total profit at ₵10 per unit that you made at ₵20 per unit, you'd need to sell exactly twice as many units. A discount that seems modest on the price tag can require a large, often unrealistic, jump in sales volume just to break even on the decision.
A quick way to check any discount before offering it
Run your own numbers through this before agreeing to a discount — especially a customer's request for "just 10 or 15% off," which sounds small but rarely is, once you see it in cedis rather than percent.