How to Calculate Discounts That Boost Sales and Keep Profits
When you run an online business, you’ve probably faced a situation where you had to give discounts to keep your products selling. But at the same time, you also need to make sure your business stays profitable. That’s why it’s important to learn how to calculate discounts the right way.
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In this article, we’ll discuss three ways to calculate discounts from the original price.
1. Use the Basic Discount Formula
This is the simplest and most common way to calculate a discount:
- Discount = Rp200,000 × (25/100) = Rp50,000
- Price after discount = Rp200,000 − Rp50,000 = Rp150,000
This method works well if you just want to lower the price quickly. But remember—discounted prices don’t always guarantee profit.
For example, if your product costs Rp200,000, after a 25% discount it becomes Rp150,000. But if your COGS (Cost of Goods Sold) is Rp140,000, your profit is only Rp10,000 per item. That’s a very thin margin and might not cover operational costs like shipping, packaging, or marketplace fees.
Too much discounting without a strategy can also create bad habits—customers might only buy when there’s a promo. Over time, this dependency on discounts can eat away at your margins.
So, even though the formula is simple, you still need to consider your business condition and discount purpose.
2. Calculate COGS First, Then Set the Discount Limit
To stay profitable, you need to know your COGS first. Never let the selling price after discount fall below COGS—because that means you lose money on every sale.
Example:
- Original Price: Rp200,000
- COGS: Rp130,000
So if you give less than 35% (say, 20–25%), you’re still safe because you have profit margin left over.
But you must ensure the remaining margin is enough to cover expenses like shipping, packaging, platform fees, or promotions.
For example, if COGS is Rp130,000 and you sell at Rp150,000 after discount, your margin is Rp20,000. That’s still healthy if you sell in high volume or have low extra costs.
However, if you go beyond 35% discount (say 40–50%), you need to double-check the numbers. Such deep discounts can quickly push you into losses if your margins are already tight.
3. Control Profits with Reverse Calculation
You can also use a reverse calculation method. For instance, if you want at least 20% profit after discount, here’s how:
Selling Price After Discount = COGS × (1 + Profit Margin)
Example:
- COGS: Rp130,000
- Desired Profit Margin: 20% → 1.2
- Price after discount = Rp130,000 × 1.2 = Rp156,000
This method is great if you want better control over profit, since you set the profit margin target upfront. Instead of randomly giving discounts, you adjust prices based on profit goals.
For example, if your COGS is Rp130,000 and you want at least 20% profit, your selling price after discount should be Rp156,000. From there, you can calculate the maximum discount based on your original price.
This approach gives you more confidence because every decision is backed by numbers—not guesswork. Especially useful if you sell on platforms with many extra costs like admin fees, automatic discounts, or shipping subsidies.
Bonus: Check How Discounts Affect Sales Volume
Discounts may reduce profit per item, but if sales increase significantly, your total profit can still grow.
Example:
- COGS: Rp130,000
- Discounted Price: Rp150,000
- Profit per item: Rp20,000
If you sold only 10 pcs before (Rp200,000 × 10 = Rp2,000,000), but after discount you sell 50 pcs (Rp150,000 × 50 = Rp7,500,000), your total profit becomes bigger.
So, it’s all about strategy. A big discount doesn’t always mean loss, as long as it drives higher sales volume. You must balance profit margin per product with the potential increase in total sales.
Those are 3 ways to calculate discounts without hurting your business. From this, you can see that discounts are part of a marketing strategy. Always know your COGS, set profit margin targets, and consider how discounts affect sales volume.
And if you often ship products to customers in different cities, don’t forget to use Paxel delivery service for faster, safer, and more reliable shipping. Apply the right discount strategy, and take your business to the next level!
