How to determine if discounts are leading to profit?
Asked a year ago
Hey guys, does anyone have a formula or calculator to determine if the discounts I'm offering on my eCommerce store are actually leading to increased profits. I don't want to be cutting into my margins unnecessarily.
Kole Kline
Wednesday, April 19, 2023
You can use the following formula to calculate your discounted profit margin and compare it to your profit margin without the discounts:
- Gross Profit Margin Percentage = Revenue - Expenses / Revenue
Once you have calculated your revenue, you can calculate your new Gross Profit MArgin Peercentage with the following:
- New Gross Profit Margin Percentage = Gross Profit Margin Percentage x Conversion Rate x (Average Order Value x (1 - Discount Rate) / Average Order Value)
Using this formula and comparing the results to your profits before discounts will help determine if your discount program is increasing profits or cutting into revenue.
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