Intermediate level · Module 1: Sales, Margin and Pricing Analytics · Lesson 3 of 3
Pricing and Discount Decisions
Calculate how much extra volume a discount needs before it pays for itself.
In this lesson you will
- Calculate the volume needed to justify a discount
- Advise on pricing decisions with evidence
Key concepts
discount break-evenprice sensitivitymargin erosiontest before rollout
The lesson
A discount reduces the margin on every unit, including units customers would have bought anyway. With a 30% margin, a 10% price cut lowers the margin per unit from 30 to 20 SSP on every 100 SSP of the original price, so volume must rise by half just to keep the same gross profit.
The rule: required volume = old margin per unit ÷ new margin per unit. Compare that with realistic expectations of how customers respond.
Where possible, test a price change in one branch or for a limited time before rolling it out.
Step by step
- Calculate the margin after the proposed discount.
- Calculate the volume increase needed.
- Judge whether it is realistic.
- Recommend and propose a test.
Practice activity
Evaluate the distributor's proposed discount.
Expected result: A recommendation with the break-even volume calculation and a test plan.
Check your understanding
-
With a 30% margin, how much must volume rise after a 10% price cut to keep gross profit?
Show answer
50%, because 30% ÷ 20% = 1.5.
-
Why test a price change first?
Show answer
Customer response is uncertain and mistakes are costly at full scale.
Taught live by an instructor — online or in person. Free course lessons are for self-study and do not lead to a certificate — see registration options.