--- title: "Percentage discount: definition and formula" description: "A share taken off the price. It comes off revenue in full while most costs stay put, so it removes a much larger share of the margin." url: https://offersuite.io/glossary/percentage-discount updated: 2026-10-13 --- # Percentage discount A share taken off the price. It comes off revenue in full while most costs stay put, so it removes a much larger share of the margin. ## In plain words A percentage discount lowers the price by a set share: 10% off, 20% off. It is the simplest offer to run and the easiest for a customer to understand. It is also the most expensive per point. The whole discount comes out of revenue, and the product, the pick and the label cost what they did before. Only the costs that are a share of revenue shrink a little. So the margin falls by nearly the full dollar value of the discount. ## Formula - Discounted price = price × (1 − discount) - Margin lost ≈ price × discount × (1 − costs charged as a share of revenue) ## Worked example At 20% off, the $40.00 bag sells for $32.00. The engine puts its margin at $7.99, down from $15.36: the margin rate falls from 38.4% to 25.0%. A fifth off the price took about half the margin. The discounted bag needs 92.2% more buyers to earn what the full-price bag earns per visitor. ### The example order A $40.00 bag of coffee, shipped free, every cost counted Revenue $40.00 to contribution margin $15.36 (38.4%) Revenue $40.00 Cost of goods −$12.00 Pick and pack −$1.18 Packaging −$0.50 Shipping label −$7.50 Card fee per order −$0.30 Refunds −$2.00 Card processing −$1.16 Contribution margin $15.36 2 declared kinds cost nothing on this option Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost. ## A 20% discount does not cost 20% of the profit It costs 20% of the price, and profit is only a part of the price. If the order keeps 38% of its revenue, a 20% discount removes roughly half of what it keeps. The thinner the margin, the larger the share a given discount takes. ## Using it Before choosing a discount, work out the lift it needs to break even. Then ask whether a change of that kind has ever produced that lift for you. Often a smaller discount, a bundle or a gift on a larger order reaches the same customer for less margin. ## Related - [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary) - [Calculator **Offer option calculator: profit per visitor** Compare up to three offer options on profit per visitor, margin per order times conversion, and see the conversion lift each one needs to match the best.](https://offersuite.io/calculators/offer-option-profit-per-visitor) - [Calculator **Bundle pricing calculator: shipping, subscriptions** Price a bundle against a single unit, one-time and subscribed, with the shipping and pick costs it saves, and the conversion it can lose and still earn as much.](https://offersuite.io/calculators/bundle-pricing) - [Glossary **Fixed-amount discount: definition and formula** A set sum off the order, such as $10 off. It costs the same on every order, so it weighs far more on a small order than a large one.](https://offersuite.io/glossary/fixed-amount-discount) - [Glossary **Discount stacking: definition, formula and example** Two or more discounts applying to one order: a sale price, a subscription discount, a code. Each looked affordable alone; together they may not be.](https://offersuite.io/glossary/discount-stacking) - [Glossary **Break-even conversion lift: definition and formula** How much more an offer has to convert to earn, per visitor, what another offer earns: the gap a cheaper offer, a gift or a discount must close.](https://offersuite.io/glossary/break-even-conversion-lift)