Pricing decisions · Illustrative example
A 10% discount is not recovered by selling just 10% more
The answer depends on how much each sale contributes before the discount. If you sell at USD 20, variable cost is USD 12 and you lower the price to USD 18, you need at least 134 sales instead of 100 to preserve the same total contribution.
This is not a demand forecast or a recommendation to discount. It is a simple way to make a pricing decision with the numbers in view.
Start by separating selling price from contribution
In a completely fictional example, an item sells for USD 20 and has a variable cost of USD 12. Unit contribution is USD 8. Selling 100 units yields USD 800 of contribution to cover fixed costs and, only then, generate profit.
The formula for the required extra units
Unit contribution = selling price − variable cost per unit.
Required units = target total contribution ÷ unit contribution after discount.
Round up: you cannot sell a fraction of a unit.
| Discount | New price | Unit contribution | Minimum units | Extra sales |
|---|---|---|---|---|
| 0% | $20.00 | $8.00 | 100 | +0% |
| 5% | $19.00 | $7.00 | 115 | +15% |
| 10% | $18.00 | $6.00 | 134 | +34% |
| 15% | $17.00 | $5.00 | 160 | +60% |
| 20% | $16.00 | $4.00 | 200 | +100% |
Discounting might be sensible; the calculation is not the full decision
Higher volume could offset lower unit contribution, but the arithmetic does not prove that customers will buy more. Before making the offer, check whether demand exists, stock is available, fulfillment costs might increase, and the lower price could displace other sales.
A discount could also help clear slow inventory or attract buyers, but that objective calls for tracking cash flow, stock turnover, refunds and other relevant costs. The example assumes unchanged variable cost per unit, an unchanged product mix and a USD 800 contribution target.
What this measures — and what it does not
Contribution is neither net profit nor cash in the bank. This example does not deduct fixed costs, taxes, financing or refunds. Nor does it describe real customers or a completed experiment: all figures are illustrative.
What should you ask before discounting?
- How much does each sale contribute after variable costs?
- How many extra units would preserve the original contribution?
- Can you deliver those units without adding other costs?
- Could you offer a smaller scope, a different bundle or different terms instead?
For a real business decision, the JFCarpio.com team can investigate one agreed question using your evidence and assumptions. The scope and terms are confirmed before any work.
How a focused business report worksBack to Articles
· Illustrative example from the JFCarpio.com team. Published October 25, 2026. No claims about client results.