Does the promotion pay? The sums almost nobody does: How much more you must sell to earn the same after lowering the price

What it is

A discount looks like a gain because it sells more. But every unit sold at a discount leaves less margin, and to earn the same you have to sell quite a lot more. Many promotions sell more and earn less, and the pharmacy does not notice because it looks at total sales and not at margin.

The sum is short. If the discount is a big share of the margin, the promotion needs a huge rise in units to break even; if it is small, it does not. And it is only valid for products the rules allow to be promoted (see the previous pill).

The formula and an example

With invented numbers to teach the sums (not from any real product):

FORMULA: increase in units needed = discount ÷ (current margin − discount), all as a percentage of the selling price.
EXAMPLE: a product sells at 100 and costs 70 (margin 30). With a 10 % discount it sells at 90 and the margin is 20.
RESULT: to earn the same you must sell 30 ÷ 20 = 1.5 times the units, that is, 50 % more. If the promotion only raises sales by 20 %, you earn less even though you sell more.
WITH A 20 % DISCOUNT the margin falls to 10 and you need three times the units. The closer the discount gets to the margin, the less it pays.

At the counter

When to recommend it

Promotions on products with a high margin or on dated surplus stock
Packs that raise the average basket without cutting the margin as much
Measure margin and not only sales during the promotion
Decide in advance how much extra you expect to sell

When not to

Discount a thin-margin product: it cannot be made up
Run a promotion only because the manufacturer offers it
Count selling more as a success without looking at how much you earn
Discount a product that already sells by itself

What to say at the counter. Before putting up an offer sign, write down how much extra you expect to sell and how much you need. If what you need is double what is realistic, the promotion is a way of earning less.

Warnings

Important This calculation only applies to products whose promotion is allowed: it does not apply to prescription or reimbursed medicines (see the previous pill).
Caution If the manufacturer funds part of the discount, the sums change: get it in writing and subtract it from the cost.
Worth knowing The numbers in this pill are invented for the example; use your own.

How to do the sums with your product

Note the selling price, the cost and the current margin.
Work out the margin with the proposed discount.
Divide the current margin by the margin with the discount: that is how many times more you must sell.
Compare with what you can realistically sell extra during the promotion.
If it does not pay, consider an alternative: a pack, a sample, or simply not doing it.

Discount and units needed (30 % margin)

Aspect	Discount	Units needed to earn the same
5 %	5 %	About 20 % more
10 %	10 %	50 % more
15 %	15 %	100 % more (double)
20 %	20 %	200 % more (triple)

The more the discount eats the margin, the harder it is to make up.

Self-assessment

Three questions. When you check your answers you will see the explanation for each one.

30 % margin and a 10 % discount: how many more units must you sell to earn the same? 10 % more 50 % more The same
A promotion raises sales but total margin falls. What happened? You sell more but earn less per unit Nothing, it is normal You sold less
Which products does this calculation not apply to? Prescription and reimbursed medicines, which cannot be promoted Health products Cosmetics

Training content. It does not replace the summary of product characteristics or clinical judgement.

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