Why a 15% Discount Costs More Than Expected

The cost of discounting is easy to misread because a discount is quoted as a share of the price, while it is paid out of profit. A 15 percent discount takes 15 percent off the sale and, at a thin margin, more than half off what you keep. This page runs one 50 dollar order through three margin levels, adds the card fee that most discount math skips, and then compares the result with three ways to spend the same cash. Every figure comes from assumptions written out in the text, so you can replace them with yours.

Discounts come out of margin, not revenue

Take a product that sells for 50 dollars. Without a discount you receive 50 dollars; with 15 percent off you receive 42.50. Your cost for the product did not change. All 7.50 dollars of the discount comes straight out of what you keep.

So the question is never "what is 15 percent of revenue". It is "what is 7.50 dollars as a share of the profit this order earns". If the order earns 12 dollars, the discount gives away more than half. If it earns 30, it gives away a quarter.

The math at 30, 50 and 70 percent gross margin

Assumptions for the table: a 50 dollar price, product cost of 35, 25 or 15 dollars (gross margins of 30, 50 and 70 percent), and a card fee of 2.9 percent plus 30 cents per order. The fee is a stand-in for your own rate, not a quote, and nothing else changes. "Profit" below means price minus product cost minus the card fee.

How to read one row, the 50 percent one. Full price: 50 − 25 − (0.029 × 50 + 0.30) = 23.25 dollars. At 15 percent off the price is 42.50, the fee is 0.029 × 42.50 + 0.30 = 1.53, and profit is 42.50 − 25 − 1.53 = 15.97. The loss of 7.28 dollars is 31.3 percent of 23.25. To earn 23.25 dollars again at 15.97 per order you need 23.25 ÷ 15.97 = 1.456 times as many orders, so 45.6 percent more.

The pattern is the point. The lower your margin, the larger the share of profit the discount removes, and the volume you need grows faster than the discount itself. Break-Even Discount: Extra Volume You Need has the general formula and a lookup table by margin and discount. The margin floor for any discount gives the other end: the deepest discount a given margin can afford.

The fee that does not shrink

Look at the difference between the table above and the plain formula. Without any fee, the extra orders needed at 15 percent off would be 15 ÷ (30 − 15) = 100 percent at a 30 percent margin, 15 ÷ (50 − 15) = 42.9 percent at 50, and 15 ÷ (70 − 15) = 27.3 percent at 70. The table says 122.0, 45.6 and 28.0. The gap is the fixed part of the card fee, 30 cents per order in this example. It stays when the price falls, so it takes a larger share of the smaller sale and a larger share of the profit.

What you pay depends on how you take payments. Shopify's Help Center says the Shopify Payments credit card rate depends on your Shopify plan and that you can see your current rate in your Shopify admin under Settings, Payments, then Manage in the Shopify Payments section. It also says that when you use Shopify Payments you pay the credit card rate but not a separate transaction fee; stores that use a third-party payment provider pay a Shopify transaction fee plus the provider's card fees. Shopify's pricing page, read on Oct. 10, 2026, lists those third-party transaction fees by plan, from 2 percent on Basic to 0.2 percent on Plus. Check your rate in your own admin and replace the 2.9 percent and 30 cents above before you decide anything. Per-order costs such as pick and pack and postage do not shrink either, and they make the real answer worse than the table.

What 7.50 dollars buys instead

A discount is only one way to spend that cash. Hold the 50 percent margin row and keep the card fee the same, then compare three ways to spend roughly 7.50 dollars per order.

Check the middle row. The order is 75 dollars with 10 percent off, so the price is 67.50; product cost is 37.50 (half of 75); the fee is 0.029 × 67.50 + 0.30 = 2.26; profit is 67.50 − 37.50 − 2.26 = 27.74. The gift row: 75 − 37.50 − 7.50 − (0.029 × 75 + 0.30 = 2.48) = 27.53.

Both alternatives assume the shopper really adds 25 dollars of goods that earn the same margin, which is the part you have to test. They also have a cost the table hides: customers who would already have spent 75 dollars receive the tier or the gift for nothing. Look at how many of your orders already sit above the line before you set it. Setting a free gift threshold goes through that cost, and free shipping thresholds apply the same logic to shipping.

Why tiers hold up better

A flat percentage off applies to every order, including the ones that needed no help. A tiered cart discount pays only when the cart reaches a line you set, and it grows with spend, so the discount is tied to the behavior you wanted. The structure has its own risk, which is training shoppers to wait for the tier, a pattern worth watching in your own repeat-order data.

Build the tiers

In Freebies Engine by Log Studio Lab, the Cart discount tiers template is described as a discount on the whole cart that grows with spend. Use the table above to set the first tier from your own margin: take the percentage your numbers can carry, set the threshold above your usual basket, and test with a short window before you leave it running. After the window, compare profit per order, not revenue, with the same weekdays from the period before.