Margin With Discount Calculator

This calculator combines two common problems — your desire to calculate your profit margin or markup while giving the customer a discount at the same time. You can check out our markup calculator, discount calculator, and margin calculator to understand more about this topic.

The base margin, base markup, and base revenue values are all of these values before the discount is taken into account. The discount is applied to base revenue and results in discounted revenue. The true margin and true markup fields show your real margin and markup after the discount has been considered. Let's take an example scenario:

You buy blue jeans at $60 a piece. Usually, you work with a 40% gross margin, so it gives you a sale price of $100 (remember, margin is a ratio of profit to revenue, while markup is a ratio of profit to cost). This would give you a $40 profit, but a customer wants to make a really big order, and you're willing to lower your price by 20% and sell it for $80. All things considered, your true gross margin is 25%.

As for most of our calculators, you may solve for any value — for example, you may start with the profit field and work your way up to find out the maximum you may pay your supplier (the cost).

To compute the new margin after you've offered a discount:

1. Write down the original margin m and the discount d.
2. Compute the difference m − d.
3. Compute the difference 1 − d.
4. Divide the number from Step 2 by that from Step 3.
5. The result is the new margin.

The formula expressing the new margin after you've applied a discount is:

new margin = (old margin − discount) / (1 − discount)

where all three variables are assumed to be expressed as decimals.

Offering discounts lower your margin. However, discounts can attract new customers and increase your sales. They also help when you want to free up space by clearing old stock. Plan the discounts carefully so that, in the end, you increase your revenue.

The margin goes down to around 11%, so it's almost halved. To arrive at this answer, recall the formula:

new margin = (old margin − discount) / (1 − discount)

Plugging in the data, we obtain:

new margin = (0.2 − 0.1) / (1 − 0.1) = 0.1 / 0.9 = 0.1111...