Margin is the difference between the selling price and the cost of the goods, and it is the only figure that determines whether a discount makes sense. A common mistake is to plan promotions based on turnover: a ten percent discount at a thirty percent margin means that to cover the lost profit you must sell substantially more units, not just a tenth more. Before every promotion, therefore, calculate what increase in sales would offset it, and decide accordingly. Also watch out for the long-term effect: regular discounts teach customers not to buy at the regular price and reduce the brand's perceived value. When stating discounts, the rules on price information apply, including the obligation to state the previous price under consumer protection regulations; check their current wording, as inspections focus on it.
See also: Price comparison website, Pricing of services, Free Shipping.
