{"id":754,"date":"2025-04-08T14:30:00","date_gmt":"2025-04-08T14:30:00","guid":{"rendered":"https:\/\/karlongroup.com\/blog\/?p=754"},"modified":"2025-05-11T23:02:17","modified_gmt":"2025-05-11T23:02:17","slug":"on-the-perils-of-discounting","status":"publish","type":"post","link":"https:\/\/www.karlongroup.com\/blog\/2025\/04\/08\/on-the-perils-of-discounting\/","title":{"rendered":"On the Perils of Discounting"},"content":{"rendered":"\n

On the perils of discounting, there’s a great article by Erik Huberman, which I’ll link to here<\/a>. The truth is, discounts are so so tempting, especially when you’re behind Plan and looking for a quick way to boost sales and hit your numbers.\u00a0<\/p>\n\n\n\n

But beware of the breakeven math. As I show in the illustrative math above, if you offer a 20% discount, you need to see gross sales lift of 25% to breakeven on net sales. Sounds doable, right? Right. But what about profit? Here’s where things go from very doable to nearly impossible. At a 20% discount, you need gross sales lift of ~70% to breakeven on gross profit. 70%!<\/p>\n\n\n\n

Next time you\u2019re considering a promotion to drive sales, remember the breakeven math and think about gross profit, not just sales. <\/p>\n\n\n\n

And beyond the breakeven math, there\u2019s another often-overlooked issue with promotions: demand pull-forward. If a customer was planning to buy next week or next month and you give them a compelling reason to buy now, you may boost this week\u2019s sales\u2014but at the expense of future periods. That\u2019s not always a bad thing (sometimes it’s necessary!), but it\u2019s important to be aware of this trade-off.<\/p>\n\n\n\n

Now, this isn\u2019t to say that all discounting is bad. There are valid reasons to run promotions. For instance, you may feel the need to discount when all your competitors are also running promotions \u2014particularly around key shopping periods like Black Friday or Labor Day. In those contexts, staying at full price might have a significant negative impact on sales. Another valid case for discounting is excess or aging inventory. Sometimes you need to move product, free up working capital, or clear space in the warehouse. Promotions can be a useful tool in those scenarios.<\/p>\n\n\n\n

Overall, the TLDR is to be careful, be intentional and consider the math. If you’re discounting, know why you’re doing it\u2014and weigh the short-term lift against the long-term cost to margins, future sales, not to mention brand equity and customer expectations.<\/p>\n\n\n\n

Discounting can be a lever, but it’s rarely a free one.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

On the perils of discounting, there’s a great article by Erik Huberman, which I’ll link to here. The truth is, discounts are so so tempting, especially when you’re behind Plan and looking for a quick way to boost sales and hit your numbers.\u00a0 But beware of the breakeven math. As I show in the illustrative […]<\/p>\n","protected":false},"author":2,"featured_media":755,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-754","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"\nOn the Perils of Discounting | Karlon Group<\/title>\n<meta name=\"description\" content=\"A blog focused on the most important finance topics for startups & venture capital investors\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.karlongroup.com\/blog\/2025\/04\/08\/on-the-perils-of-discounting\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"On the Perils of Discounting | Karlon 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