Attribution & Analytics
How Discounts Change Your Break-Even ROAS
Discounting reduces revenue while product and fulfilment costs often stay largely the same. That means the percentage margin available for advertising can shrink quickly.
Example
Normal price: $100
COGS/variable cost before ads: $50
Contribution before ads: $50 / 50%
Break-even ROAS: 2.0x.
Now discount 20%:
Sale price: $80
Costs: still $50
Contribution: $30 / 37.5%
Break-even ROAS: about 2.67x.
You need a higher ROAS to break even after the discount, even though promotions often make Ads Manager performance look better because conversion increases.
Conversion must compensate
The sale can still be profitable if CPA falls enough or order volume rises enough. Calculate the required lift rather than assuming more orders equals more profit.
Watch stacked incentives
A discounted product plus free shipping plus affiliate commission can leave much less contribution than the headline promotion suggests.
Need the real economics laid out?
If your campaigns perform best during promotions but profit is hard to reconcile, contact us. We can calculate the true break-even ROAS at sale pricing.