Discount Calculations
Discounts reduce the original price by a percentage or fixed amount. A $200 item with 25% discount costs $150, saving $50. Retailers use discounts to drive sales, clear inventory, attract customers, or compete. Understanding discount math helps consumers identify genuine deals and helps businesses set effective promotion strategies.
Strategic discounting can boost revenue despite lower per-unit profit. A 25% discount that doubles sales volume increases total profit. However, frequent discounts train customers to wait for sales, eroding full-price sales. Premium brands rarely discount to protect brand value. Value brands discount frequently to drive volume. Consider your positioning when setting discount strategies.
Multiple discounts compound differently than intuition suggests. Two 20% discounts don't equal 40% off. After the first 20% discount on $100 ($80), the second 20% applies to $80, not $100, yielding $64 total (36% off). This is why stores structure promotions carefully: '20% off already reduced prices' differs significantly from '40% off original prices.'
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Final Price = Original Price × (1 - Discount%/100). For 25% off $200: $200 × 0.75 = $150. Or calculate discount amount first ($200 × 0.25 = $50) then subtract ($200 - $50 = $150).
Apply sequentially, not additively. Two 20% discounts: Price × 0.80 × 0.80 = 64% of original (36% total discount), not 40% off. Order usually doesn't matter for percentage discounts, but check store policies.
Depends on policy. Some stores apply percentage discounts first, then dollar coupons. Others do opposite. A $10 coupon on a 25%-off $200 item could be $140 ($150 - $10) or $142.50 ($200 - $10 = $190, then 25% off = $142.50).
Depends on goals. 10-15% encourages consideration. 20-25% drives action. 30-50% creates urgency but may damage brand perception. Test different levels. Deeper discounts on slower-moving inventory, moderate discounts on popular items.
Percentage discounts scale with price - better for high-value items. Dollar discounts are simple and impactful for lower-priced items. '$5 off' sounds better than '5% off' on a $50 item, but '20% off' beats '$20 off' on a $200 item psychologically.