Depth of promotion
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Promotional depth refers tothe extent of the discount applied to a product during a promotion, expressed as a percentage of the regular price: a 20% discount corresponds to a promotional depth of 20%. The greater the discount, the more sales volume increases, but the lower the unit margin becomes.
The Essentials in 6 Questions
The discount percentage applied during a promotion.
Promotions, pricing, and category management teams.
In the preparation of each operation.
By product or category, based on their price elasticity.
Find the right balance between volume and profit margin.
Price elasticity, A/B testing, choosing the price point that maximizes total profit.
Why is the promotion depth set on a product-by-product basis?
Because a discount that's too small won't sell anything, and a discount that's too large wipes out the margin without generating any profit.
- Finding the right balance between volume and margin: not so little that it’s invisible, nor so much that it’s destructive.
- Adjust for elasticity: 10 to 20% is often sufficient for an elastic product, whereas a product with little elasticity requires 30 to 50% to respond.
- Distinguish between objectives: clearing inventory (high priority), generating traffic (moderate), testing a price (low).
This should be distinguished from the promotional rate, which measures the percentage of sales generated through promotions.
A concrete example: the correct level is -20%, not -30%
For a blender, a 20% discount increases the gross margin by 15%; a 30% discount boosts sales but actually results in a 5% loss.
The sweet spot is at -20%, not at -30%
A/B/C Test on an Electric Blender · 3 Promotion Levels
Optimal promotion depth identified for this product: +70% in sales and +15% in gross margin—the best balance among the three tests conducted.
Gross margin at the sweet spot (-20% discount, +70% sales)
Gross margin with a 30% discount: A 100% increase in sales isn't enough to offset it
| Test | Weekly Sales | Total Gross Margin |
|---|---|---|
| -10% | 50 → 60 (+20%) | +5% |
| -20% | 50 → 85 (+70%) | +15% |
| -30% | 50 → 100 (+100%) | -5% |
Case Study: Booper Pricing Glossary.
How can you optimize promotion depth?
Estimate based on elasticity, test two or three depths, and choose the one that maximizes the total margin.
Estimating Using Elasticity
Calculateprice elasticity to predict the effect of each depth.
Test in a real-world environment
2 or 3 levels, through A/B testing or by geographic region.
Choose the Best One
The one that maximizes total gross profit, unless the goal is to move inventory.
Our promotional management system simulates the impact on margins at various price levels before making a decision; for end-of-season sales, markdown tiers are calculated using our markdown and clearance offerings. See also our 7 promotional pricing strategies.
The 3 Common Mistakes Regarding Promotion Depth
A uniform depth—either too shallow or set out of habit.
- Uniform depth: -20% across the board ignores differences in elasticity between products.
- Insufficient depth: 5% goes unnoticed; start at 10–15% for a visible effect.
- Excessive depth out of habit: “We always go 30% below” is not a strategy; test less.
Frequently Asked Questions
Short answers to the most frequently asked questions about promotion depth.
What is promotion depth?
Promotional depth refers to the extent of the discount applied to a product during a promotion, typically expressed as a percentage of the regular price. The greater the promotional depth, the greater the impact on sales volume, but the lower the unit margin.
What is the depth of a product at the end of its life cycle?
A steep discount—between 30 and 50 percent—to move inventory, even if it means sacrificing profit margins: sometimes it’s better to sell at a loss than to throw it away.
Should the depth be a round number (-20%, -30%)?
Not necessarily, but round percentages are easier to read: -17% often has less of an impact than -20%.
Can the depth be customized for each client?
Yes, in e-commerce, by offering member-exclusive prices or targeted promotions, while taking care not to cause frustration.
Key Takeaways
- Promotion depth is the discount percentage for a promotion.
- It is adjusted on a product-by-product basis, depending onprice elasticity.
- Choose the one that maximizes total profit, not volume.
Would you like to adjust the depth of your promotions?
Booper simulates the margin and volume impact of each discount level before implementing it.
Let's talk about your discount tiers →Learn about our promotions managementYou might also be interested in these articles
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