How do I price a buy two get 10 percent off offer?
A buy two get 10 percent off offer trims your profit on the pair but can raise basket size, and this worked example compares the margin with and without it.
A multi-buy offer is one of the gentler ways to raise your order value. Instead of cutting the price of one item, you reward customers for picking up two. But you still need to check that the pair earns enough.
The setup
Say a pair of printed pillow covers is priced at Rs 500 each. Each costs you Rs 280 in all, so Rs 560 for two (illustrative numbers).
Without the offer
A customer buying two pays 2 x 500 = Rs 1,000.
- Cost: Rs 560
- Profit: 1,000 - 560 = Rs 440
- Margin on the revenue: 440 divided by 1,000 = 44 percent
With 10 percent off the pair
The pair now costs 1,000 - 100 = Rs 900.
- Cost: still Rs 560
- Profit: 900 - 560 = Rs 340
- Margin on the revenue: 340 divided by 900 = about 37.8 percent
So the offer cuts your profit on the pair from Rs 440 to Rs 340, a fall of Rs 100, which is about 23 percent of the profit.
Compared with a single-item order
A customer buying only one pays Rs 500 and you earn Rs 220. If the multi-buy offer brings that same customer to buy two, you earn Rs 340 instead of Rs 220. That is Rs 120 more than the single order, even after the discount.
So the real question is not whether the offer earns less than a full-price pair. It does. The question is whether it brings in pairs from customers who would otherwise buy one, or whether it only gives a discount to customers who would have bought two anyway.
Check your basket history
Look at your last 50 orders. How many contained two or more units already? If many did, the offer mostly gives away a discount you did not need to give. If almost all were single units, the offer has room to lift your average basket.
Shipping helps you
Two items often ship in one parcel. If shipping per order is Rs 70 whether it holds one or two covers, then selling two spreads that shipping over more revenue. For a pair, shipping per item is Rs 35 rather than Rs 70. That partly offsets the discount. Check with your own courier rates, as heavier parcels can move into a higher slab. Shipping across India, what small brands should know is a good place to understand this.
Other levers to test
- Make the offer apply only to certain products where margin is high
- Offer 5 percent instead of 10, and see how profit changes
- Offer it on three items with a bigger discount, such as 15 percent, if your margin allows
The rule of thumb
Calculate three numbers for any multi-buy deal. Profit on a single unit, profit on the pair with the offer, and the extra pairs you need to make the offer worth it. The last number can be found with extra sales needed to pay for a discount. If the pair still leaves a healthy margin and you believe the offer will lift your basket, it is a reasonable move. If it drops your profit below what you need for fixed costs, pick a smaller discount.