The Discount Trap

Why selling more can sometimes mean earning less

Is Discounting Always a Good Idea?

How can you reach more customers and sell more of your product? Sure, discounting can make your offer more attractive—and yes, it can boost sales volume.

But increasing sales isn’t always a win. It comes at a price.

Let’s look at a simple example

You sell a product for 100, and it costs you 70 to produce. That gives you a profit of 30. Now, to drive more demand, you decide to offer a 20% discount, bringing the selling price down to 80. The production cost remains 70, so your profit per unit drops to just 10.

That seemingly harmless 20% discount caused your profit to shrink by 67%—from 30 to 10. That’s a huge hit for what might feel like a minor change in price.

This is why you need to be careful with discounting. You might create a short-term spike in your sales curve, but at the cost of damaging profitability.

Looking at it another way: To earn the same total profit, you now need to sell three times more units.

Risk of permanently reducing the profitability

And here’s the real question: Is that sales boost sustainable? Or are customers simply grabbing the deal while it lasts?

Next year, when sales slow down again, you may be tempted to offer yet another discount. Before you know it, discounting becomes a habit—not a strategy. And showing consistent sales growth starts to depend on it.

Even worse, customers may begin to expect discounts and hold off on purchases, waiting for the next price drop. Over time, fewer people buy at full price, and your business’s profitability takes a long-term hit.

How to make this work

That doesn’t mean discounting is always bad.

There are times when it makes sense—like clearing out old inventory, where profit isn’t the top priority.

Or when used strategically.

Take Amazon, for example. It frequently offers discounts on Prime memberships, which include free shipping, streaming, and more. They’re not looking to make money on the membership itself. They know that once customers are in the ecosystem, they’ll spend more on the platform.

It’s a smart way to use discounting to increase customer lifetime value—not just to drive short-term sales.

So before offering a discount, ask yourself: is this a short-term fix, or part of a long-term strategy?

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