E-commerce & DTC Brands · Scenario 35

Specialty Food DTC

Discounts move boxes but quietly torch the margin — and nobody knows how deep is too deep. We model the discount depth that maximises profit, not just revenue.

Method · Promotion-depth optimization

The situation

A specialty-food brand runs promotion after promotion because they reliably spike sales, but each deeper discount gives away more margin and trains customers to wait for the next sale. Some promotions are genuinely profitable; others sell more boxes at a loss. Without a model, discount depth is set by habit and competitor fear.

Nobody has measured how sales and profit actually respond to discount depth, or which customers needed the discount at all — so the brand subsidises buyers who would have paid full price and goes too deep on promotions that do not pay.

Promo-driven
sales spike, margin sags
Set by habit
discount depth
Trained to wait
customers
No model
of promo profit

Where we dig for the truth

We model how profit — not just units — responds to discount depth, and which customers actually need an offer to convert.

Promotion & discount historyUnits & revenue by promoMargin per productFull-price vs discount buyersRedemption & cannibalisationCustomer price sensitivity
Profit vs discount depthEach point a past promotion; profit peaks, then falls035701051400%16%33%49%65%Discount depth (%)Profit index

Profit climbs with modest discounts, peaks around 25%, then falls as deeper cuts give away margin faster than they add volume. The sweet spot is well short of the deepest deal.

Our approach — Promotion-Depth & Discount Optimization

We estimate the profit-versus-discount curve for each product and segment, finding the depth that maximises contribution rather than revenue. Promotions are re-set to that sweet spot, capped where they stop paying, and targeted so discounts go to price-sensitive customers who actually need them — not loyal buyers who would have paid full price.

The promotion calendar and depth become a model output, ending the reflexive race to the deepest discount and the habit of training customers to wait.

From reflexive discounts to a profit curve1Map the promosTie every pastpromotion to its units,margin and profit.2Fit the curveModel how profitresponds to discountdepth.3Set the sweet spotPrice promotions to theprofit-maximisingdepth.4Target the offerSend discounts tocustomers who actuallyneed them.
Contribution margin by promo strategy — before vs afterAverage margin on promoted sales0%10%19%29%39%14%22%Site-wide sale19%27%Category sale24%33%Targeted offerBeforeAfter

Setting depth to the profit sweet spot and targeting offers lifts the margin on promoted sales across every promotion type.

What changes

Same promotional calendar, set to a profit curve. Representative for a specialty-food DTC brand.

Representative 90-day movementAvg. promo margin18%28%▲ +10 ptsDiscount depth34% avg24% avg▼ -10 ptsFull-price sell-through52%64%▲ +12 ptsAnnual profit$640k$880k▲ +38%
Where the profit comes from+$240kannual profitRight-sized discount depth42%Targeted, not blanket, offers34%Less margin to full-price buyers24%
Why this is not "social media management"
We didn't tell this brand to run more sales. We modelled the discount depth that actually maximises profit and aimed offers only where they were needed — ending the reflexive race to the bottom. Promotion optimisation is price science, not a calendar.

Frequently asked questions

How deep should an e-commerce discount be?
We model how profit — not just units — responds to discount depth and find the sweet spot, which is usually well short of the deepest deal. Promotions are re-set to that depth and targeted at customers who actually need an offer.
What is promotion-depth optimization?
It is estimating the profit-versus-discount curve for your products, so you discount to the point that maximises contribution rather than reflexively cutting deeper. It also avoids subsidising customers who would have paid full price.
Isn't running more sales the way to grow?
Deeper, more frequent sales train customers to wait and erode margin. We find the depth that actually pays and target it. Book a marketing audit.

Want this run on your numbers?

Send your promotion history and we’ll find the discount depth that maximises your profit.

Book a marketing audit
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