Last Updated on June 23, 2026 by Jason Andrew
Most eCommerce promotions are designed backwards.
The discount depth gets chosen first. The creative goes out. The revenue comes in. Then, weeks later, someone looks at the margin report and wonders why a strong sales period did not translate into a stronger bank balance.
A well-run promotion is not just a marketing exercise. It is a financial decision that happens to involve marketing. The mechanics of how you structure the offer, who you target and how much you spend need to be modelled before a single ad goes live, not evaluated in the post-mortem.
This article covers how to design a promotion that is genuinely attractive to buyers and financially defensible for your business, how to get it in front of the right people in the right order and what to measure when it is over.
Part 1: Designing the Promotion
Start with the margin floor, not the discount ceiling
The most common mistake in promotion design is starting with the discount percentage and working backwards. The right approach is the reverse: start with the minimum margin your business needs to make the promotion worthwhile, then determine the maximum discount that allows you to stay above that floor.
The formula below shows gross profit per $100,000 in revenue at a given gross margin percentage and discount depth. Plug in your own numbers to see where your margin floor sits and what discount ceiling that implies.
Gross Profit Calculator
Plug in your revenue, gross margin, and discount to see where your margin floor sits.
$100,000 × (40.0% − 10.0%) = $30,000
Use this table to identify the discount depth at which your specific margin structure starts to break down. The right floor is your own minimum viable gross profit, not a generic benchmark.
| Discount Depth | 30% GM | 40% GM | 50% GM | 60% GM |
|---|---|---|---|---|
| No discount | $30,000 | $40,000 | $50,000 | $60,000 |
| 10% discount | $20,000 | $30,000 | $40,000 | $50,000 |
| 20% discount | $10,000 | $20,000 | $30,000 | $40,000 |
| 25% discount | $5,000 | $15,000 | $25,000 | $35,000 |
| 30% discount | $0 | $10,000 | $20,000 | $30,000 |
| 40% discount | -$10,000 | $0 | $10,000 | $20,000 |
A business running at a 30% gross profit margin has limited room to discount. Every percentage point of discount directly reduces the revenue base that margin is applied to, so even a 20% discount leaves only $10,000 gross profit per $100,000 in original revenue. A business at 60% gross margin has significantly more flexibility, but still needs to account for the advertising spend required to run the campaign.
Rule of thumb: use your minimum gross profit floor, not your gross margin percentage, to set your discount ceiling. Determine the minimum gross profit your business needs per $100,000 in revenue to cover fulfilment costs, platform fees, returns and still make the promotion worthwhile, then work backwards from that number to find the maximum discount your margin structure can support.
Choose the right promotion mechanic
Not all promotions are created equal. The mechanic you choose determines not just the margin impact but the customer behaviour it encourages. Here is a breakdown of the most common options:
| Mechanic | How it works | Best used for | Key risk |
|---|---|---|---|
| Percentage off | Reduces price by a set percentage | Volume sales, new customer acquisition | Sets a low price anchor; highest margin risk |
| Dollar off | Fixed dollar reduction above a spend threshold | Average order value lift | Less impactful on small-ticket items |
| Bundle discount | Multiple products sold together at a reduced combined rate | AOV lift, slow-stock clearance | Requires careful margin modelling per bundle |
| Gift with purchase | A reward item unlocked above a spend threshold | AOV lift, loyalty and brand experience | Cost of the gift eats into margin |
| Free shipping | Removes the shipping fee above a minimum order | Conversion rate improvement | Expensive if your AOV is below the threshold |
| Early access | Existing customers get first access before the public promotion | Retention, loyalty, urgency | Low financial risk; high relationship value |
The most financially conservative options are gift with purchase and early access, because they reward spend rather than reducing price. The most financially dangerous is a broad percentage-off discount applied site-wide, because it reduces margin on every transaction including those where the customer would have purchased anyway.
Set hard start and end dates
A promotion without a clear end date trains customers to wait. Urgency is one of the most powerful levers in conversion, and the clearest way to create it is a countdown to a genuine deadline.
Build the campaign around a defined window, communicate the end date prominently and honour it. Extending a promotion because sales were softer than expected sends a signal that your deadlines are not real, which undermines the urgency of every future campaign.
Part 2: Marketing the promotion
Target in the right order
There is a well-established principle in customer economics that it costs significantly more to acquire a new customer than to sell to an existing one. Estimates of the multiplier vary by category, but the directional truth is consistent: your existing customer base is your highest-value, lowest-cost promotional audience.
Apply this logic to how you sequence your targeting. Do not spend budget on cold acquisition until you have extracted maximum return from the audiences closest to you. Here is the order of priority:
| Priority | Segment | Why target them |
|---|---|---|
| 1 | Existing customers | Lowest acquisition cost; highest conversion likelihood |
| 2 | Lapsed customers | Already familiar with the brand; reactivation cost lower than cold acquisition |
| 3 | Lookalike and similar audiences | Modelled on your best customers; more efficient than broad cold targeting |
| 4 | Warm audiences (engaged non-buyers) | Have shown interest; lower friction than cold prospects |
| 5 | Cold audiences | Highest cost to convert; lowest margin contribution |
Working through this hierarchy in order means your lowest-margin promotional offers are reaching the people most likely to convert, before you start spending on cold audiences where conversion rates are lower and costs are higher.
Set your budget based on unit economics, not a percentage guess
A common benchmark in B2C eCommerce is to spend up to 20% of revenue on marketing and advertising. That figure can serve as a rough orientation, but using it as a budgeting method for a specific promotion is imprecise.
The better approach is to work from your unit economics. Specifically:
- Determine the maximum customer acquisition cost (CAC) your margin and lifetime value can support
- Set the total campaign budget as: target new customers to acquire multiplied by maximum CAC
- Allocate the remainder of the marketing budget to existing customer and warm audience channels, which should require significantly less spend per conversion
This means your budget is grounded in what the business can afford to pay for a new customer, rather than in an arbitrary percentage of a revenue target you have not yet achieved.
A note on attribution in 2026
Marketing attribution has become significantly less reliable over the past few years. Privacy changes across iOS, increasing browser restrictions on third-party cookies and the fragmentation of customer journeys across multiple platforms mean that last-click attribution models systematically overstate the contribution of some channels and understate others.
This matters for promotional budgeting because it affects how you read your ROAS figures. A campaign that appears to be generating a 4x return on a last-click basis may be partially claiming credit for customers who would have converted anyway through organic or direct channels.
The most reliable metric for evaluating promotional spend is not channel-level ROAS. It is the net margin contribution of the campaign after all costs, measured against a clear baseline of what the business would have generated in the same period without the promotion. This is harder to calculate but significantly more useful.
Part 3: Measuring what actually happened
A promotion that is not measured is an expense. A promotion that is measured is an investment in future decision-making.
Here are the metrics that matter and why each one earns its place in the post-campaign review:
| Metric | What to measure | Why it matters |
|---|---|---|
| Revenue vs margin | Total revenue generated and gross margin earned during the period | Revenue without margin context is a vanity metric for promos |
| Cost of promotion | Total discount value given, plus ad spend | Needed to calculate true net margin after campaign costs |
| New customers acquired | Count of first-time buyers during the campaign | The base metric for evaluating acquisition efficiency |
| Customer acquisition cost (CAC) | Total campaign spend divided by new customers acquired | Tells you whether the economics of acquiring each customer are viable |
| Average order value (AOV) | Average transaction size during the promo vs baseline | A falling AOV during promos signals customers are cherry-picking discounts |
| Return rate | Percentage of promo orders returned | Promos sometimes drive higher returns; this eats margin after the fact |
| Full-price repurchase rate (within your chosen window) | Percentage of promo-acquired customers who buy again at full price within a window that matches your product's typical use cycle | The single most important indicator of whether the acquisition was profitable |
The full-price repurchase rate measures how many customers acquired during the promotion came back and bought again at full price, within a window that reflects your product’s actual use cycle. If your product typically runs out in 60 days, that is your window. If it lasts 6 months, that is your window. There is no standard number to borrow here.
If those customers never come back at full price, the promotion did not create new demand. It just pulled forward purchases that would have happened anyway, at a lower margin. That is not growth. That is an expensive revenue spike dressed up as one.
Running promotions in the 2026 eCommerce environment
The promotional calendar in Australian eCommerce has lengthened considerably. Black Friday and Cyber Monday campaigns now routinely begin in the first week of November. EOFY promotions have expanded beyond traditional retail into almost every product category. The result is a market where consumers have become highly trained to anticipate discount events and delay purchases accordingly.
This shift has two practical implications for how you design and run promotions.
First, the bar for what constitutes a compelling offer has risen. A 10% discount that felt meaningful in 2020 may generate no urgency in 2026 when competitors are offering 30% or more. Understanding what discount depth actually moves your specific customer is something only your own historical data can answer reliably.
Second, the cost of paid acquisition during peak promotional periods has increased as more brands compete for the same market. Planning your promotional budget based on off-peak CPM benchmarks will result in underspending when it matters and overspending relative to return. Build your campaign budgets using data from the same period in prior years where possible.
Frequently Asked Questions
👉 Want to model the true profit impact of your next promotion before it runs? We will work through your unit economics, set a defensible discount ceiling and help you build a post-campaign measurement framework so every promotion makes you smarter and more profitable.
