A gift with purchase usually keeps more profit than a percentage discount. On a $75 bundle with $50 profit, 25% off leaves $31.25 and needs 60% more orders to match, while a $6 gift leaves $44 and needs only 14% more.
A 25% discount on a $75 bundle costs you $18.75 of pure margin on every order, including the orders you would have got anyway. A gift that costs you $6 to make delivers a similar feeling of value at a third of the price.
The maths
Take a $75 bundle that leaves $50 profit before ads. At 25% off it leaves $31.25. To make the same total profit, you need 60% more orders. With a $6 gift, profit per order is $44 and you need just 14% more orders to match.
The hidden benefits of a gift
- Price integrity. Customers don't learn to wait for your next sale.
- Product trial. A tanning customer who gets a free lip balm is a lip balm customer next month.
- Higher order value. Tie the gift to a bundle or threshold and it pulls order value up.
When a discount still makes sense
Clearing slow stock, competing in a category where every rival is discounting, or a one-off push where volume matters more than margin. Even then, discount the bundle, not the single.
Run your numbers with the discount vs gift calculator.
Discount vs gift calculator
Frequently asked questions
Is a gift with purchase better than a discount?
Usually for profit, because the gift costs you its product cost while a discount costs a share of the full price.
When should I use a discount instead?
To clear stock, or when volume matters more than margin for a short period.
Written by Shimeez Bok, founder of Growth Alchemy, an ecommerce growth studio in Auckland, New Zealand.
