Marketplace Promotion ROI Calculator

A promotion pays off only if the extra units at a lower margin earn more than you would have made anyway at full price, after the deal fee and ad spend.

Also called: Deal ROI calculator · Promotion profitability calculator

  • Last updated
  • Formula tested against reference values

Your numbers

Example rate: enter your category’s referral or commission rate.

Over the same period, e.g. from the previous comparable period.

Result

Extra profit from the deal
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Calculating…

ROI on deal cost
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Units needed to break even
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Deal price
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Profit per unit at deal price
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Profit without the deal
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Profit with the deal
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Deal cost (discount given + spend)
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How to use this calculator

  1. Enter or choose regular selling price.
  2. Enter or choose promotion discount.
  3. Enter or choose cost per unit (product + fulfilment).
  4. Enter or choose marketplace fee on the selling price.
  5. Enter or choose units you would sell without the deal.
  6. The extra profit from the deal updates as you type. Use Copy result or Share to keep it.

Method

Unit profit = Price × (1 − Fee%) − Cost; Extra profit = Deal units × Deal unit profit − Spend − Baseline units × Regular unit profit; ROI = Extra profit ÷ (Spend + Deal units × Discount per unit)

Baseline units
what you would have sold at full price in the same period
Spend
deal fee, coupon fees and advertising for the promotion

Worked example

  1. Regular unit profit = 40 × 0.85 − 18 = 16, so 100 units = 1,600.
  2. Deal price 32; unit profit = 32 × 0.85 − 18 = 9.20; 260 × 9.20 − 500 = 1,892.
  3. Extra profit = 1,892 − 1,600 = 292; deal cost = 500 + 260 × 8 = 2,580; ROI = 11.32%.
  4. Break-even = (1,600 + 500) ÷ 9.20 = 228.3, so 229 units.

The deal earned 292 more than selling at full price, an 11.3% return on its cost; it needed 229 units to break even.

What the result means

Extra profit is the number that matters; revenue and units always look good during a deal. Any later lift from better ranking or reviews is a bonus not counted here, and any sales pulled forward from next month are a cost not counted here.

Assumptions and limits

  • The marketplace fee is a percentage of the selling price.
  • Unit cost is the same with and without the deal.
  • Halo effects on other products, post-deal ranking changes and pulled-forward demand are not modelled.

Questions

How do I estimate baseline units?

Use sales of the same product in a comparable period without a promotion, adjusted for seasonality.

Why is ROI low even though sales tripled?

Because each discounted unit earns much less, and you also gave the discount to customers who would have bought anyway.