Pricing guide
Should you match a competitor’s discount?
Their promo is live and it feels urgent. Before you copy it, answer one question: how many extra sales would your own discount need just to earn what you earn today? Here is the formula, a worked example and the checks to run first.
By the Rival team · Updated
The real question isn’t “are they cheaper?”
When a competitor cuts prices, the reflex is to compare price tags. But what you keep is gross profit: the price minus what each unit costs you. A discount comes straight out of that profit, so the useful question is how many more units you would need to sell to end up with the same gross profit as before.
If the answer is a volume you have never seen on that product, matching the promo will cost you money, even if it brings in orders.
The break-even formula
Write your gross margin rate as m (for example 60% = 0.60) and the discount as d (20% = 0.20). The extra volume you need to keep the same gross profit is:
Extra sales needed = d ÷ (m − d)
Always use prices excluding VAT, and a unit cost that includes everything that varies with each sale: product cost, packaging, payment fees and, if you pay for them, shipping and returns.
If the discount is equal to or larger than your margin rate, there is no break-even point: every sale at that price loses money.
A worked example
Take a product sold at €40.00 excluding VAT that costs you €16.00 per unit, a 60% gross margin. Here is what three discount levels require. These figures are an illustration computed with the formula above, not data from a real store.
| Discount | Price after discount | Margin per unit | Extra sales needed |
|---|---|---|---|
| -10% | €36.00 | €20.00 | +20% |
| -20% | €32.00 | €16.00 | +50% |
| -30% | €28.00 | €12.00 | +100% |
Five checks before you react
- Is it really the same product? Compare size, pack, bundle and delivery terms before comparing prices.
- How long will the promo last? A flash sale ending tomorrow doesn’t call for the same answer as a lasting price cut.
- The whole range, or a few products? A targeted discount can be answered on the overlapping products only.
- Are they clearing stock? Low availability or disappearing sizes often signal a clearance, not a price war.
- Where do you stand without the promo? If your price is already close to the market median, customers may not need a discount to choose you.
Your options besides matching
- Hold your price and make the difference visible: guarantee, delivery time, reviews, bundle value.
- Answer on the overlap only: a smaller discount on the products that compete directly, for a limited time.
- Add value instead of cutting the price: a free sample or gift with purchase costs you its unit cost, not a percentage of every sale.
- Do nothing, on purpose: note the promo, watch whether your sales actually move, and decide a week later with numbers in hand.
How Rival helps with this decision
Rival reads your competitors’ product pages every day and spots price changes, promos and stock-outs the day they happen. Before suggesting a discount, it projects the effect on your margin and declines anything past the guardrail you set, with the evidence attached.
You can run the same break-even calculation yourself with the free calculator below.