Promo approval guide
Margin thresholds before scaling a promo
Before an ecommerce client runs a discount and increases ad spend, the agency needs one answer: can the campaign grow without damaging contribution profit, inventory coverage, or cash runway?
Fast answer
Do not approve the promo until the margin math clears three gates.
The discount must leave contribution profit, the required unit lift must be realistic, and ROAS must stay above the new break-even floor with enough cushion for a bad week. If any of those are weak, approve with guardrails, reduce the discount, or reject the spend increase.
The threshold formula agencies should start with
The simplest way to catch a risky discount is to calculate how much extra unit volume the promo needs before contribution profit is preserved.
Required unit lift = discount rate / (gross margin - discount rate)Break-even ROAS = revenue / contribution profit before ad spendPromo decision = margin cushion + realistic lift + ROAS guardrail + inventory coverage
Example: if gross margin is 54% and the client wants a 20% discount, the promo needs about a 59% unit-volume lift to preserve contribution profit. If the last comparable promo lifted units by only 27%, the discount should not be approved as-is.
Five approval thresholds to check before the client call
If the discount leaves too little contribution profit, the campaign can grow revenue while shrinking cash.
A discount should not be approved unless the required unit lift is realistic against prior promo performance.
The more volatile the channel, the more cushion the client needs before increasing spend.
A successful promo can still fail operationally if the reorder point is too late or supplier lead time is uncertain.
If the test burns cash faster than the client can recover, approve a smaller spend window or reject the move.
How to turn the thresholds into a recommendation
Approve
- Current ROAS clears the promo-adjusted break-even floor.
- Required unit lift is below comparable promo history.
- Inventory and cash runway can absorb the base case.
Approve with guardrails
- The move is viable only inside a spend cap or short test window.
- ROAS needs a clear rollback trigger.
- Inventory or cash needs a review date before scaling further.
Reject
- The required volume lift is unrealistic.
- The discount pushes break-even ROAS above actual channel performance.
- The worst case materially shortens runway.
Needs better data
- COGS, refund rate, or fulfillment cost is estimated too loosely.
- There is no comparable promo history.
- Ad spend and inventory data are not current enough to trust.
Client-call language
Example recommendation
Approve a 15% ad spend increase, but reject the 20% discount. The discount requires a 58% unit-volume lift to preserve contribution profit, while the last comparable promo only lifted volume by 27%. If ROAS falls below 2.4x for 7 days, reduce spend back to baseline.
Approval checklist
What is the current gross margin before the discount?
What is contribution profit after COGS, fulfillment, refunds, and payment fees?
How much unit-volume lift is required to preserve contribution profit?
What did the last comparable promo lift by?
What is the break-even ROAS after the discount?
How far above that floor is current ROAS?
How many days of inventory coverage remain if the base case hits?
What is the rollback trigger if ROAS drops or stock gets tight?
What to do next
If the client only needs a quick threshold, run the free calculators below. If the decision needs to be approved by a founder, finance lead, or client stakeholder, turn the math into a client-ready approval report.
Calculate required unit-volume lift before approving a promo.
Free calculatorBreak-even ROASFind the ROAS floor after product cost, fulfillment, and discount pressure.
Paid workflowPromo + Ad Scale Approval ReportPackage the recommendation, guardrails, and client approval status.
SampleView sample client reportSee what the client-facing deliverable looks like.
FAQ
What margin should an ecommerce brand have before running a discount?
There is no universal margin target, but the discount should leave enough contribution profit to cover ad spend, fulfillment, refunds, and cash timing. If the required unit-volume lift is higher than prior comparable promos, the discount should usually be rejected or reduced.
How do agencies decide whether to scale ad spend during a promo?
Agencies should compare current ROAS against the break-even ROAS after the discount, then add a cushion for channel volatility. If ROAS falls below the guardrail for the review window, spend should return to baseline.
Why can a profitable promo still hurt runway?
Cash can leave before profit is realized. Inventory purchases, higher ad spend, fulfillment costs, and refund timing can reduce runway even when the campaign looks profitable on paper.