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TERM
Depth of Discount
The size of a price cut during promotion.
Definition
Depth of discount is the percent drop from base price to promo price.
How to Calculate
Subtract promo price from base price, divide by base price, multiply by 100.
Why it Matters
Helps balance lift versus margin.
Key Advantages
Comparable across items and sizes.
Example
$5.00 to $4.00 is a 20 percent depth.
Use it to
Express the reduction from regular price as a percent to standardize deal intensity. Compare depths across retailers and periods to find efficient thresholds that move units without excess subsidy.
