Why are BOGO Discounts superior to Percent off Sales?

Many people think that offering a BOGO style discount – buy 1 get 1 free, buy 2 get one free, etc. – is no different from simply offering a percent off sale.  It may well be the same for the consumer – but to the retailer, there is a tremendous difference.  Even though the gross margin is the same, the BOGO sale brings in more profit.

Consider an item which sells for $100 which your store buys for $25.

If you offer a half off sale, and sell one item, you make a $25 profit.  ($50 revenue – $25 cost of goods = $25)

If you offer a buy one get one free sale, and you sell one item, you make a $50 profit ($100 revenue – $50 cost of goods = $50).    What’s more, in this transaction, and you increase the velocity of your inventory.

The gross margin in each case is the same; in the former, 50-25/50 = 50%, in the latter, 100-50/100 = 50%.

Buy one, get a lower priced item for free sales are even more compelling.

If the main item retails for $100 with a cost of $25, and the add-on item retails for $50 with a cost of $12.50, buy one, get the add on free brings in $100 of revenue for a cost of goods sold of $37.50, for a profit of $62.50.  This is a gross margin of $100-$37.50/$100 = 62.5%!

If you run a Zen Cart based business, you can do BOGO style discounts with the following modules:

  • Zen Cart Better Together – Buy two linked items, save money; buy one, get one free; buy one item, get a free gift.
  • Zen Cart Combination Discounts – Buy multiple linked items, get a discount on another product / receive another product free.
  • Zen Cart BOGO Discount – Buy some number of items, get some other number of items at a discount, for all items in the cart (grouping by item, category or without restriction).
  • Zen Cart Big Spender – Spend over a certain dollar amount, get a discount on other products / receive other products free.
  • Zen Cart Big Chooser – Buy multiple items, get a discount on other products or combinations of products, or receive other products or combinations of products free.