What makes a local coupon profitable?
A profitability framework for local coupons that starts with gross margin and works forward to a break-even redemption rate.
| Avg. ticket | Gross margin | Profit per redemption | Redemptions to break even |
|---|---|---|---|
| $25 | 60% | $15 | 34 |
| $50 | 50% | $25 | 20 |
| $100 | 40% | $40 | 13 |
| $250 | 30% | $75 | 7 |
The formula
Break-even redemptions = campaign cost ÷ (average ticket after discount × gross margin %). Anything past break-even, plus repeat visits from those new customers, is profit. Anything below it means the campaign paid for awareness rather than a sale.
Discount depth matters more than headline
A 50% off headline that leaves you with 15% margin needs three times the redemptions of a 20% off headline that preserves 45% margin. Bundle offers, added services and 'free with purchase' formats often beat straight percentage discounts because they protect margin.
Count lifetime value, but honestly
Repeat visits matter — a first-time customer at a restaurant who returns twice more effectively triples the payback. But do not use lifetime value to justify a losing offer; measure repeat visits from redeemers before crediting them.