Calculating Discounts Correctly
Discounts are everywhere: in clearance sales, online promotions, negotiating at flea markets. But not every discount is as good as it sounds. In this article, you'll learn the formulas and tricks to properly evaluate discounts.
The Basic Discount Formula
Discounted Price = Original Price x (1 - Discount / 100)
Example: A sweater costs EUR 89.99 regularly and is reduced by 30%. New price: 89.99 x 0.70 = EUR 62.99. You save EUR 27.00.
Stacked Discounts (Discount on Discount)
With stacked discounts, they are applied sequentially, not added. 20% + 10% is NOT 30%, but:
Final Price = Original Price x (1 - 0.20) x (1 - 0.10) = Original Price x 0.80 x 0.90 = Original Price x 0.72
This results in a total discount of 28%, not 30%. The difference may seem small but becomes significant with larger amounts.
From Discounted Price to Original Price
Sometimes you only see the reduced price and the discount percentage. The formula is: **Original Price = Discounted Price / (1 - Discount / 100)**
Example: An item costs EUR 75 after a 25% discount. Original price: 75 / 0.75 = EUR 100.
Psychological Discount Traps
**Anchoring effect:** A product is artificially priced higher to make the discount appear larger.
**Percent vs. absolute:** '20% off' often sounds better than 'save EUR 10', even though the absolute amount is what matters.
**Double discounts:** 'Up to 70% + 20% extra' sounds like 90%, but it's actually only 76% (0.30 x 0.80 = 0.24, so 76% discount).
When a Discount Is Actually Worth It
Always calculate the absolute amount you save. Ask yourself: Would I have bought this product at full price? Only then is the discount a real saving. Use our percentage calculator in 'Markup/Discount' mode to quickly calculate the reduced price.