Promotion math
Gift with purchase profit.
Enter the gift cost, how many promotion orders earn it, and how far the threshold lifts order value. See profit per order, break-even orders and the order value you need.
Profit per promotion order = order value x gross margin - share of orders earning the gift x gift cost. The example below clears $29.55 per order and needs 921 orders to beat a normal period.
Your numbers
Result
Worked example
A store normally takes 1,000 orders of $60.00 at a 45% margin, which is $27,000 of gross profit. It offers a $6.00 gift above a threshold. During the promotion it expects 1,100 orders averaging $75.00, and 70% of them earn the gift, so the gift costs $4.20 per order, 5.6% of order value. Each order earns $75.00 x 45% - $4.20 = $29.55. After $200 of promotion cost the promotion earns 1,100 x $29.55 - $200 = $32,305, which is $5,305 more than normal. It breaks even at 921 orders (rounded up), or at an average order value of $64.28 if you hold 1,100 orders.
How it works
Gift cost per order = gift cost x share of orders that earn it. Only orders over the threshold receive the gift, so the cost is spread across every promotion order. Include everything you pay for the gift: purchase, packaging, and any extra postage or weight it adds.
Profit per order = order value x gross margin - gift cost per order. The gift is treated as a cost on top of normal margin, not a discount.
Break-even orders = (normal-period profit + fixed cost) / profit per promotion order. The break-even order value solves the same equation for order value when your order count is fixed.
The honest test is whether the threshold lifts the average order. A gift only helps when shoppers add items to reach it; if they would have spent that much anyway, the gift is a pure cost. Compare the order value you enter to a real before figure.
Sources
Retrieved 2026-10. The formulas are arithmetic on your inputs; the sources below are the rules and standards this page refers to.
- FTC Guide Concerning Use of the Word "Free" and Similar Representations, 16 CFR Part 251: a "free" gift with purchase should be offered against the regular price of the item bought, and all terms and conditions, such as the spend threshold, should be disclosed clearly and conspicuously at the outset of the offer (section 251.1(b) and (c)).
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FAQ
What should count as the gift cost?
What the gift costs you landed in your hands, plus packaging and any extra shipping weight. Do not use the gift retail price: the cost to you is what leaves your bank account.
How do I set the threshold?
Pick a threshold a little above your normal average order so it pushes shoppers to add an item. Then enter the order value you expect afterwards and check that the break-even order value is below it.
Why is the share earning the gift not 100%?
Not every promotion order reaches the threshold. Only the ones that do receive a gift, so the average cost per order is lower than the gift cost.
Does a gift change the legal requirements?
In the US the FTC "Free" guide asks that the spend threshold and other conditions be disclosed clearly at the start of the offer. Check the rules that apply where you sell.