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Guide · Pricing & Margin

Buy One, Get One Economics: Cost Both Units

Evaluate a buy-one-get-one promotion by separating paid units, delivered units, order contribution, and the required lift in orders.

By PriceAndProfit Editorial Updated 3 min read

On this page
  1. Worked calculation
  2. Decision checks and limits
  3. Apply the calculation

A buy-one-get-one-free offer collects revenue for one unit while delivering two. Its economic discount is 50% of the two-unit list value only when both products have the same regular price and the customer would otherwise pay that price for both. For the seller, the immediate question is whether the revenue from the paid item covers the variable costs of both items and the order.

Worked calculation

BOGO order contribution = one paid price − cost of both delivered items − variable order costs

Assume an item lists for $30 and costs $9 to supply. A shipment costs another $4 per order. One regular single-item order contributes $30 − $9 − $4 = $17. A buy-one-get-one order contributes $30 − $18 − $4 = $8. The promotion halves the average selling price per delivered unit to $15, but it reduces contribution per order by approximately 52.9412% compared with the single-item baseline.

If 100 regular single-item orders would generate $1,700 contribution, matching that total requires 212.5 promotional orders. Because orders are whole transactions, 213 promotional orders are needed, producing $1,704 contribution and requiring 426 units of inventory. This is a much larger fulfillment and inventory requirement than the original 100 units. A campaign can therefore create a cash and capacity problem even when every promotional order contributes a positive amount.

Hypothetical worked example
OrderRevenueProduct costShippingContribution
One unit at regular price $30 $9 $4 $17
Two units at regular prices $60 $18 $4 $38
Buy one, get one free $30 $18 $4 $8

Decision checks and limits

Choose the baseline carefully. If customers normally buy two units in one order, the relevant regular contribution is $60 − $18 − $4 = $38, not $17. In that case the offer sacrifices $30 per existing two-unit order. If the free item has a different cost, use that cost rather than doubling the paid item's cost. Packaging and shipping may also rise when two products require a larger box or a different service.

The promotion's effect depends on incremental demand, substitution, and future purchases. A customer receiving two units may delay the next order; that postponed sale belongs in the campaign review. Keep return treatment and inventory availability clear in the offer, and track paid units separately from delivered units in reporting. Average revenue per delivered unit, revenue per order, and contribution per order are all useful, but they answer different questions. None of them establishes long-term customer value without evidence from subsequent transactions.

Apply the calculation

  1. Choose the counterfactual

    Identify whether promoted customers would otherwise buy one item, two items, or nothing during the evaluation period.

  2. Count physical units

    Forecast inventory, packing time, and shipment capacity from all delivered units, including the free ones.

  3. Review later purchasing

    Compare subsequent demand and returns with the baseline so an order pulled forward is not counted twice as incremental growth.

Method references: OpenStax: Contribution margin. Accessed October 22, 2026. All dollar figures are hypothetical worked examples.

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