Blog · Wallet share and penetration
Compare incremental contribution from a new category with concessions on purchases the customer already makes. Review the whole account basket before approving an expansion offer.
A seller wins a new category by offering a discount across the customer's current basket. The new line shows positive margin, yet the account earns less overall because the concession applies to much more existing revenue. A useful expansion review measures the entire changed relationship, not just the new product.
The discount-approval guide explains how to inspect pricing behavior. This article owns the spillover from an expansion offer into purchases the customer already makes.
Identify the current products, quantities, prices and costs for the same period as the proposed offer. State which purchases are expected to continue without it. That baseline is an assumption about the counterfactual, even when it is informed by recent invoices.
Keep one-time purchases, expiring arrangements and known demand changes separate. Using last year's peak order as the unchanged baseline can exaggerate the discount cost. Equally, ignoring recurring current purchases can make a broad concession appear inexpensive.
Use margin by account to understand the existing relationship. Confirm whether its cost basis includes the costs that change with the proposed expansion. An allocated account margin and an incremental decision margin answer different questions.
Record the new category's candidate revenue, product costs, delivery costs, setup effort and recurring service requirements. List exactly which existing prices the concession changes, its effective date and its conditions. A general description such as “improved terms” is insufficient for financial review.
Separate a fixed price reduction from a rebate contingent on achieved volume. Also distinguish cash timing from profitability: longer payment terms may change working capital without changing the invoiced price. These differences need their own assumptions rather than one blended percentage.
Do not treat a conditional sales amount as a customer commitment. Keep the quote, demand evidence and accepted terms separate.
The DEMO-401 case below is invented. Existing annual revenue is $200,000, with $150,000 of unchanged relevant costs, giving $50,000 contribution. The offer discounts that entire existing basket by 5%, with units and costs unchanged.
| Change | Contribution effect |
|---|---|
| New category: $40,000 revenue less $28,000 relevant costs | +$12,000 |
| Discount on existing $200,000 basket | -$10,000 |
| Additional annual service cost | -$3,000 |
| Net annual contribution change | -$1,000 |
The new basket produces $230,000 revenue: $190,000 existing after discount plus $40,000 new. Relevant costs become $181,000: $150,000 existing, $28,000 new and $3,000 additional service. Contribution is $49,000, below the $50,000 baseline despite higher revenue.
At a 30% new-category contribution margin before that additional service cost, break-even new revenue is ($10,000 + $3,000) / 30% = $43,333.33. This assumes the same discount scope, costs and period. It is not a universal cross-sell target.
If the same 5% discount applied to only $80,000 of existing purchases, the concession would cost $4,000 under unchanged units and costs. The scenario's net contribution increase would be $12,000 - $4,000 - $3,000 = $5,000.
The narrower offer is financially different, but the customer may reject it. Show the alternatives rather than quietly assuming the better case will be accepted. The competing-offer guide keeps alternative packages from being added together.
The SBA's break-even explanation provides general cost and contribution context. The account-specific model and examples here are original illustrations.
Review what happens if the new category reaches only half its candidate sales, or if some purchases replace existing products. Use replacement-versus-incremental growth for that distinction. Avoid counting the same new demand in several offers.
Separate certain concessions from uncertain benefits. A price commitment may apply immediately while new volume grows slowly. Compare aligned periods and show any implementation delay rather than using a full annual benefit against a short-period cost.
Publish baseline contribution, new-category contribution, concession cost, additional costs and downside scenarios. Agree who can accept the tradeoff and what later evidence will be reviewed. A strategically approved reduction in contribution should be visible, not mislabeled as a profitable expansion.
Read the calculation alongside the customer-growth review example. Bring an authorized revenue and cost sample to Covirage contact to agree the basket view and review scope.
No. Review concessions on current purchases, incremental fulfillment and service costs, and any revenue being replaced. Use a consistent contribution basis for the whole change.
With unchanged units and unchanged costs, a dollar of price concession reduces contribution by a dollar. If volume or costs change, model those changes separately.
Show the volume case separately with its evidence and downside scenario. A contractual price concession and an unconfirmed volume assumption have different certainty.