The BOGO Promotions Math

Buy-one-get-one promotions are the restaurant industry’s favourite double-edged sword. They fill seats and empty inventory with equal efficiency. Yet for every coffee shop that turns BOGO into a customer acquisition engine, another watches margins evaporate. The difference is rarely luck. It is mathematics.

Understanding when a 1+1 promotion generates profit—and when it quietly bleeds money—requires more than intuition. It demands a clear-eyed look at margins, customer behaviour, and the often-overlooked concept of incremental sales. This analysis provides the formulas, frameworks, and real-world scenarios that separate strategic promotions from expensive mistakes.

Key Takeaways

• Margin threshold matters: BOGO promotions typically require product margins above 40% to remain profitable after accounting for the free item.
• Incremental sales are everything: If existing customers simply shift their purchasing patterns rather than buying more, the promotion destroys value.
• Time-boxing prevents brand erosion: Promotions exceeding four weeks risk training customers to expect discounts permanently.
• High-margin items (coffee, alcohol, desserts) are ideal candidates; low-margin dishes (salads, main courses with expensive proteins) rarely survive the math.

Digital loyalty systems transform one-time promotions into measurable, data-driven strategies with trackable ROI.

The Core Mathematics: What 1+1 Actually Costs

A BOGO promotion is, in effect, a 50% discount when customers take both items. The fundamental question is whether your margins can absorb this while still generating profit per transaction.

The basic margin formula:

Margin = Selling Price − Cost of Goods Sold (COGS)

For a BOGO promotion, you must calculate the margin on the combined transaction: revenue from one item minus costs for two items.

BOGO Margin = Price × 1 − COGS × 2

Consider a coffee priced at €4 with a COGS of €0.80. Normal margin: €3.20 (80%). Under BOGO: €4 revenue minus €1.60 costs equals €2.40 profit. The promotion remains viable because coffee’s exceptional margin absorbs the discount.

Now consider a salad at €12 with €8.50 in ingredient costs. Normal margin: €3.50 (29%). Under BOGO: €12 revenue minus €17 costs equals a €5 loss per transaction. The restaurant pays customers to take salads.

The breakeven margin threshold for BOGO sustainability is approximately 50%. Below this, every promotional transaction generates a loss. Above it, the question becomes whether volume increases justify the margin compression.

When 1+1 Promotions Generate Value

BOGO works under specific, identifiable conditions. Understanding these scenarios prevents the common mistake of applying promotions indiscriminately.

Customer Acquisition

When the primary goal is introducing new customers to your establishment, BOGO functions as a marketing expense rather than a pricing strategy. The calculation shifts from per-transaction profit to customer lifetime value. If your average customer returns 8 times annually with a €25 average order, acquiring them at a €5 promotional loss remains profitable within two visits.

Dead Hour Activation

Restaurants face significant fixed costs regardless of traffic. A café empty between 2pm and 5pm still pays rent, utilities, and staff. BOGO promotions restricted to these windows can convert zero-revenue hours into profitable ones, even at compressed margins. The incremental revenue—money that would not exist without the promotion—represents pure gain against fixed costs already being incurred.

High-Margin Product Categories

Beverages (particularly coffee, tea, and alcohol), desserts, and side dishes typically carry margins between 60% and 85%. These categories can sustain BOGO promotions while remaining profitable. A cocktail with a 75% margin retains 50% margin under BOGO—still healthier than many menu items at full price.

Inventory Management

Perishable items approaching expiration represent sunk costs. BOGO promotions on these items recover partial value rather than accepting total loss through waste. The alternative to selling two pastries at a slight profit is disposing of both at complete loss.

When 1+1 Promotions Destroy Value

The scenarios where BOGO fails share common characteristics: structural margin problems, cannibalisation of existing sales, or long-term brand damage.

Low-Margin Items

Products with margins below 40% cannot mathematically sustain BOGO promotions. Main courses with expensive proteins, imported ingredients, or labour-intensive preparation fall into this category. A €28 steak with €18 in costs generates €10 margin normally but loses €8 per BOGO transaction.

Peak-Hour Promotions

Running BOGO during periods when your restaurant already operates at capacity creates pure cannibalisation. Customers who would have paid full price receive discounts. Queue times increase, potentially driving away full-price customers. The promotion displaces revenue rather than generating it.

Absence of Measurement Systems

Without robust tracking, restaurants cannot distinguish incremental sales from shifted sales. The kitchen sees increased orders; management assumes success. But if those orders came from Tuesday customers who simply waited until Wednesday’s promotion, the restaurant traded margin for the illusion of growth.

Extended Duration

Promotions lasting beyond four weeks transition from tactical tools to permanent price reductions in customer perception. Research consistently shows that extended discounting erodes willingness to pay at full price, creating a cycle where promotions become necessary to maintain baseline traffic.

Essential Metrics for Promotion Evaluation

Effective promotion management requires tracking specific indicators before, during, and after campaigns.

Return on Investment (ROI)

ROI = (Incremental Profit − Promotion Cost) / Promotion Cost × 100%

An ROI below 100% indicates the promotion cost more than it generated. Target benchmarks vary by objective: customer acquisition campaigns might accept lower ROI if lifetime value projections justify the initial loss.

Average Order Value (AOV)

BOGO promotions should ideally increase AOV by encouraging customers to purchase complementary items alongside the promotional offer. If AOV declines during promotions, customers may be substituting the BOGO offer for items they would otherwise have purchased—a clear warning sign.

Incremental Sales Ratio

This metric isolates true promotional impact by comparing period-over-period sales growth against baseline trends. If your restaurant typically sees 5% weekly variation, a promotional week must exceed this threshold significantly to demonstrate genuine incrementality.

Strategic Implementation Framework

Converting these insights into operational practice requires systematic processes.

1. Product Selection: Limit BOGO to items with documented margins above 40%. Create an internal ranking of promotion-eligible products based on margin analysis.
2. Time Restriction: Define specific promotional windows—ideally during documented low-traffic periods. Avoid weekends and meal rush hours unless customer acquisition is the explicit, budgeted goal.
3. Duration Limits: Cap promotional periods at 2–4 weeks. Longer campaigns require explicit justification and monitoring for brand perception shifts.
4. Measurement Infrastructure: Implement digital loyalty systems that track customer behaviour at the individual level. This enables calculation of true incrementality rather than aggregate volume changes.
5. Alternative Mechanics: Consider cashback programmes or loyalty points instead of direct discounts. These mechanics encourage return visits while preserving full-price transactions in the current visit.

The Technology Factor: Digital Loyalty as Promotion Infrastructure

Modern loyalty platforms transform promotion management from intuition-based decisions to data-driven strategy. Systems like Eatery Club’s loyalty module enable restaurants to configure promotions with precision: specific products, time windows, customer segments, and automatic tracking of results.

The “Piggy Bank” feature exemplifies sophisticated promotional mechanics—customers accumulate progress toward rewards through repeat purchases of specific items, encouraging return visits without immediate margin sacrifice. A customer buying nine coffees at full price before receiving the tenth free represents fundamentally different economics than BOGO: 90% of revenue captured versus 50%.

Digital systems also enable A/B testing of promotional mechanics, customer segmentation for targeted offers, and real-time adjustment based on performance data. The marginal cost of this precision approaches zero once infrastructure is established.

BOGO promotions occupy a specific, limited space in effective restaurant marketing. They work when margins can absorb the discount, when timing targets incremental traffic, and when measurement systems capture true impact. They fail when applied indiscriminately, extended indefinitely, or deployed without the infrastructure to learn from results.

The restaurants that extract consistent value from promotional mechanics share a common trait: they treat promotions as measurable investments rather than hopeful gestures. In an industry where margins determine survival, this mathematical discipline separates sustainable operations from businesses slowly subsidising their own decline.