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I am sure its possible but can't see how its done.

I would like to set up a promotion where a customer gets 20% off a sku if they enter in a promotion code.

I presume I need to use "Percentage of a price discount" and set the shopping cart rule to be 20% and but it seems to be taking 20% off every product and not just the 1 SKU I want it to take off

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You will need to add it under Actions where you set the discount see image below that should helpSee image

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