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How much you add to cost to set price — not the same as margin.
Markup is profit as a percentage of cost, whereas margin is profit as a percentage of price. The same dollar profit gives a bigger markup number than margin number. A $60 item sold for $100 has a 67% markup but a 40% margin — mixing them up is a classic pricing error.
In practice
Markup and margin describe the same gap between cost and price from opposite ends, and confusing them is one of the most expensive arithmetic errors in retail. Markup measures the gap against your cost; margin measures it against your price. A 50% markup is a 33% margin. A 100% markup is a 50% margin. Price a catalogue believing those pairs are interchangeable and you'll be a third short on every line.
Markup is the more natural tool at the point of pricing, because you're working forward from a supplier invoice. Margin is the right language everywhere after that — targets, reporting, ad break-evens — since it's a share of revenue and comparable across products with different costs. Most teams that get burned are using markup in a conversation where everyone else means margin.
Formula
Markup = (Price − Cost) ÷ Cost × 100
Example: $100 price on $60 cost = 67% markup (but 40% margin).
What a good result depends on
Set markup to hit the margin you actually need after all costs.
Common mistakes
- Quoting markup as if it were margin.
- Setting markup on COGS alone, ignoring fees and shipping.
Questions people ask
- How do I convert markup to margin?
- Margin = markup ÷ (1 + markup). A 60% markup is 0.6 ÷ 1.6 = 37.5% margin. Going the other way, markup = margin ÷ (1 − margin).
- Which should I use for pricing?
- Markup is easier when you're pricing up from a known cost. Convert to margin before you set ad targets or report performance, because every downstream metric is expressed as a share of revenue.
- Is a keystone markup still a useful rule?
- Doubling cost is a quick sanity check, not a strategy — it ignores fees, shipping, returns and what the market will bear. Treat it as a starting point, then test it against your actual contribution margin.