See the difference between markup % and margin % for the same product. The two are not interchangeable and mixing them up loses money.
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A 50% markup is not a 50% margin. It's a 33% margin. A 100% markup is a 50% margin. The two percentages are not interchangeable, and confusing them causes real pricing errors that cost real money.
Markup is profit expressed as a percentage of cost: (price − cost) ÷ cost × 100.
Margin is profit expressed as a percentage of price: (price − cost) ÷ price × 100.
Because price is always larger than cost, the same dollar profit looks like a bigger percentage when divided by cost (markup) than by price (margin). Margin is the number you want for financial analysis — it's what your accountant means by "margin."
If you tell a supplier "I need a 50% margin" and they hear "50% markup," they'll quote you a price that's wrong by a factor of 1.5×. If you set retail prices by saying "let's add 50% to cost" (markup) but tell investors "we have 50% margins" (margin), your numbers won't reconcile and you'll lose credibility.
Read our full article on markup vs margin for the worked examples.
| Metric | Formula | Value |
|---|---|---|
| Profit per unit | $40 − $20 | $20.00 |
| Markup | $20 ÷ $20 | 100.00% |
| Margin | $20 ÷ $40 | 50.00% |
| Difference | 100% − 50% | 50 percentage points |
Same $20 profit. Two different percentages. The 50-percentage-point gap is the source of more pricing confusion than any other single number in ecommerce.
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