Glossary
Markup vs Margin
Markup and margin are two ways of describing the same profit — and they give different numbers. Confusing them is one of the most common pricing mistakes.
What it means
Margin is profit as a share of the selling price: margin equals selling price minus cost, divided by selling price. Markup is the increase over the cost price: markup equals selling price minus cost, divided by cost. The same sale has both, and they are never equal unless the profit is zero. A product that costs 60 and sells for 100 has a profit of 40: a margin of 40 percent, because 40 is 40 percent of the 100 selling price, and a markup of about 67 percent, because 40 is about 67 percent of the 60 cost. Markup is always the larger figure for a profitable sale, and the gap between them grows as the profit grows.
Example
As an illustration, suppose you want a 40 percent margin on a product that costs 60. Cost-plus thinking can mislead here: adding a 40 percent markup gives a price of 84, and the margin on that sale is only about 29 percent — 24 divided by 84. To get a true 40 percent margin, the price must be 100, which is a markup of about 67 percent. The pricing calculator on this site works in margin terms precisely to make this mistake visible before the price is set.
Common misunderstandings
The most common misunderstanding is using the two words as if they meant the same thing — saying margin when the figure is markup, and pricing on the wrong one. The second is quoting margin without saying which costs are counted: a margin on product cost alone is a gross margin, and it is not the profit after fees, shipping, advertising and refunds. The full-cost margin is the one that decides whether a sale makes money.
Related terms
Learn more
- Pricing Digital Products
- Store Profitability
- Digital Product Pricing Calculator
- Dropshipping Profit Calculator
- Digital Product Creation
- Back to the full glossary
Last checked: 14 November 2026.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is the increase over the cost price. A product costing 60 and selling for 100 has a 40 percent margin and a 67 percent markup.
Why does the difference matter when pricing?
Because pricing on the wrong one sets the wrong price. A 40 percent markup on a 60 cost gives a price of 84 — but the margin on that sale is only about 29 percent, not 40.
Which is larger, margin or markup?
Markup, for any profitable sale. The profit is a larger share of the smaller cost figure than of the larger selling price.
What is the difference between gross margin and net margin?
Gross margin counts product cost only; net margin counts everything — fees, shipping, advertising, refunds. The full-cost margin is the one that decides whether a sale makes money.