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Profit margin vs markup: how to tell the difference

2026-05-14 04:30 · Pricing Guides

Learn the difference between margin and markup before you set product prices.

Profit margin and markup are easy to confuse, but they answer different questions. Margin shows profit as a share of revenue. Markup shows how much you add on top of cost.

If a product costs $50 and sells for $100, the markup is 100 percent because you doubled the cost. The margin is 50 percent because half of the revenue remains after cost.

The mistake many sellers make is using markup when they really want to measure margin. That can lead to prices that look healthy on paper but leave too little room for ads, shipping, or discounts.

Use a margin calculator when you want to understand actual profitability. Use markup when you are deciding how much to add to a base cost.

A simple rule helps:

- margin compares profit to revenue
- markup compares added value to cost

If you sell on marketplaces or across regions, keeping both numbers straight will make pricing reviews much easier.