Markup
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is markup?
Markup is the amount added to an item’s cost to set its selling price, expressed as a percentage of cost: markup % = (price − cost) ÷ cost. An item that costs $75 and sells for $100 has a 33% markup.
How it works
Markup and gross margin start from the same dollar difference but divide by different numbers: markup by cost, margin by price, so the $75 item above has a 25% margin. Applying a margin target as if it were a markup prices too low; to hit a target margin, divide the cost by (1 − target margin).
Markup example
Asked for a 30% margin on a $70 item, a new rep adds 30% and quotes $91, which is a 23% margin. The price that gives 30% is $70 ÷ 0.70 = $100.
Often confused
Related terms
- Gross marginGross margin is the share of sales a distributor keeps after paying for the goods it sold: gross margin % = (revenue − COGS) ÷ revenue.
- Cost-plus pricingCost-plus pricing sets a customer’s price as the distributor’s cost plus a fixed percentage or amount, such as cost plus 12%.
- List priceList price is the published, undiscounted price of a product, set by the manufacturer in its price book.
