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Glossary

Markup vs margin

Markup is profit as a share of cost, while margin is profit as a share of the selling price, so margin is always the smaller figure.

By Berend Vrakking, founder of Product Metrics. Updated 7 October 2026.

Formula

Markup = (price − cost) ÷ cost · Margin = (price − cost) ÷ price

To convert: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). Both use the same profit. Only the number you divide by differs.

Example

One product, two percentages
StepValue
Cost€60.00
Selling price (excl. VAT)€100.00
Profit (€100.00 − €60.00)€40.00
Markup (€40.00 ÷ €60.00)66.7%
Margin (€40.00 ÷ €100.00)40%

The same €40.00 of profit is a 66.7% markup and a 40% margin. Illustrative data.

For one product, and for an account

Many shops set a price per product as cost plus a markup. Return on ad spend works from margin, because break-even ROAS is 1 ÷ margin. A 50% markup is a margin of 33.3% (0.50 ÷ 1.50), so if product cost were the only cost, break-even ROAS would be 3. Reading that 50% as a margin gives 2, and every sale at a ROAS between 2 and 3 would lose money.

The gap grows with the percentage, and it differs per product when each has its own markup. Product Metrics switches from ROAS to POAS on margin data, so connect margins rather than markups.

Common mistake

Typing the 50% from the price list into a field that asks for margin. The real margin is always smaller than the markup, so the break-even ROAS comes out too low.

Questions

What is the difference between a 30% margin and a 30% markup?

On a product that costs €70.00, a 30% markup gives a price of €91.00 and a profit of €21.00, which is a margin of 23.1%. A 30% margin gives a price of €100.00 and a profit of €30.00, which is a markup of 42.9%. Illustrative data.

Is a 20% margin the same as a 25% markup?

Yes. A product that costs €80.00 and sells for €100.00 makes €20.00 profit. That is 20% of the price (margin) and 25% of the cost (markup). Illustrative data.

Should I use markup or margin?

Use markup if you set prices as cost plus a percentage. Use margin to judge ads, because break-even ROAS is 1 ÷ margin. Convert a markup to a margin with markup ÷ (1 + markup): a 25% markup is a 20% margin.

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