Margin vs Markup: How to Price Products Correctly

Two ways to describe the same profit

Suppose a product costs you ₹600 and you sell it for ₹900. Your profit is ₹300.

Markup compares profit with cost: 300 ÷ 600 = 50%. Margin compares profit with the selling price: 300 ÷ 900 = 33.3%. Same sale, two different percentages.

Why the difference matters

If you want a 50% margin but add a 50% markup, you end up with only a 33% margin. On a whole catalogue that gap can wipe out the money meant for rent, salaries and advertising. Decide which measure your business uses and stick to it.

Finding the price for a target margin

Formula: selling price = cost ÷ (1 − target margin).

For a 40% margin on a ₹600 cost: 600 ÷ (1 − 0.40) = ₹1,000. Check: profit ₹400, and 400 ÷ 1,000 = 40%.

Count every cost

Margins are only as accurate as the cost you enter. Include:

• Purchase or manufacturing cost per unit.
• Packaging and shipping.
• Marketplace commission and payment gateway fees.
• Returns and damaged stock, as an average per unit.

Discounts and margin

A 20% discount on a product with a 33% margin removes most of your profit, not a fifth of it. Before running a sale, enter the discounted price in the calculator to see what margin is left.