---
title: "Markup: definition, formula and example"
description: "Profit as a share of cost, where margin is profit as a share of price. The same product has a markup far larger than its margin."
url: https://offersuite.io/glossary/markup
updated: 2026-10-13
---

# Markup

Profit as a share of cost, where margin is profit as a share of price. The same product has a markup far larger than its margin.

## In plain words

Markup is how much a price sits above a cost, as a share of the cost. A product bought for $10 and sold for $25 has a markup of 150%.

Margin describes the same gap as a share of the price, which makes it 60% for that product. The two are easy to confuse, and the confusion is expensive: a discount is a share of price, so it has to be held against margin, never against markup.

## Formula

- Markup = (price − cost) ÷ cost
- Margin = (price − cost) ÷ price
- Margin = markup ÷ (1 + markup)

## Worked example

The coffee bag sells for $40.00 and costs $12.00. Its markup on that cost is 233.3%, and its gross margin is 70.0%: the same gap, measured against two different bases.

Neither is what the order keeps. With fulfilment, the label, fees and the refund reserve counted, the engine puts its contribution margin at 38.4%.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## A 100% markup is not a 100% margin

Doubling the cost gives a 100% markup and a 50% margin. A margin can never reach 100% while the product costs anything. A brand that reads its markup as margin will think a 40% discount leaves plenty, when it may leave nothing.

## Using it

Use markup when you set a price from a cost, the way a buyer or a wholesaler does. Switch to margin as soon as the question involves the selling price: discounts, fees charged on revenue, and ad spend. And remember both are computed on the product cost alone, before any cost of getting the order out.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Bundle pricing calculator: shipping, subscriptions** Price a bundle against a single unit, one-time and subscribed, with the shipping and pick costs it saves, and the conversion it can lose and still earn as much.](https://offersuite.io/calculators/bundle-pricing)
- [Glossary **Gross margin: definition, formula and example** Revenue minus the cost of the goods sold, as a share of revenue. The accounting margin: it leaves out shipping, fulfilment and payment costs.](https://offersuite.io/glossary/gross-margin)
- [Glossary **Cost of goods sold (COGS): definition and formula** What the units you sold cost you to make or buy. In an offer calculation it is charged per unit, gifts included, at the cost in effect on the order's date.](https://offersuite.io/glossary/cost-of-goods-sold)
- [Glossary **Contribution margin: definition and formula** What an order keeps after every cost that grows with it: product cost, fulfilment, shipping, card fees and refunds. The number an offer should be judged on.](https://offersuite.io/glossary/contribution-margin)
- [Glossary **Percentage discount: definition and formula** A share taken off the price. It comes off revenue in full while most costs stay put, so it removes a much larger share of the margin.](https://offersuite.io/glossary/percentage-discount)