- Markup is always larger than margin.
- Margin drives break-even ROAS.
- Convert between them before comparing.
Two ways to express the same profit
Profit here is $40. Divide by the $100 price for a 40% margin. Divide by the $60 cost for a 66.7% markup. Both are right, and they answer different questions.
Convert between them
Margin equals markup divided by one plus markup. Markup equals margin divided by one minus margin. A 50% markup gives a 33.3% margin, and a 25% margin gives a 33.3% markup.
| Markup | Margin |
|---|---|
| 25% | 20.0% |
| 50% | 33.3% |
| 100% | 50.0% |
| 200% | 66.7% |
Why it matters for ads
A seller who thinks a 50% markup is a 50% margin will set a break-even ROAS of 2.0 when the real figure is 3.0. Every campaign near ROAS 2.5 would then lose money while looking profitable.
Keep one standard
Pick margin for planning and reporting. Use markup only when you set prices from supplier cost, and convert before you share numbers with the team.
What is the difference between margin and markup?
Questions about Unit Economics and Measurement
Which is bigger, margin or markup?
Markup, for any profitable product.
Can margin be negative?
Yes, if cost exceeds price. The product then loses money on each sale.
Do taxes affect either figure?
Sales tax collected for the government is not revenue, so exclude it from price.
Key terms
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