Margin, Markup & Discount

Margin and markup express the same spread from different vantage points. Margin looks forward from selling price: it’s the share of your revenue that remains after cost. Markup looks backward from cost: it’s how much you’ve multiplied cost to reach the selling price. Teams often talk past each other because 40% margin is not the same as 40% markup. If net price is 20 and cost is 12, margin is (20−12)/20 = 40%, while markup is (20−12)/12 ≈ 66.7%.

Discounts amplify the difference. When you run a 10% coupon on a 29 price, the net price becomes 26.10. If cost remains 12.40, your margin and markup both compress: margin = (26.10−12.40)/26.10 ≈ 52.5%, markup = (26.10−12.40)/12.40 ≈ 110.5%. Because margin divides by net price and markup divides by cost, a discount reduces margin faster when prices are already tight. That’s why merchants plan promotions with the margin math, not just a generic “percent off.”

The target margin solver helps you set guardrails. Suppose your cost is 18 and you want to keep 55% margin even during a sale with a 15% discount. The required list price is Cost ÷ (1−0.55) ÷ (1−0.15) ≈ 46.67. If your current list is lower, you’ll dip under target when the promo runs. Alternatively, if the list price is fixed, the max discount calculation tells you the deepest coupon you can offer without breaching the target margin: 1 − Cost ÷ (Price × (1 − Target)).

Use the output three ways. First, sanity-check your current price and discount against margin and markup so your team speaks one language. Second, enter your target margin to compute the required list price that preserves the goal even after discounting. Third, with a fixed list price, use max discount to set coupon caps for affiliates or ads. The small reference table echoes the numbers so you can paste them into a brief or a pricing sheet quickly.

Two final tips keep you on course. Keep costs current—landed cost should include freight, duties, and packaging, not just unit price. And for marketplaces with variable fees, treat those fees as part of cost for margin planning (or use your separate profit calculator to include fees explicitly). Clear definitions prevent “margin drift” when teams toggle between internal cost sheets, sale planners, and creative briefs.

Let list price be P, cost be C, and discount share be d (e.g., 0.10 for 10%). Net price is P_net = P·(1−d). Margin measures profit per unit over net price: Margin = (P_net − C)/P_net. Markup measures the same spread over cost: Markup = (P_net − C)/C. These are connected by Markup = Margin / (1 − Margin) and Margin = Markup / (1 + Markup) when discount is already baked into P_net.

To solve price for a target margin t, require (P·(1−d) − C)/(P·(1−d)) = t. Rearranging gives P = C / (1 − t) / (1 − d). To find the max discount you can offer at a fixed list price and target margin, solve for d in (P·(1−d) − C)/(P·(1−d)) = t, yielding d = 1 − C / (P·(1 − t)). If the result is negative, your list price is too low to ever hit the target; if it exceeds 1, the target is trivially satisfied without discount pressure.