Product margin
Product margin
Revenue
The profit on a product after its direct costs, shown as a share of its price.
What is Product margin?
Product margin shows how much of each sale you keep after paying for the product itself. It is calculated per product, so you can see which items earn the most and which barely break even.
Margin is not the same as markup. Margin divides profit by the price. Markup divides profit by the cost. The same product can have a 65% margin and a markup of about 186%, so be sure which one a report is using. Discounts come straight out of margin, which is why subscribe-and-save discounts should be set with each product's margin in mind.
Formula
Product margin = (Price - Product cost) ÷ Price × 100
Markup = (Price - Product cost) ÷ Product cost × 100
Example
For example, a product sells for $40 and costs $14 to make. Its margin is ($40 - $14) ÷ $40 = 65%. A 15% subscription discount lowers the price to $34, and the margin to about 59%.
Why Product margin Matters
Knowing each product's margin tells you where you can afford discounts and which products to promote.
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