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Relationship between Margins and Markups

Relationship between Markup / Margin:

 

Margin = Profit / Revenue
Margin = Markup / (1 + Markup)
Markup = Margin / (1 - Margin)

 

Margin of 12% on $100 means $88 Ad Spend + $12 in pocket
Markup of 12% on $100 means $100 Ad Spend + $12 in pocket

 

Both give the same $12 in your pocket, but with margins the advertiser spends $100 and with a Markup the advertiser spends $112

 

Formula for calculating cost with a Markup:
Total Cost to Advertiser = Actual Cost ( 1 + Markup)

(Inverted:)
Actual Cost = Total Cost to Advertiser / ( 1 + Markup)

 

Formula for calculating cost with a Margin:
Total Cost to Advertiser = Actual Cost / (1 - Margin)

(Inverted:)
Actual Cost = Total Cost to Advertiser * (1 - Margin)

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