The one-word difference that changes everything
Margin = profit ÷ selling price × 100 — profit measured against what the customer pays. Markup = profit ÷ cost price × 100 — profit measured against what the business paid. Same numerator (profit), different denominator — and that denominator difference is the entire distinction between the two terms.
A worked example showing the gap
A product costing ₹100 to produce, priced for a 30% MARGIN: selling price = cost ÷ (1 − margin%) = 100 ÷ 0.70 = ₹142.86, a profit of ₹42.86. The same ₹100 cost, priced for a 30% MARKUP instead: selling price = cost + (cost × markup%) = 100 + 30 = ₹130, a profit of ₹30. Same starting cost, same "30%" figure, but a ₹12.86 difference in both the final price and the profit — purely from which metric "30%" refers to.
Why margin is always the smaller percentage-equivalent number
For any given cost and selling price, the margin percentage is always smaller than the markup percentage on that same pair, because margin divides by the larger number (selling price) while markup divides by the smaller number (cost price) — dividing the same profit by a bigger denominator always gives a smaller percentage. This is a useful sanity check: if you ever see a margin percentage reported as larger than the markup percentage for the same transaction, one of the two was calculated incorrectly.
Why this distinction matters for setting prices
If a business wants to guarantee a specific profit margin (a common target when pricing for target profitability as a share of revenue), pricing using the markup formula instead will systematically undershoot that target — a 30% markup only achieves about a 23.08% margin, not 30%. Conversely, achieving a genuine 30% margin requires the larger 42.86% markup shown above. Confusing the two when setting prices is a common, costly mistake for anyone pricing goods for the first time.
Which one is used where
Retailers commonly think in markup when pricing individual items relative to wholesale cost (a "50% markup" over wholesale cost is intuitive shelf-pricing language). Finance and accounting typically report margin, since it's expressed as a share of revenue — the number that ties directly into overall profitability and revenue-based financial statements. Knowing which convention a specific business, industry, or report is using matters before comparing numbers across sources.