What it means in practice
The denominator is cost, not selling price. A 50 per cent markup therefore does not create a 50 per cent margin. The cost basis must be clear: using purchase cost alone produces a different result from including packaging and variable delivery. Where cost is zero, a markup percentage is undefined. A markup rule can be convenient, but it does not replace checking demand, capacity and total operating economics. A markup of twenty five per cent on cost does not produce a twenty five per cent margin on sales. If cost is ₦800, adding ₦200 creates a selling price of ₦1,000. The markup is twenty five per cent, but the margin is twenty per cent. Naming the denominator prevents a common pricing misunderstanding when colleagues use the two terms interchangeably.
A fictional worked example
Adding ₦3,000 to a ₦6,000 cost gives a ₦9,000 price and a 50 per cent markup, with a margin of one third before omitted costs.
A useful question
Does your team use the word markup when it actually means margin?
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