Summary Overview A markup is a dollar amount added to the cost of products to get the selling price, usually expressed as a percentage of the selling price. Markups are necessary to cover the costs of distribution and allow middlemen to make a profit. Key Concepts Related to Markups Standard Percentage.
Many middlemen use a standard percentage applied to all the products they handle.
This greatly simplifies the pricing process for the middlemen and allows them to concentrate on getting products to customers. Percentages often are the same within a given industry, which encourages all players to increase efficiency and lower costs. That benefits all parties, including consumers. A markup chain is the sequence of markups firms use at different levels in a channel. This process determines the price structure in the whole channel.