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Markup pricing

Definition updated on November 2023

What is markup pricing and how does it influence product pricing strategies?

Markup pricing is a pricing method where a set amount or percentage is added to the cost of a product to determine its selling price. This added amount represents the profit margin the seller aims to achieve with each sale. Essentially, it's the difference between the cost of acquiring or producing the item and the price at which it's sold. For sneaker resellers, markup pricing comes into play when determining how much to charge for a pair of sneakers above what they initially paid for them. The markup compensates for business expenses and provides the desired profit. To calculate the selling price using a markup, one would take the original cost of the sneaker and add the markup amount. For example, if a reseller buys a sneaker for $100 and wants a 50% markup, the selling price would be $150 ($100 + $50). It's essential for resellers to consider various factors when setting markups, such as market demand, rarity of the sneaker, competition, and targeted customer segment. While markup pricing provides a clear method for determining prices, it's also crucial for resellers to remain flexible and adjust their markups based on market conditions, ensuring their prices remain competitive while still achieving desired profitability.

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