Markup relates to the process of calculating the price of the product based on its cost. There are two main methodologies to calculate the sales price of your product or service: by market and by markup. Markup pricing takes the cost of producing the product or service (the "cost of goods") and adds a fixed percentage on to come up with the sales price. This method gives you a fixed profit
. percentage and is commonly used in retail pricing. Market pricing however bases the price on what your competitors are charging which also equates to what the market will bear. For example, if your competitors are charging $3 per item, it will be difficult for you to charge $6.00. The "going or market rate" would therefore be $3.