Keystone pricing

Keystone pricing sets the retail selling price at twice the product's wholesale cost. This gives a 100% markup and a 50% gross margin before other costs, but may be unsuitable where competition or expenses require a different price.

The method is a simple pricing rule rather than a detailed profitability model. It works only where the resulting price is commercially acceptable and leaves enough room for discounts and operating expenses. Freight, handling or other buying costs may need to be included in the cost base before applying the rule.

For example, an item bought for £15 would be priced at £30 under keystone pricing. The £15 difference is a 100% markup on cost but a 50% gross margin on sales. If the item later sells for £24, its actual margin will be lower, even though the original price followed the rule.