highermargin

Higher margin is a term used in business to describe products, services, or business units that generate a higher profit relative to revenue. It is commonly contrasted with low-margin or commoditized offerings and is a key consideration in pricing, product strategy, and portfolio management.

Margins are typically measured as gross margin or operating margin. Gross margin equals (revenue minus cost of goods sold) divided by revenue, while operating margin equals operating income divided by revenue. Higher-margin items usually arise from lower variable costs, premium pricing, or value-added features.

Strategies to achieve higher margins include differentiating products through branding or quality, increasing prices where customers perceive higher value, and reducing costs through supply chain optimization, automation, or selective outsourcing. Bundling products and services or offering maintenance, support, or analytics can also raise willingness to pay.

Industries with higher average margins include software, pharmaceuticals, professional services, luxury goods, and some business-to-business offerings. By comparison, commodity-driven sectors tend to rely on high volume and price discipline but carry thinner margins.

In practice, managers analyze margin by product, customer segment, channel, or geography to optimize mix and profitability. Margin can be affected by input costs, competitive pressure, and demand; long-term success often requires balancing margin with market share and strategic objectives.

See also: gross margin, operating margin, contribution margin, product mix optimization.