Price Volume Mix Analysis: How to Present It Visually

2025-03-12

For instance, a misaligned sales mix can result in excess inventory of underperforming products, tying up valuable funds that could be invested in more profitable ventures. To find the sales mix, divide the sales of each product by the total sales and multiply by 100 to get the percentage. An example is selling a bundle of products where each product contributes differently to total sales, like a laptop with accessories. Add up the sales amounts of all products to get the total sales for the period. Collect the total sales figures for each product within a specific period.

Review the percentages or ratios to understand the contribution of each product. This analysis helps in making informed decisions about inventory, pricing, and marketing strategies. Understanding the sales mix of your company’s product line is a value-added activity that can shed light on the priorities of your customer and align those with profit and revenue goals for the business. Use the sales mix and sales mix variance formulas to optimize your sales strategy this quarter. Now that you understand what sales mix is, and how to calculate it for the products your company sells, let’s discuss ways your company can make necessary improvements to sales mix to bring in more profits.

Let’s create an insightful visualization of the data below in Excel by using ChartExpo and glean valuable insights. It highlights how shifts in customer preferences affect your bottom line. Accruing tax liabilities in accounting involves recognizing and recording taxes that a company owes but has not yet paid. This is important for accurate financial reporting and compliance with… Addressing these issues promptly is crucial to maintaining a competitive edge in the market and ensuring sustainable growth.

The higher the result, the greater the percentage of money kept from each dollar of revenue, and the more efficient a business is operating. By contrast, the lower the result, the less efficiently it’s operating, which can indicate overspending on any number of things, such as marketing (see an ROI guide for marketing analytics). ROS is concerned with keeping the money you make through sales, prioritizing operational efficiency.

By understanding which products contribute most significantly to revenue, businesses can allocate resources more effectively and make informed decisions about future investments. For example, if a particular product line is consistently underperforming, management may decide to phase it out or invest in marketing efforts to boost its visibility. Conversely, identifying high-performing products allows for targeted promotions and inventory management strategies that can further enhance profitability.

How do you calculate total sales mix?

To calculate the total sales mix, sum the sales percentages of all products to see their combined share of total sales.
This can have direct implications on the company’s financial performance and profitability as favorable sales mixes often lead to higher margins and increased overall revenue generation.
Regularly updating ratios ensures businesses adapt to changing conditions and sustain profitability.
Analysing and evaluating the sales mix is essential for understanding its impact on overall business performance.
This makes sense because businesses generally carry a variety of products in their inventory.

These insights help refine product portfolios and identify opportunities. It pinpoints whether price, sales volume, or product mix drives the shift. Marketing could actually impact the performance of commodities; marketing is like magic. In our example, jackets were falling behind, so little investment in marketing could improve sales. Sometimes people aren’t aware of the commodity, but marketing fills that gap and creates a name for brand. Before marketing and research tactics that bring in better results, marketing for jackets in Dubai and Saudi Arabia won’t work.

Such predictions in businesses have very little importance; however, they show a slight trend of demand for products and services.
The sales mix is significant because some products or services may be more profitable than others, and if a company’s sales mix changes, its profits also change.
By understanding the sales mix, a company can make strategic decisions about pricing, marketing, and product development to maximize revenue and profit.
Assume, for example, XYZ Hardware generates a net income of $15 on a lawnmower that sells for $300 and sells a $10 hammer that produces a $2 profit.
Sales mix variance, another key metric, examines deviations in the proportion of products sold compared to the planned sales mix.
In this blog post, we will explain what sales mix is, why it is important, and provide an example to illustrate the concept.

What Happens if a Business Has a Poor Sales Mix?

Customer preferences play a significant role in determining the sales mix, as businesses need to adapt their offerings based on consumer demand and segmentation. Revenue-based analysis involves calculating the proportion of total sales generated by each product/service category, providing a clear breakdown of revenue sources. Goodmeetings is an AI-powered platform designed to boost your sales team’s meeting performance. It can significantly improve your sales mix by optimizing your sales strategy through smart data insights and automation.

Return on sales is the ratio of operating profit to net sales, demonstrating how much of your revenue translates to profit. Furthermore, evaluating the sales mix should also involve benchmarking against industry standards or competitors. This comparative analysis can reveal gaps in performance and highlight opportunities for improvement. For instance, if a business’s sales mix heavily favours low-margin products compared to industry peers, it may need to reassess its strategy to enhance profitability. For example, if a particular product line is consistently underperforming despite significant marketing efforts, it may be time to reconsider its place in the sales mix.

How to Use the Price Volume Mix Analysis Formula?

The discrepancy reveals the need for a more detailed analysis, which can be addressed with sales mix variance to better align with sales goals. A clear sales mix helps allocate marketing and sales resources efficiently. If certain products have lower sales, targeted promotions can be launched to boost demand. According to Gartner, companies that use customer behavior data to shape their marketing strategies can boost their profits by up to 15%.

It needs to be chosen to sustain in the market and improve financial performance. Handling multiple product lines can be both favorable and unfavorable at times, depending on the market conditions, customer needs, the economy in the country, etc. Therefore, it needs to be monitored continuously, and it shall be altered from time to time by analyzing the individual product contribution.

Step 2: Go to marketing

Depending on your calculations, sales mix can help you determine the most to least profitable product and whether you sell what is sales mix enough of each to reach your sales targets. Is it because of higher prices, more sold units, or changes in your products? Was it because of higher prices, greater sales volume, or a shift in product mix?

But keep in mind, this number only refers to the number of units sold, not the impact of the units on revenue. Operational efficiency directly impacts your gross profit by reducing unnecessary expenses while maintaining or improving output quality. You can use process automation for routine tasks to reduce manual labor costs and minimize errors, and optimize your resources through better allocation and scheduling. And move to digital tools to monitor and control costs more effectively.

Additionally, engaging with customers through surveys or feedback mechanisms can provide valuable insights into their preferences and expectations, enabling businesses to refine their offerings accordingly. Effectively managing sales mix requires a combination of strategic planning and tactical execution. One common strategy is the implementation of data analytics tools that provide insights into customer purchasing behaviour and preferences. By leveraging data analytics, businesses can identify trends and patterns that inform decisions about which products to promote or discontinue.

For example, if demand for Product Z is expected to decline, companies can shift focus to Products X and Y, which offer higher margins. The weighted average approach refines profitability analysis by accounting for each product’s relative importance within the sales mix. This involves multiplying each product’s contribution margin by its sales mix ratio to calculate a weighted contribution margin.

ETL versus ELT: How to Optimize for Faster Insights

Understanding the nuances of sales mix is essential for businesses aiming to optimise their product offerings and maximise profitability. The concept of sales mix extends beyond mere numbers; it encapsulates the strategic choices that businesses make in response to market demands. The above calculations don’t mean anything if sellers don’t know how to capitalize on results. The company must focus on jackets because item has the potential to improve revenue.

Profit margin is defined as net income divided by sales, and this ratio is a useful tool to compare the relative profitability of two products with different retail sales prices. Assume, for example, XYZ Hardware generates a net income of $15 on a lawnmower that sells for $300 and sells a $10 hammer that produces a $2 profit. The profit margin on the hammer is 20%, or $2 divided by $10 while the mower only generates a 5% profit margin, $15 divided by $300. Profit margin removes the sales price in dollars as a variable and allows the owner to compare products based on profit per sales dollar. If XYZ’s profits are slowing, the firm may shift the marketing and sales budget to promote the products that offer the highest profit margin.

Product A sold 500 units, and that was enough to hit the necessary sales mix percentage. Product B, however, sold 800 units when it needed to sell 895 units to meet its sales mix percentage. That’s a difference of 95 units, or 2 percent in sales mix percentage (14 percent instead of 16 percent). The manufacturing sector demonstrates diverse profitability patterns, with industrial and commercial machinery on the lower end while primary metal industries can reach closer to 8%. This metric reveals your operational efficiency, helping you maximize profits and identify wasteful spending.