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What is Price Volume Mix (PVM)?

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Price Volume Mix Analysis (PVM) is a method that shows how 3 factors affect revenue over time. They are price changes, the changes in the amount sold, and the variety of products sold. It breaks down these factors to show how they impact financial results. Analysing each of these factors helps companies make smarter and profitable decisions.

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It checks each factor to draw performance insights. Following this, businesses make improvements leading to smarter decisions.

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It’s a method that deciphers the impact of various elements. Such as adjustments in prices, quantities sold, and the assortment of products on sale. These factors cause revenue or profit fluctuations within a specific timeframe.

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‍Here’s a closer look at the key components involved:

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1. Price

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This aspect looks at how changes in the selling prices alone influence revenue. When a company increases a product's price, there is a corresponding rise in revenue. This phenomenon is the price effect. It quantifies the financial impact of price changes.

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2. Volume

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This factor evaluates how the changes in the volume of products sold affect revenue. Here, the price effect and the mix effect have no play.

If you sell a greater number of units at an unchanged price, it results in increased revenue. This is the volume effect. It focuses on the financial outcomes after variations in sales quantities.

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3. Mix

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The "Mix Effect" shows how selling different combinations of products or services can impact revenue. Remember to keep the total amount sold and the prices unchanged.

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Imagine a store sells two kinds of items: high-margin items and low-margin items. The former makes more profit per sale, while the latter makes less profit per sale. If the store starts selling more of the high-margin items and less of the low-margin items, the "mix" of what they're selling has changed.

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This change in the mix can lead to more profit for the store. This happens even if the total number of items sold doesn't increase and the prices of the items don't change. This increase in profit, from selling a different proportion of high-profit versus low-profit items, is the "Mix Effect."

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But, in your retail store, if you have a necessary item with moderate pricing, you can lower the price even more. This makes you attract more customers to your store or webshop. This is the Key Value Items Pricing Strategy. Take a look at the KVI pricing in detail to know more about how well it would suit your product and pricing strategy.

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Download Whitepaper: The Ultimate Guide to a Perfect Pricing Strategy

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What is your Current Position in Implementing a Price Volume Mix?

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Let's help you understand your current situation by asking some simple-yet-revealing questions. If you find yourself uncertain about the answers, it's a sign that there's potential for improvement in your setup.

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• Are you aware of your customers' reactions to adjustments in pricing?

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• How do specific customer groups react to various pricing strategies like volume discounts or tiered pricing, when matched with different product types?

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• Can you identify the relationship between your promotional activities, price increases, and profit margins?

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This approach aims to focus on introspective questions. These highlight areas for potential improvement.

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Also Read: Product Bundling Pricing: Boosting Sales and Margin with Strategic Packaging

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Understanding Revenue Variance Tree with Price Volume Mix Analysis

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Variance Tree Analysis is a common tool in understanding revenue performance. It shows how price changes, volume changes and product mix impact revenue variations over time.

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‍It tracks the total amount of revenue gained or lost. Variance Tree Analysis also shows the reason behind the change in revenue. For eg, whether it was the price change, the volume or the mix that generated more revenue or incurred losses.

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Variance tree analysis, otherwise called variance decomposition, breaks down the total variance within a dataset into its key components. This detailed analysis helps you understand the following aspects:

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• Identifying key revenue influencers: You can identify which factors are affecting your sales, profits, or expenses the most. Understanding these elements can show the areas of strength and opportunities for improvement.

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• Prioritise strategic focus: You'll know how each component contributes to revenue variance. Thereby, it enables businesses to divide their efforts and resources. With this, it helps you focus on strategies that promise the greatest impact.

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• Identifying problems and making improvements: It highlights the areas where the performance deviated from your goals. It facilitates problem identification and resolution. It offers valuable data-driven insights that can inform strategic planning and decision-making processes.

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The Variance Tree Analysis is beneficial for businesses with a wide range of products or varying profit margins. It allows leaders to identify areas for strategic adjustments. This includes pricing, product focus, or sales volume optimisation.

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Also Read: STP Marketing Model Pricing

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What are the Uses of Price Volume Mix in Different Sectors?

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Here’s how the revenue variance analysis helps businesses in both B2B and B2C sectors.

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• B2B Context: Variance tree analysis helps businesses understand the factors affecting sales across different customer groups, product lines, or regions, guiding efforts towards the most profitable areas and enhancing sales strategies.

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• B2C Scenario: It supports B2C companies in examining market trends, product performance, and consumer behaviour. It also suggests product development, marketing initiatives, and customer experience improvements.

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Like budget variance analysis, this method breaks down performance indicators into smaller parts. It focuses on actual performance to assess the quality of set goals and targets. This approach compares yearly performance for a clear overview.

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How to Optimise Revenue with Symson's Price Volume Mix Analysis?

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Symson provides you with a comprehensive variance tree analysis. This is an essential tool for understanding the nuances of your financial performance. Here's how it can illuminate different aspects affecting your revenue or profit:

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1. Sales Quantity's Role

We look at how selling more or fewer items affects your bottom line. This tells you if shifting unit sales is behind your revenue ups and downs. This helps you grasp customer demand and your sales efficiency.

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2. Price Adjustments' Impact

This part assesses how tweaking your prices influences your earnings and sales. You will see if your pricing hits the mark with customers and market trends.

3. Product Mix Shifts

We examine how adjusting your product mix impacts your business. For example, balancing high- and low-profit items or prioritizing one product over another. It's about finding the sweet spot in your product lineup to boost profits.

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Symson's comprehensive analysis helps you identify the reasons for revenue and profit changes. You can make strategic decisions based on detailed insights into sales quantity, pricing strategies, and product mix effectiveness.

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Download Now: Top 10 Smart Pricing Solutions for Sustainable Profitability

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What are the Data Requirements for Price Volume Mix Optimisation?

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To assist you in optimising your Price Volume Mix, we need specific types of data from your end. Here's a detailed look at what we need:

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• Historical Data: A comprehensive collection of your past sales records and financial reports. This data will allow us to analyse trends, identify patterns, and understand the historical context of your business's performance. It serves as the foundation for predicting future outcomes and making informed decisions.

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• Segmentation Data: Detailed information about your market segments is crucial. This includes data on customer demographics, product categories, and sales channels, among others. With this data, we can tailor our analysis to different segments of your business. It ensures that strategies address the unique characteristics and needs of each segment.

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• External Data: For a holistic view, we also need data external to your organisation. This can include industry trends, economic indicators, competitor information, and other relevant market data. External data helps us to place your business within the wider market context. It further highlights opportunities for growth and potential challenges.

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In Symson, doing this is easy thanks to our user-friendly pricing system.

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