It is a crucial exercise that allows you to invest more resources and energy in the most profitable product range and to identify lost sales opportunities in different customer segments.
In this article, we'll explain how to calculate, track, and improve your sales mix easily and accurately to achieve higher revenues .
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What is the sales mix ?
For companies with a broad product portfolio, sales mix calculations determine the proportion of each product sold. The sales mix will identify which individual products have the highest profit margin, which ones generate a lower percentage profit margin, and whether you are selling enough of each to meet your total sales goals.
If a company sells 100 units of Product A and 200 units of Product B, the basic sales mix is 33.33% Product A and 66.67% Product B. You could also say that the product mix ratio is 1:2.
Companies use the sales mix as a tool to maximize profitability and ensure they allocate resources to the right products within their product range.
Suppose you run a B2B model that sells five services. Calculating the sales mix can help you determine:
Net income for each service or product line
The difference between actual sales and sales budget
How variable costs (e.g., raw materials or labor) have affected sales
With this information, you can tell if you're selling enough of each product or service to meet your desired sales volumes. You can also adjust your sales strategies, marketing plans , and pricing strategies to identify any disparities.
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Why do companies need to know their sales mix ?
A company's sales mix helps it understand which products or departments generate the most profit and whether its sales teams are meeting sales goals .
Every business has limited time to create, market and sell products, so making cost-effective decisions and focusing on the right products can increase your unit sales volumes.
Let’s say you produce and sell two types of custom office furniture. You’re in a competitive market with a small team, so you need to optimize your product positioning matrix.
Your two products are:
Product A : High-end ergonomic chairs designed to offer maximum comfort and support during long work days.
Product B: Customizable modular tables that customers can easily configure to fit any space.
Your ergonomic office chairs account for 33% of your tota overseas chinese in canada data sales mix and 45% of your revenue. Your most popular modular desks account for 67% of your sales mix and 55% of your gross margin.
Your ergonomic office chairs have a higher profit margin. However, they are also more complex and take longer to manufacture. Your modular desks have a shorter production time per unit and lower variable costs.
Calculating your sales mix shows that you don’t always need to sell more of your most expensive products to be more profitable. Instead, it can direct your sales team ’s attention to the right products.
Product mix information and sales metrics help business owners and leaders more accurately visualize and allocate future resources to products that positively impact their bottom line.
