In a recent live webinar for PricingBrew Journal subscribers, we explored the topic of customer and product mix.
For over an hour, we illustrated in detail how relatively small changes in mix can boost performance along multiple dimensions. We walked through the essential steps for getting proactive about managing mix, rather than just taking it as it comes. And, of course, we shared numerous tips, tricks, and even some “gotchas” practitioners will want to avoid.
Along the way, we also highlighted how mix shifts typically manifest, relative to pricing outcomes.
You see, changes in mix can generate massive top- and bottom-line impacts without affecting certain pricing metrics very much at all. For example, realized prices at a SKU level can be exactly the same from one period to the next, while the quantities sold at those prices can be dramatically different—generating huge bumps in revenue and profit contribution.
In other words, you can sell 25% more of the most advantageous products this quarter, while commanding exactly the same prices for each of those products as you did last quarter.
Naturally, this dynamic caused some attendees to wonder whether or not Pricing would actually get credit for any mix-driven improvements they had a hand in.
Imagine you work to identify the most advantageous elements of your customer and product mix. Then, you take proactive steps to shift the mix of business toward those more advantageous elements and ultimately generate impressive overall performance increases. And after all of that, someone in management then points to some pricing-specific metrics and says, “Gee, price realization on these product lines has barely moved at all. I guess you Pricing folks just haven’t contributed very much to the gains we’re seeing this quarter.”
Not a pretty picture, right? But in imagining this frustrating scenario, you’ve just gotten a great start on the solution.
By simply understanding how mix shifts manifest, recognizing that improvements may not be reflected in certain pricing metrics, and anticipating others’ perceptions and conclusions, you can take proactive steps to mitigate any attribution issues.
It’s all about anticipation and communication. Anticipate what will happen and how things will play out. Communicate those things to others in advance and let them know what they should expect if all goes well. Then, when everything plays out as you predicted, there can be no confusion or debate about your contributions to the outcome.
Managing Mix to Improve Pricing
Product and customer mix have an incredible amount of influence over every aspect of your performance. In this on-demand webinar, learn how to get proactive about "rigging" your mix to your advantage.
Isolating the Impacts of Price, Volume, Cost and Mix
Using this straightforward tool, you can finally put an end to the second guessing and skepticism by isolating and quantifying the contributions of price, volume, cost and mix to period-over-period revenue and margin differences.