Mix effect

The part of a change in average margin or price caused by a shift in which lines sold, with each line's own margin held constant.

DefinitionThe part of a change in average margin or price caused by a shift in which lines sold, with each line's own margin held constant.

The mix effect is the change in an average, usually gross margin percentage or price per unit, that comes from selling a different blend of products or customers rather than from any line getting better or worse. Margin can fall with every product's margin unchanged, simply because more of the volume moved to the low-margin line.

How it is computed

Mix effect = sum over lines of (share this period − share last period) × margin last period. Shares are each line's share of revenue or volume. The rate effect, change in each line's margin at this period's shares, makes up the rest of the movement.

Example

Premium earns 40% and Value 20%. Last period each was half of revenue, an average margin of 30%. This period Premium is 40% and Value 60%, with margins unchanged, so the average is 28%. Mix effect: (0.4 − 0.5) × 40 + (0.6 − 0.5) × 20 = −4 + 2 = −2 points.

Where it goes wrong

Mixing the shares and margins of different periods, so the effects no longer sum to the total change. The full guide is AI data analysis.

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