POWER TIPS SERIES
Power Tip 3 – Are you sacrificing sales mix for sales?
Your profitability is enhanced not by your Sales but from your Sales Mix. So, what is the difference?
Sales is about the number of products on offer. Sales Mix is about the combinations of products on offer. Sales deals with absolute quantity sold. Sales mix deals with proportion of each product compared to total.
Proportion and Quantity
Why are proportion and quantity such a big deal?
Combinations are where the sales mix magic happens. Each combination of price, cost and contribution margin for the items forming part of the sales mix is what brings in the profit element.
Contribution Margin – path to profit
Put simply, contribution margin is selling price less variable expenses. This is different for different items being sold. However, the unique combination of high contribution margin items in the sales mix is what boosts the bottom line.
Pay attention to what each item in the sales mix contributes to profitability. It is more important than simply the number of items sold.
Watch out for Power Tip 4 in the Power Tips Series.
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