By Martin Heubel, Founder and Director of Consulterce, a strategy consultancy for B2C Household & CPG brands.
The concept of the mix effect is one of the most misunderstood margin management levers of our time.
Even Directors of multinational corporations often get this wrong.
So what is it all about?
Put simply, an account’s portfolio consists of a number of different products. Some have higher, others have lower margins.
To increase your margins across your account, the most common approach is to either raise prices or lower costs.
This describes a “rate” change in your margin.
But there is another dimension to it: You could leave your prices and costs as they are.
Instead, you focus on selling more products with a higher margin.
The resulting change in the portfolio margin is the so-called mix effect.
So how can you actually drive a positive mix for your business?
- Use major sales events like Prime Day to sell more of your high-margin products.
- Don’t discount products with ultra-low margins. Instead: Focus on subscription-based incentives to increase your CLV (e.g., through SnS).
- Get comfortable with delisting products that cannot realise any profit.
- Review your pricing strategy for new products.
- Create bundles between low- and high-margin items.
For further insight and support, contact Martin Heubel here
