FlowProofsGlossary
Price-volume-mix analysis
Price-volume-mix (PVM) analysis splits a change in revenue or margin into three effects: prices changed, more or fewer units sold, and the share of each product in what sold changed.
Price and volume are the intuitive parts. Mix is the one people miss: if customers move from a cheap product to an expensive one, revenue per unit rises even though no price changed.
The three effects add up to the total change. When they don't, the method is leaving a remainder unexplained; FlowProofs shares that remainder fairly between the drivers (the Shapley method) so nothing is left over.
Worked example: two products, one month apart
Last month a shop sold 1,000 Basic units at $20 and 1,000 Pro units at $60: $80,000. This month it sold 900 Basic at $20 and 1,300 Pro at $60: $96,000, with no price change at all.
Volume rose by 200 units, worth about $8,000 at last month's average of $40 a unit. The other $8,000 is mix: customers moved towards Pro, so the average unit is now worth $43.64. Price effect: zero.
Try it in FlowProofs: try it on sample data
Related terms
- Variance analysis: Variance analysis compares an actual number with a reference (the budget, last month, last year) and splits the difference into the drivers that caused it.
- Bridge chart (waterfall chart): A bridge chart, also called a waterfall chart, starts at one total, adds and subtracts a floating bar for each cause, and ends at the new total.
- Driver tree: A driver tree breaks one result, such as profit, into the inputs that produce it, joined by arithmetic, so you can see which input moved the result.