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Average Margin per Item
from Product
Metrics type
Actionable
Units of measure
Rate
Direction
More - better
Check frequency
Monthly
Description
The average profit margin for each product, calculated as the percentage difference between the average selling price and average cost per item.
Why it is important
This metric guides businesses in setting appropriate pricing strategies, optimizing product mix, and maximizing overall profitability. By understanding the margin per item, businesses can make informed decisions to balance revenue generation and cost efficiency, ensuring sustainable financial performance.
Formula
((Average Price per Item - Average Cost per Item) / Average Price per Item) * 100
Calculation example
If the average price per item is $50 and the average cost per item is $30,
Average Margin per Item = (($50−$30)/$50)∗100 = 40
Average Margin per Item = (($50−$30)/$50)∗100 = 40
Related metrics
↪️ Affected
- Average Price per Item
- Average Price per Item
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Suggested slices for dashboards
- Product Category
- Pricing Strategy
- Time Period
- Competitive Pricing
- Marketing Campaigns
- Pricing Strategy
- Time Period
- Competitive Pricing
- Marketing Campaigns
Questions to be Answered
1. How does the average margin per item vary across different product categories, and are there specific categories where the margin is higher or lower, influencing overall profitability?
2. Can we identify any patterns in the correlation between average margin per item and the number of product variants, indicating whether product diversity impacts the profitability of individual items?
3. How does the average margin per item change during promotional events or discount periods, and are there strategies to maintain profitability while offering discounts to customers?
4. What role do customer reviews and ratings play in influencing the average margin per item, and are higher-rated products associated with better profit margins compared to lower-rated items?
5. Is there a correlation between the average margin per item and the product lifespan, indicating whether products with longer lifespans tend to have higher or lower profit margins?
2. Can we identify any patterns in the correlation between average margin per item and the number of product variants, indicating whether product diversity impacts the profitability of individual items?
3. How does the average margin per item change during promotional events or discount periods, and are there strategies to maintain profitability while offering discounts to customers?
4. What role do customer reviews and ratings play in influencing the average margin per item, and are higher-rated products associated with better profit margins compared to lower-rated items?
5. Is there a correlation between the average margin per item and the product lifespan, indicating whether products with longer lifespans tend to have higher or lower profit margins?
Possible causes of worsening
🔹 Pricing Strategy Adjustments. Changes in pricing strategies, such as lowering profit margins, can lead to a decrease in the average margin per item.
🔹 Increased Competition. Intensified competition may necessitate price reductions, affecting the average margin per item.
Explore more causes in full version of JetMetrics Lite
🔹 Increased Competition. Intensified competition may necessitate price reductions, affecting the average margin per item.
Explore more causes in full version of JetMetrics Lite
Tactics to improve this metric
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