Module 2 · Explain a miss
Actuals differ from forecast. Which driver moved?
The miss is split into Volume varianceVolume varianceThe part of the miss from selling more or fewer units in total, at the forecast average price.Formula( Volume − Volume ) × Forecast average price = Volume varianceExample(9,500 − 10,000) units × $6.44 forecast average price = ($3,220.)Also calledprice-volume-mix (PVM), rate/volume analysis, Mix varianceMix varianceThe part of the miss from selling a different blend of lines than forecast, at forecast prices. For each line: (actual units − total actual units × the line's forecast share) × the line's forecast price.ExampleMore annual plans and fewer monthly plans than forecast.Also calledprice-volume-mix (PVM), and Price variancePrice varianceThe part of the miss from each unit selling at a different price than forecast. For each line: (actual price − forecast price) × actual units.Watch forCalculated last, at actual units. Calculating price first, at forecast units, moves dollars between price and mix. The total does not change.Also calledrate variance, price-volume-mix (PVM), then checked against the total. The largest piece is where the investigation starts.
Forecast and actual
Each line needs units and a price for both the forecast and the actual. A line can be a plan, a product, or an offer within a ticket band. Published prices are optional and allow price variance to be split further.
One quarter after the bundle launches. Lines are the offer and the ticket band, units are settled transactions, and price is Tax plus Radar revenue per settled transaction. Total volume came in just under forecast, more of it moved to the bundle than forecast, and bundle deals closed 3% under the bundle's published price.
illustrative| Line | ForecastForecastWhat the model said would happen, by line, for a period. | ActualActualWhat did happen, by line, for the same period. | ||||
|---|---|---|---|---|---|---|
| Settled transactions | Revenue per transaction | Published price | Settled transactions | Revenue per transaction | Published price | |
| A-la-carte, $20 ticket band | $ | $ | $ | $ | ||
| A-la-carte, $50 ticket band | $ | $ | $ | $ | ||
| A-la-carte, $80 ticket band | $ | $ | $ | $ | ||
| Bundle, $20 ticket band | $ | $ | $ | $ | ||
| Bundle, $50 ticket band | $ | $ | $ | $ | ||
| Bundle, $80 ticket band | $ | $ | $ | $ | ||
| Total | 135,000,000 | $32,591,304 revenue | 134,000,000 | $30,998,591 revenue | ||
Lines are split by Ticket bandTicket bandA range of transaction sizes treated as one line, such as $50 to $100.Watch forRates still vary inside a band. Narrower bands give a cleaner split. because a capped percentage fee earns a lower Effective rateEffective rateTotal fees divided by payment volume.Watch forIt moves when ticket size or product mix moves, even if no price changed. on larger tickets. Without bands, a shift toward larger tickets would be reported as price variance with no price change.
Variance split
The split runs in a fixed order: volume first, then mix, then price. Each piece answers one question, and the three pieces have to add up to the total.
The variance is 4.9% of forecast revenue, under the 5.0% threshold. It is not material in total. Drivers that offset each other can still be worth explaining.
| Step | Amount | DirectionFavorable and unfavorableA revenue variance is favorable when actual is above forecast and unfavorable when it is below.Watch forThe labels flip for costs, where coming in under forecast is favorable. A favorable driver can hide an unfavorable one of the same size. | Share of variance | Running revenue |
|---|---|---|---|---|
| Forecast revenue | $32,591,304 | |||
| Volume variance | ($241,417) | Unfavorable | 15.2% | $32,349,887 |
| Mix variance | ($1,002,931) | Unfavorable | 63.0% | $31,346,957 |
| Price variance | ($348,365) | Unfavorable | 21.9% | $30,998,591 |
| Actual revenue | ($1,592,713) | Unfavorable | 100.0% | $30,998,591 |
The last running figure has to equal actual revenue. A share can be over 100% or negative when drivers offset each other.
Volume varianceVolume varianceThe part of the miss from selling more or fewer units in total, at the forecast average price.Formula( Volume − Volume ) × Forecast average price = Volume varianceExample(9,500 − 10,000) units × $6.44 forecast average price = ($3,220.)Also calledprice-volume-mix (PVM), rate/volume analysis
Did total units differ from forecast, with the forecast blend and forecast prices held fixed?
Variance by line
Each row adds across to that line's own revenue variance, and each column adds down to the total for that driver. A line's volume share is the change in total units at the line's forecast share and forecast price.
| Line | Forecast revenue | Actual revenue | VolumeVolume varianceThe part of the miss from selling more or fewer units in total, at the forecast average price.Formula( Volume − Volume ) × Forecast average price = Volume varianceExample(9,500 − 10,000) units × $6.44 forecast average price = ($3,220.)Also calledprice-volume-mix (PVM), rate/volume analysis | MixMix varianceThe part of the miss from selling a different blend of lines than forecast, at forecast prices. For each line: (actual units − total actual units × the line's forecast share) × the line's forecast price.ExampleMore annual plans and fewer monthly plans than forecast.Also calledprice-volume-mix (PVM) | PricePrice varianceThe part of the miss from each unit selling at a different price than forecast. For each line: (actual price − forecast price) × actual units.Watch forCalculated last, at actual units. Calculating price first, at forecast units, moves dollars between price and mix. The total does not change.Also calledrate variance, price-volume-mix (PVM) | Total |
|---|---|---|---|---|---|---|
| A-la-carte, $20 ticket band | $10,565,217 | $8,100,000 | ($78,261) | ($2,386,957) | $0 | ($2,465,217) |
| A-la-carte, $50 ticket band | $9,782,609 | $7,826,087 | ($72,464) | ($1,884,058) | $0 | ($1,956,522) |
| A-la-carte, $80 ticket band | $4,760,870 | $3,808,696 | ($35,266) | ($916,908) | $0 | ($952,174) |
| Bundle, $20 ticket band | $2,904,348 | $4,789,270 | ($21,514) | $2,054,557 | ($148,122) | $1,884,922 |
| Bundle, $50 ticket band | $2,652,174 | $3,858,913 | ($19,646) | $1,345,733 | ($119,348) | $1,206,739 |
| Bundle, $80 ticket band | $1,926,087 | $2,615,626 | ($14,267) | $784,702 | ($80,896) | $689,539 |
| Total | $32,591,304 | $30,998,591 | ($241,417) | ($1,002,931) | ($348,365) | ($1,592,713) |
| Share of total variance | 15.2% | 63.0% | 21.9% | 100.0% | ||
List price varianceList price variancePrice variance caused by a change in the published price. For each line: (actual list price − forecast list price) × actual units. is the part caused by a change in the published price. The remainder is Realization varianceRealization variancePrice variance caused by discounts and promotions off the published price.FormulaPrice variance − List price variance = Realization varianceWatch forIt is everything in price variance that a list price change does not explain. Currency effects and a shift in ticket size inside a band land here too.Also calleddiscount leakage, which is discounting and promotions off the published price.
ReconciliationReconciliationThe check that volume, mix, and price variance add up to the total variance.FormulaVolume variance + Mix variance + Price variance = Total varianceWatch forAny residual means a line is missing or double counted.
Funnel split
When the miss is in the count coming out of a funnel, the next cut separates how many entered from the share that converted. More entering at a lower rate can hide a conversion problem behind a healthy count at the top.
For a bundle sold through a sales team, the funnel is deals quoted and the share of them won.
illustrativeNet change in deals won: −6. Deals quoted contributed 5 and win rate contributed −11.
Investigation
The split shows where the dollars are. It does not show the cause. The nine steps run in the same order whatever the driver, and a badge marks the two that bear most on the largest one. Notes are saved in this browser.
Start with mix, which accounts for ($1,002,931) of the ($1,592,713) variance.
Rule out late data, a tracking change, a definition change, and timing such as a holiday or a short month.
Fewer new customers or deals and lower volume from existing accounts have different causes and different owners.
Find the stage where the count first drops below forecast. Self-serve: visits, signups, trials, paid. Sales-led: deals quoted, discounts approved, contracts signed, volume live.
- Most relevant to mix
Cut by plan, channel, region, device, and customer size. A miss concentrated in one segment points to a cause.
A sudden break points to a release or an event. A slow drift points to the market or the forecast.
- Most relevant to mix
List price changes, promotions, releases, checkout changes, and marketing spend changes near the start date.
Competitor moves, seasonality, and platform or search changes.
Check the assumptions behind the forecast before explaining the actuals. The forecast may be the error.
Attach a dollar amount to each cause in the table below the checklist and confirm the amounts add up to the miss.
Causes sized against the variance
Enter each cause with the dollars it explains, negative for a shortfall. Outlook says whether the cause repeats next period, and action says what follows from it. The check compares the sum with the total variance, the same way volume, mix, and price are checked against it.