Market Analysis
Part of Retail pricing behaviour
Distinguishing price increases from a richer product mix
Average selling price can rise because each item costs more, or because customers buy a greater share of premium items. Those lead to different decisions. A …
Average selling price (ASP) can rise because prices increased within products, because customers bought a richer mix of products, or because of both. Separating the causes shows whether the movement came from like-for-like prices or a change in what customers bought.
Compare two consistent periods using the same products, pack sizes and stores, excluding products unavailable in either period. For each product, record units sold and the realised price per unit, then calculate its share of all units sold.
For product i, let p₀ᵢ and p₁ᵢ be its realised price per unit in periods 0 and 1, and s₀ᵢ and s₁ᵢ its share of units. ASP₀ = Σs₀ᵢp₀ᵢ and ASP₁ = Σs₁ᵢp₁ᵢ. The exact split is Price effect = Σs₀ᵢ(p₁ᵢ−p₀ᵢ) and Mix effect = Σp₁ᵢ(s₁ᵢ−s₀ᵢ), so ASP₁−ASP₀ equals the price effect plus the mix effect.
This calculation holds product shares at period 0 to measure the price effect, then values the share changes at period 1 prices to measure mix. Total units alone do not change ASP; quantities affect it when they change each product’s share.
To bridge revenue as well, let Q₀ and Q₁ be total units sold in each period. Volume effect = (Q₁−Q₀)×ASP₀; multiply each ASP effect by Q₁ to get the revenue price and mix effects, and the three effects add to the revenue change.
Read the signs to identify the cause of a rise: a positive price effect with zero mix effect is price-led; zero price effect with a positive mix effect is mix-led. If both are positive, both contributed.
A mix calculation with 30 actual units and 15 units at budget price gives a 15-unit difference; at a budget price of €100, the mix effect is (30−15)×€100 = €1,500. This illustrates the revenue value of a mix difference; use the share-weighted calculation above to split ASP.
Check promotions and substitutions alongside the split: an unavailable cheaper item can push customers towards a dearer option, which alone is not evidence of a lasting preference. When pack sizes differ, compare unit prices as well as shelf prices; the ACCC enforces the mandatory Unit Pricing Code for groceries.
The ABS publication Retail Trade, Australia methodology (April 2025) reports monthly turnover estimates in current prices and quarterly chain volume measures at state and industry levels. Chain volume measures remove direct price effects; product-level matched data is needed to identify a retailer’s own price and mix effects.
Price Effect vs Mix Effect: Understanding ASP Changes
- Mix EffectMeasured by holding prices constant at period 1 and calculating share changes: Σp₁ᵢ(s₁ᵢ−s₀ᵢ)
- InterpretationPositive price effect + zero mix effect = price-led rise. Zero price effect + positive mix effect = mix-led rise. Both positive = combined influence.
Key Metrics in ASP Analysis
- Average Selling Price (ASP) Change
- ASP₁ − ASP₀ = Price Effect + Mix Effect
- Volume Effect on Revenue
- (Q₁ − Q₀) × ASP₀
- ACCC Unit Pricing Requirement
- Mandatory for groceries in Australia; ensures transparent comparison of unit prices
Using Product Mix to Interpret ASP Trends
- ProsHelps identify whether pricing or customer preferences drive ASP growth. Supports strategic decisions on promotions, pricing and product range management.
- ConsCan be misleading if cheaper items are unavailable, pushing customers toward premium options without indicating lasting preference. Pack size differences may distort comparisons unless unit prices are used.
How to Split ASP Increases into Price and Mix Effects
- Select consistent periods with identical products, pack sizes and storesExclude products unavailable in either period
- Record units sold and realised price per unit for each product in both periodsCalculate product share of total units sold in each period
- Compute Price Effect using period 0 shares and period 1 pricesΣs₀ᵢ(p₁ᵢ−p₀ᵢ)
- Compute Mix Effect using period 1 prices and share changesΣp₁ᵢ(s₁ᵢ−s₀ᵢ)
- Verify results with unit pricing and check for promotions or substitutionsUse ACCC’s mandatory unit pricing data for groceries in Australia
