Hi Anonymous,

I would suggest to use the first method, but with a switch; you won’t need indeed to know price and volume for all the segments. More specifically:

• I would start dividing in revenue streams (not necessarily by product – it could also be by customer or distribution channel)
• I would then ask how revenues changed for each stream
• I would start from the one that had the biggest decline in revenues. For that only, I would then move to divide in price and volume to identify the issue. In case we are not able to fix the issue, I would then move to the second-worst stream

The reason I believe this method is superior to an initial division of revenues in price * volume is that will allow to understand immediately the real reason for the problem, and for which segment. With an initial division in price*volume, that may not always be the case.

Assuming for example that the problem of the company is a decline in volume of the more expensive product A by 10 units and at the same time the cheaper product B increased by 20 units, dividing in price*volume will show an increase of volume and a decrease of the average price – thus apparently a price issue. Although you may eventually identify the issue is volume for product A, and thus not price related, this would take longer than following the previous steps.

Hope this helps,

Francesco