Blended Margin
Also called: blended gross margin, overall margin
What is Blended Margin?
Blended margin is total gross profit divided by total revenue for a period, expressed as a percentage. It is the margin your actual sales mix produced, as opposed to the margin on any individual line. The number moves for two quite different reasons — because prices or costs changed, or because customers bought a different mix of the same items — and separating those two causes is most of the value in tracking it.
Why it moves without anyone changing a price
Mix is the usual culprit. If a high-margin line sells less this month and a low-margin line sells more, the blended figure falls even though every individual price and cost is identical. That is why a falling blended margin is a question rather than a conclusion: the first thing to establish is whether the mix shifted or the economics did.
Reading it beside line-level margin
Blended margin tells you what the business earned; line-level margin tells you where. Used together they answer the useful question, which is which lines are carrying the business and which are along for the ride. Used alone, the blended figure hides a loss-making bestseller behind a handful of strong products, which is how businesses discover they have been subsidising their most popular item.
What a promotion does to it
Any discount pulls the blended figure down for the period, because discounted units enter the mix at a lower margin. The question worth asking is whether the fall was smaller than the extra gross profit the volume produced. If blended margin fell and total gross profit rose, the offer worked; if both fell, it did not, regardless of how busy the period felt.
A practical target
There is no universal right number — it is set by your category and your cost base. What is useful is your own trailing twelve-month range. Once you know the band your business normally sits in, a month outside it becomes a signal rather than a mystery, and that is far more actionable than comparing yourself with an industry average that was computed on a different definition of cost.
Frequently asked questions
No. Blended margin is a gross figure: revenue less the direct cost of goods or services sold, before rent, salaries and other overheads. Net margin is what remains after all of those, so it is always the smaller number and it moves for different reasons.