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The Branded Perspective | A Quick MBA Class with this Gable Girl - Weighted Margin

Bananas, Elephants & Broken Math: A Marketer’s Guide to Margins That Matter

I was once in a meeting with the Executive Leadership Team (ELT) of a small company—CFO, COO, CSO, CEO, and me. We were reviewing our monthly results to prep for the board, and when we got to the margin goal slide, something caught my eye.

The company-wide margin? It was just the average of each SKU category. 🚨 Yes, your alarm bells should be ringing. 🚨

I carefully asked, “Are we calculating overall company margin by just averaging SKU-level margins?”

[Answer: Yes.]

Trying to tread lightly—because this was a big miss—I suggested that to make smarter decisions about portfolio and SKU prioritization, we should consider using a weighted margin to get a true picture of business impact. That suggestion was met with blank stares…and a gem from the CFO: “That would be too hard.”

Reader, I bit my tongue. I didn’t say, “Give me two minutes to go back to the slide with our SKU mix and I’ll throw together a better snapshot.” But now that I don’t have to worry about anyone’s ego, I’m doing a little Brand Math for all the marketers (and CFOs) out there who want to get it right.

Step 1: List Your SKUs

Let’s say you sell 5 products:

  1. A is for Apple Shirt 🍎
  2. B is for Banana Coat 🍌
  3. C is for Cookie Socks 🍪
  4. D is for Dinosaur Shoes 🦖
  5. E is for Elephant Bag 🐘

Step 2: Assign SKU Margins

Let’s give each SKU a margin:

SKUProductMargin
AApple Shirt 🍎50%
BBanana Coat 🍌75%
CCookie Socks 🍪30%
DDinosaur Shoes 🦖5%
EElephant Bag 🐘45%

If you average these, you get a 41% margin. But that’s not what's actually happening in your business. You don’t sell equal amounts of each SKU. So using a simple average skews your reality.

Step 3: Add % of Business per SKU

Let’s assume the following sales mix:

SKUMargin% of Business
A50%5%
B75%15%
C30%30%
D5%5%
E45%45%

Now, even though Bananas and Apples have the highest margins, you're selling way more Cookies and Elephants. So you can't just optimize around margin alone—you need to factor in volume.

Step 4: Calculate Weighted Contribution

Here’s what the real contribution looks like:

SKUMargin% of BusinessContribution (Margin x % of Business)
A50%5%2.5%
B75%15%11.25%
C30%30%9%
D5%5%0.25%
E45%45%20.25%
Total—100%43.25%

So instead of 41%, your true weighted margin is 43.25%. And now you have real insights:

  1. Elephant Bags 🐘 are doing the heavy lifting—even with a mid-range margin. So if you have any way to make those margins work harder with some savings on this sku, DO IT!!
  2. Banana Coats 🍌 punch above their weight in volume and sales should be pushing them... hard!
  3. Dinosaur Shoes 🦖 might be extinct for a reason.

In short: Weighted margins matter. This isn’t just finance nerd stuff—it’s how you make better marketing, pricing, and product decisions.

It's not hard. It’s math. And we’ve got calculators. 😉


About the Author


Sara L. Gable is a marketing strategist with over 20 years of experience building beloved brands and driving business growth.  She served as Chief Marketing Officer at a startup wine company and has led initiatives for household brands including Samuel Adams, Heinz, and Colgate. Known for her creative instincts and data-driven approach, Sara brings a unique blend of entrepreneurial energy and big-brand discipline to every project.

Learn more at The Art of Marketing.

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