Let's Steak Down the Volume Effects

 In prior volume affects post, I served up more potatoes than meat — pun fully intended. But beneath that hearty surface lies something worth chewing on: the volume effect actually breaks down into three distinct subgroups. And in my experience, these subgroups offer even more insight than the volume effect itself.

The three subgroups are:

  • Recurring Volume
  • Non-Recurring Volume
  • New Volume

When you sum these three, you get the total volume effect we discussed previously. But the real power comes from understanding where the volume is coming from — not just how much it changed. Some of the questions that they can help answer are:

  • Is revenue coming from recurring customers?
  • Is growth driven by new customers?
  • Or are we losing business — unable to retain either new or existing customers?

These three columns tell a story. And they open the door to measuring all kinds of other ideas and concepts. That’s exactly what I plan to explore on latter posts.

For example:

  • Contract Performance: If multiple customers are on the same contract, how are individual products being utilized? Sometimes we load up contracts with products that aren’t actually needed — leaving money on the table. Those unused items might be better positioned as add-ons.
  • Sales Performance: These volume measures can be applied at every level — from individual reps to managers, all the way up to directors and VPs. They offer a strategic lens into what’s really driving growth.

And now, for a slightly ridiculous analogy — one that stuck with me from my undergrad days. I went go to an ag-based school, so cattle came up all the time. Let’s talk cows:

-            Recurring Volume is like owning a cow that produces another cow. You sell the new cow or keep it to grow the herd, and the cycle continues. That’s recurring business.

§  Formula: If quantity > 0 in both base and current periods, multiply quantity by base ASP.
Why base ASP? It isolates the price effect, allowing us to focus on volume changes.

-            New Volume is when you buy a cow you didn’t have before. Now you’ve got a new opportunity — maybe to grow the herd in the future, maybe just to keep that one cow. That’s new business.

§  Formula: If quantity ≤ 0 in base and > 0 in current, multiply current quantity by current ASP.
Hint: You can’t use base ASP — there was no prior purchase.

-            Non-Recurring Volume is when you sell the cow maybe because "beef it's what's for dinner" meaning producing another is out of the question. You’re left with no cow, no growth. That’s lost business.

§  Formula: If quantity > 0 in base and ≤ 0 in current, multiply base quantity by base ASP.
Hint: You can’t use current ASP — there were no purchases.

These categories don’t just show how much volume changed — they show where it changed:

There’s so much potential in these measures. It honestly astounds me how rarely businesses isolate volume from price — or track where volume is coming from. As pricers, we can do better. We should encourage leaders and sales teams to measure these drivers and incentivize what truly grows revenue and margin.

Let’s not just count cows — let’s understand the herd.

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