Cost to Serve Solutions
When we talk about cost to serve, we like to think of it in terms of a waterfall.
- You start with your quoted price
- From there, you offer discounts and add in freight costs and other program allowances to get down to your invoice price
- You’re not done there, though, because then you have to consider elements like rebates, payment terms, advertising costs, packaging, samples, returns and restocking fees
- Once all these cost factors are accounted for, you reach your pocket margin – the amount of money you actually make on each transaction
Each of those cost elements listed above – discounts, payment terms, marketing programs – is an investment your organization has elected to make in order to serve your customers, to entice them to purchase from you.