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.

cost to serve strategy

Creating a Cost to Serve Model Based On Actionable Data

INSIGHT2PROFIT’s cost to serve analysis identifies and quantifies the effect those investments are having on your profitability at the customer and product level. For example, we might identify your freight policies are causing you to lose money on some transactions, or we may find your rebate programs are out of date and instead of rewarding growth and reflecting current market dynamics, have come to be seen as entitlements by some customers and may be eating into your margins.

Once we understand the real impact those costs to serve are having on your pocket price, we can work with you to put strategic, differentiated processes and programs in place designed to right-size the profitability of each customer.

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