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The Secret Pricing Formula

So we wanted to set our pricing so that it:

 

  • Wouldn’t be sensitive to the price of the claim
  • Wouldn’t be sensitive to the size of the market
  • Was based on the minimum calculations possible
  • Wouldn’t be based on collections
  • Would be fair to our retail customers and
  • Would be fair to us.

 

Since co-op claims are a matter of paper handling, the more paper we handled the more we charge – the way we know how much paper we handled is how much the postage costs. If we get a 16-page flyer and bunch of tearsheets and some radio ads, the postage is going to be X. If we just handle a couple of tearsheets, all going to the same manufacturer, the postage is Y.

 

So what we do is we put all your claims together, put them in envelopes, put stamps on them and get a total postage cost.

 

Then – drum roll – we send a bill for 7 times that amount.

 

The price is based on our cost for the postage to mail everything out. Doesn’t matter what market you’re in, doesn’t matter what the claim is worth.

 

That includes the postage, all your reports, all the claims; the complete deal for the month.

 

So a store in Albany with a television ad is paying the same as a guy in Amarillo with a radio schedule.

 

So if you have a big month for claims, we aren’t stuck behind some flat fee and if we have a small month, you aren’t.

 

Brilliant. And it works

 

How We Set Our Pricing

In December, I wrote that this article was forthcoming. That was just before Christmas, my wife’s birthday, New Years, Patriots winning the Super Bowl and before we took about two feet of snow. You’ve probably been waiting with bated breath for it to get written and posted. It’s finally here. Be strong.

We wanted a schema that was fair. Fair to our retailers so that when they were busy and sent us a lot of work, we were busy and getting paid for it, but when they weren’t busy, they weren’t getting random invoices from CCBS. We do not want to spend a lot of time on the phone with customers who think we charge too much or feel that they aren’t getting a good deal – and with our plan, we don’t.

We have, and have had, customers all over the world (yes, we do currency conversions); we’ve also seen competitors that have come and gone for whatever reason and we’ve seen and considered myriad pricing ideas over the past 30-odd years.

Co-op ad claims is all we do. We don’t design or print flyers, we don’t wholesale any products; we don’t drive plow trucks. Just co-op claims.

We’ve pondered these scenarios:

• We don’t know when, how much, or if, you have any accruals. Why would we have any incentive to send out a claim if we know you don’t have any accruals?
• We don’t know what claims you’ve handled personally with a rep for, say, custom printed bags, which usually come out of your accruals.
• We don’t know that you got paid so that we can submit an invoice? (See: How do you know if your co-op advertising claim got paid? December 17, 2014).
• We could have checks and Credit Memos sent here but there other ways that you get reimbursed that you wouldn’t see, hence we wouldn’t get paid for. Plus, if we handle your checks it takes them longer to get back into your hands. Plus, I had enough trouble coming up with a plan for us to get paid for handling co-op claims; I didn’t want to figure out how to get paid for handling that, too. Plus there is other exposure like if we lost a check.
• How can we place the burden on our stores to do the extra accounting and work of generating ‘commission’ checks?
• What if you’re a farm supply store in Idaho that puts an ad in the weekly paper for paint? What’s a good deal for that guy?
• What if you run a 7-store chain in Pennsylvania that runs a 16-page flyer every week? What would be a good deal for both of them?
• What if you don’t use flyers, what if you just do radio, TV, newspaper ads, shows, wearable’s? What do we charge that guy?

I’m getting a headache just reliving it.

Finally, we considered what we actually do, which is basically handle paper and ad materials in the form of flyers, invoices, tearsheets, scripts, photos, printed bags, collateral, POP signage, music-on-hold scripts, ads on Facebook and elsewhere on the internet, and anything else you want to try to get reimbursed for.

We handle paper. And postage.

Paper and postage.

You’ll see what we came up with after I go out and shovel some snow, clear off the cars, run the snowblower and my fingers thaw out. I think it was fair, clever and, most importantly, fair.

 

How do you know your co-op advertising claim got paid?!?

Where to look for your Reimbursements…

We’re all tuned in to looking for checks for reimbursements for our co-op advertising. There are a couple of issues here:

• First, reimbursements, as you may have noticed, don’t come in all at once from every vendor. One of our customers was all excited that a paint claim for over $1,400 got paid just a month after the claim was submitted. False alarm: the claim was actually 14 months old.
• Second, the checks frequently don’t match the amount claimed. We bill 100% of the value of the claim because the manufacturer/auditor is able to apply the arithmetic of their particular program to the claim for us; some programs are 50/50, some 75/25, some reimburse 100%. In fact, we haven’t seen any for a while, but there have been short term, seasonal programs that paid over 100%.
• Some reimbursements, millwork category comes immediately to mind, that pay a credit memo. A lot of credit memos look like invoices or have a number of items on them so the reimbursement is easy to miss. We’ve had a payable department pay a credit memo once, a long time ago, but it was a new person that had just started and a mistake that was easy to unmake.
• Some of those credits show up on your statements. They may be listed with a lot of returns, cancelled or backordered items and, again, they’re very easy to miss or not have accrued to the correct account internally
• Sometimes, you are reimbursed with product. Auto parts and lubricant guys do this a lot. You get a case of product instead of cash. (I personally like these because you have product to sell that usually moves pretty well.) The problem is that a lot of this gets through undocumented. You get a case of motor oil – but it just showed up out of nowhere. There may be documentation for this ‘reimbursement by product’ but I’ve never seen it.

All of this leads to my next, exciting episode: How we price our service.

Btw, if there’s anything you want to see or ask about, feel free to comment or call.

Randy

HA!

We have a local, Massachusetts customer who seems to delight in advertising products that even we’ve never heard of. Impressive, considering we’ve generated the mother of all hardware/millwork/bag goods/tools databases over the past 25 or so years and we’ve heard of all kinds of products.

Well, this time we chugged through their 8-page circular, found 37 good, current claims and they are ALL in our database. We don’t have to Google anything, SRDS anything, call around or visit the library to borrow their Thomas Register to find any of their products this month!

It’s like hitting grand slam when someone’s co-op claims go that smoothly.

Now, if we can just keep our photocopier running…

That was fun…

The “Month Three is Free!” promotion ended and we did well with, among other things, two new customers from one state. Howdy Texas! Howyalldoin?

Looks like it’s time for us to review agricultural and feedlot products co-op programs.

If you want to offload your co-op ad claims, just give us a call.

Thanks!

Randy

Month 3 is Free

Every first quarter, things slow down for us at Co-op Cash Back. It’s normal; our retailers aren’t selling a lot of consumer products, commodities are moving a little bit as the pros work but regrouping and restocking and getting ready for a good start for the spring is taking place. There’s relatively little mass media advertising and we get it.

We still don’t like it.

We’ve invented a promotion for new customers (but we’re willing to offer it to any customer who hasn’t enjoyed it yet.) It’s called ‘Month Three is Free.” I bet you know what’s coming: Your third set of claims gets done by the aggressive and thorough Co-op Cash Back Systems gratuito!

You can see how aggressive we are about going after every penny and every item that you advertise, how fast the turnaround is, how the reports read, what the money looks like when it comes in. And you can see how well the Co-op Cash Back System can work for you.

Call 508 643 1000 and ask about getting set up or visit co-opcashback.com today.

2013

Well, it was a busy year for shooting out co-op claims and we started doing shows, again. We were at Standard Hardware over the summer.

In a couple of days I’ll see what the totals for the year were and try to get some stuff posted.


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