One Blog |August 25, 2014 | POS Tracking Software
POS Marketing Topic: POS Waste Reduction — What’s it Worth to You?
In this blog, I’ll give you some guidelines to help determine if POS Tracking tools, like those from OnTrak, can be justified by the elimination of POS waste. For purposes of this blog, POS means signage, which is placed in the retail market to promote a particular beverage brand.
In order to determine the value of any software that is designed to reduce the costs of your Point-of-Sale (POS) marketing materials, and speed your POS to market, it is important to know just how much wasted POS actually costs.
A Recent Example
Recently, we demonstrated one of our products, SignTrak, to an enthusiastic audience at a large beverage alcohol distributor with over 100 sales reps, who also are responsible for merchandising.
Like most of our prospective customers, and all of our current customers, the first problem this distributor was attempting to solve with our software was his out-of-control POS costs. As requests for signage from retailers have increased, so too have the costs of ordering, producing and installing that POS. But these costs were increasing at a rate disproportionate to the actual increase in the demand for the signs themselves.
For some time, the POS costs for most beverage alcohol distributors have increased due to the increase in the costs of the consumables used to create the POS signs. Paper and ink costs continue to escalate; and with the increased demand for signage, additional infrastructure and labor costs swell too. Indeed it is not unusual for distributors to rank POS — and all the associated costs — as the number two expense following payroll.
It is no wonder, then, that OnTrak’s prospective customers are looking for solutions that will “Stop the bleeding” of cash being spent on what they perceive to be “breathtakingly expensive” POS marketing materials.
Calculating the ROI of POS Tracking Software
The question then becomes, “How do we determine the ROI that can be realized by using a POS tracking and management tool?”
The following will provide you with an understanding of how our customers use OnTrak to calculate and reduce the cash burn associated with the ordering, production and placement of POS signage, and other POS marketing materials.
Remember, there are competitive advantages to using marketing technology to increase both sales results and supplier marketing-recovery dollars; but we’re not dealing with those aspects of deploying marketing technology tools in this blog.
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How Much Does a Re-work Cost?
There are three things to consider:
1. Production Costs
Let’s establish some base-line costs for the production of a non-laminated 3’x5’ paper sign to be placed at your retail customer’s location. Sign costs for consumables currently stand at about $1.60 per square foot. This cost includes infrastructure costs, such as your printers, graphics software, office space, etc.
This translates to a base cost for this sign, as follows:
(3 x 5) x 1.60 = $24.00 (production)
2. Labor Costs
Next, we need to determine the cost of the labor required for the production of the signage. Fully burdened, the cost of the graphics or sign shop manager is at least $25 per hour — often more, based on the local labor market. Assuming it takes about 20 minutes total time to: Receive the sign order, create the sign using a commercially available graphics package, load and unload the printer, and finally notify the merchandiser responsible for the installation of the sign that it can be picked up, the labor costs will be $8.33. Your sign’s base cost is now:
$24.00 (production) + $8.33 (labor) = $32.33
3. Ordering and Processing Costs
To that amount — $32.33 — the costs associated with ordering the sign and processing the request need to be accounted for. Fully burdened, sales reps typically cost at least $36 per hour, often much more. Distributors tell us that the amount of time required to order a sign without an automated system is 3 to 5 minutes with an additional 3 to 5 minutes spent on the phone with sign shop personnel to explain what the sign is supposed to look like and subsequently to inquire about the sign’s availability to be picked up. If we simply assume a total of only 5 minutes for these two communication activities combined, we will increase our costs by about an additional $3.00. Our single 3’ x 5’ sign’s cost in this example, not including any time or cost attributed to picking the sign up and delivering it, is now:
$32.33 (production and labor) + $3.00 (order and process) = $35.33
Our prospective customer indicated they would agree that $35.00 is their average cost per sign.
So What is the Total Cost for Re-works?
To which we reply: “How many re-works do you have per month?” (See Note 1)
In this case the graphics and POS production manager indicated that with 100 sales reps and 10 sales-team leaders, they estimated “About one re-worked sign, per rep, per month.” In other words, 100 re-works per month. At an average cost of $35 per sign, re-worked sign costs were $3,500 per month, or $42,000 per year.
The sales manager, in attendance at this meeting, added, “The cost is actually greater, because we had to have our rep place the first order and have our sign shop produce the sign incorrectly the first time — usually finding out the sign was wrong when we delivered it to our customer.” He added, “Then we have to re-order and produce the sign a second time which usually means it doesn’t get to the trade until a day or two after we had planned.”
The discussion continued and the sales-manager pointed out that “Price sells most of our products,” and that “Price is communicated via signage placed near the products.” This suggests that getting the sign to the trade two-days later than he planned would cut into this week’s market share, assuming the competition got their signs up two-days earlier.
So How Much Does SignTrak Cost?
At this point our prospective customer asks: “How much will SignTrak cost us?”
The list price, per user, per month for SignTrak for a customer with 100 users is $12.00; or $1,200 per month; or $14,400 per year. Our customers tell us the re-work reduction after deploying SignTrak is 75% to 95%. Assuming the lower number - 75% - this would, in the above example, be a cost reduction of $31,500 per year. This means that for every $1.00 spent on SignTrak, the cost reduction of re-works alone would be a return of $2.19 — Over a 2 to 1 ROI.
Isn’t this a no-brainer? Act Now!
Please take the time to put pen to paper and take a serious look at the ROI your company could enjoy by deploying OnTrak’s POS marketing technology solutions.
A live, OnTrak demonstration will show you how we accomplish these saving. The demo typically requires less than an hour of your time.
To schedule a demo, click here >> Product Demonstration
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Note 1: A re-work regardless of the reason for it, is any sign request that has to be produced, scrapped and re-produced due to either an error in ordering/configuration or an error made during production. Often a sign is produced according to the order, is picked up and delivered, and then either the rep or the retail customer finds an error in the graphic or the content, or both.