Cost grain

The level a cost is charged at: per unit, per parcel, per order or as a share of revenue. Counting a cost at the wrong grain misprices every bundle.

In plain words

A cost's grain is the thing it is charged for. A product cost is charged per unit. A label is charged per parcel. A base pick-and-pack fee is charged per order. A card fee is charged as a percentage of what the customer paid.

Grain is what makes multi-unit offers behave differently from single orders. Put three units in one box and the per-unit costs triple while the per-order and per-parcel costs stay put. Every offer that changes how many units ship in an order is, underneath, an argument about grain.

Formula

  • Order cost = Σ per-unit costs × units + Σ per-parcel costs × parcels + Σ per-order costs + Σ percentage costs × revenue

Worked example

In the three-bag order, the engine counts the per-unit product cost three times, $36.00, and the extra-pick fee twice, $0.40. It counts the per-order base fee once, $1.18, and the per-parcel box and label once, $0.50 and $7.50.

The percentage costs follow the $102.00 the customer paid: $2.96 in card fees and $5.10 for the refund reserve.

The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)
Revenue
$40.00
Cost of goods
−$12.00
Pick and pack
−$1.18
Packaging
−$0.50
Shipping label
−$7.50
Card fee per order
−$0.30
Refunds
−$2.00
Card processing
−$1.16
Contribution margin
$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

A grain is not a cost category

Shipping is a category. Its grain depends on your contract: one carrier charges per parcel, a warehouse may charge a handling fee per order on top, and a fuel surcharge may be a percentage. One category can hold costs at three grains. What the calculation needs is the grain.

Using it

Read the grain off the invoice, not off the name. Ask of each line: if this order had one more unit, would this charge go up? If it shipped in two boxes, would it double? If the price were higher, would it grow? The answers put the cost at its grain, and from there bundles and gifts price themselves.

In Offer Suite

Offer Suite's engine counts every cost kind exactly once, at its grain: per unit, per parcel, per order, or as a percentage of revenue. A per-parcel kind on a three-pack is counted once and a per-unit kind three times.

Source: Offer Suite's margin engine and its cost grains.