In plain words
A missing cost is a cost that exists and was never entered. The gift has no unit cost on file. The new product has no label cost yet. Nothing looks wrong, because a calculation with a blank in it still returns a number.
That number is too high by the whole of the missing cost. It is the most common reason a margin report flatters an offer, and gifts are the usual culprit, since nobody sells them and so nobody prices them.
Formula
- Reported margin = true margin + every cost that is missing
Worked example
Three bags with a free mug keep $43.86 when the mug's $4.00 unit cost is entered. Leave the mug uncosted and the engine, given nothing to charge, puts the same order at $47.86.
The margin rate reads 46.9% when it is really 43.0%. Every order with the gift carries the same error.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| Cost of goods | per unit | −$12.00 |
| Pick and pack | per order | −$1.18 |
| Packaging | per parcel | −$0.50 |
| Shipping label | per parcel | −$7.50 |
| Card fee per order | per order | −$0.30 |
| Refunds | percent | −$2.00 |
| Card processing | percent | −$1.16 |
| Contribution margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
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 missing cost is not a cost of zero
Some costs really are zero: a digital insert, shipping the customer collects. A missing cost is unknown. A system that cannot tell the two apart will show a confident margin for an order it cannot actually cost.
Using it
Before trusting a margin, ask which costs it is built on and whether any are blank. Check gifts, samples, new products and anything added to an offer at the last minute. Enter a rough cost now and correct it later. A dated estimate beats a blank that reads as free.
In Offer Suite
Offer Suite's forecasts name the costs an option is missing, so a blank is never passed off as a result, and its item health report lists the items whose costs are incomplete.
Source: Offer Suite's cost ledger.