Now it's time to move on to what are called Point of Sale (POS) costs. POS costs are everything you need to communicate effectively and efficiently with your consumers. This includes your sales materials, manufacturing costs, in-store advertising and marketing, sales costs, slotting costs, and other expenses such as websites, distributor expenses, incentives, and third-party logistics.
Sales costs are the expenses associated with getting your new beverage brand into stores or other selling venues and then getting it sold. The costs involved in sales can vary depending on the type of sales channels you use to sell your product. While many beverage brand owners think of sales costs as the expenses associated with maintaining sales representatives who sell their product, there is more to it than that. When starting out, you may not have a sales representative, or you may have one assigned to you through a distributor. In either case, you will need to provide sales materials and marketing support to the representative, as well as an incentive to motivate them to sell your product.
Incentives are often overlooked by new beverage brands, who assume that the sales representative will simply do their job. However, sales reps usually sell other products as well, and they will focus on the products that are most profitable for them. Offering commissions and incentives for a certain amount of product sold can encourage the sales rep to push your product and lead to increased sales. Neglecting to offer incentives could mean that your product is left in the trunk of the sales representative's car while more profitable products get their attention.
Sales costs involve more than just sales reps and marketing materials. They can also include expenses such as slotting costs for premium shelf space, website creation, distributor incentives, and retailer incentives. However, these costs must be carefully planned for in order to ensure the profitability of your product. Incentives can boost sales and encourage sales reps, retailers, and distributors to work harder to promote your product, but if you are too generous or fail to accurately calculate the profit margin, there may be no profit left to be made.
Similarly, slotting fees can be a valuable investment for getting your product into major grocery chains, but they can also be an unreasonable cost that your new drink cannot support, particularly if your profit margin is slim. It is important to assess the market before considering slotting fees or attempting to enter large retailers, as these stores can be difficult to break into and require a large amount of cash flow to manage their receivables.
Slotting fees can be beneficial for many drinks, but before considering them, it is essential to evaluate whether the market is worth the investment. It is a common misconception among those entering the business to believe that large retailers are the ideal places to sell their products. However, this thinking is flawed due to two significant problems: difficulty in getting into large stores until sales have been established and the need for significant cash flow to support large vendors' receivables. Additionally, being in big stores may not always be the best option for new drink products.
As a professional drinks marketing agency
, we have the expertise to help you navigate through these costs and determine the most cost-effective approach for your drink product. Partner with us to ensure your drink product is poised for success from production to POS.