Salesforce CPQ: Types of Product Pricing Methods
In CPQ, P Stands for Price and it has several ways of pricing. Pricing can be very complex for some business use cases. It is very crucial to understand all the pricing methods in CPQ so that you can use the right method before you start implementing your CPQ solution.
There are Four main Pricing Methods available.
- Percent of Total
- Batch Price
- Contracted Price
This method is used when we have the fixed prices for the products, List Price is directly coming from the Price Book entries. we can even make the price editable if we want it to be editable by the sales rep using the field present on the product Price Editable to checked.
On the List Price, we can add the discounts and are also known as List Price and Discount.
we can even override the list price on the product option level under the bundle so a product inside a bundle can be sold for less or more.
Using this Pricing method we can use the cost price for the product and then use Markup on top of it. it is the opposite of List and Discount, here we don’t give a discount on the price instead we can apply the Markup on the cost price.
and it is also known as Cost-and-Markup.
for Making a product as cost price select the pricing method to Cost and create a cost record from the related list same as we create in list price as price book entries. On these products, the discount fields will now work only the Markup of Quote or Quote Line can be applied.
As we can make the price editable we can make the cost editable as well from the checkbox present on the product.
Cost pricing method can be useful when,
- You are selling any product after aplying a profitable markup on it’s manufactuting cost.
- If you are selling a product for $50000 after appliying a Markup while it costs under $40000 to the dealer.
As the name suggests Block Pricing is nothing but the blocks or the ranges of quantity and when the sales rep selects a block-priced product and adds the quantity then CPQ checks where it fits in the quantity range and then prices it accordingly.
For example, for the quantity range of 1-10 units a product costs $15, and for 11-25 units it costs $25. then the total price for 20 units will be $25.
You can configure a Block price from the product’s Block Price related list. there you can define the Price Name and lower bound and upper bound (Note: Upper Bound is always excluded from the Block Price range) and then you can define the price from the price column and can add more block price ranges as well.
Percent of Total (PoT)
This pricing method is based on the percentage of different product prices such as a percent of all software products will become the price of maintenance Subscription.
To set a product as a Percent of the total we need several fields to populate accordingly.
- Subscription Pricing to Percent of Total.
- Pricing Method to Percent of Total.
- Percent Of Total (%) populate the percent that you want it to calculate.
- Percent Of Total Base it can be List, Regular, Customer, Net.
- Percent Of Total Category which type of products you want it to include in the POT calculation.
- Percent Of Total Constraint if you want to constraint the calculated price on the basis of list price.
- Include/Exclude From Percent Of Total polulate these fields on all the products if you want any product to include or exclude from the percent of total calculation.
Batch Prices can only be used with the product option inside a bundle it doesn’t work with standalone products or bundle parent products. it is used to price Component and Accessory products based on the quantity ranges.
for Setting this up you have to update the batch quantity on the product then add that product inside a bundle.
for example: if you have any product which costs $30 and for this product batch quantity is set to 4 units then if you select this product and add the quantity as 15 then CPQ divide the selected quantity by batch quantity and calculates the quantity to the next integer. so in this case the final quantity will become 4 ( 15/4 ≈ 4 to the next integer ) so the final price becomes $120.
1-4 Unit = $30
5-8 Unit = $60
9-12 Unit = $90
12-16 Unit = $120
Whenever a new contract is created we can use the price for each line item from the original quote in future quotes under that Account, these contracted prices are stored in the Account’s related list of Contracted prices.
This contracted price is useful when the negotiation is done on the first contract and the client wants to use the same prices for future quotes. Salesforce CPQ uses this negotiated price on new quotes, renewal quotes, and amendment quotes.
For example: if a product price was $400 and after the negotiation, the final price was $300 and the contract is generated. if the contracted Price is enabled, all the future quotes for that account will show the price without any discount as $300 only.