Pricing Waterfall Model - Salesforce CPQ

Hello Everyone,

Welcome again to my blog.

In CPQ (Configure, Price & Quote) softwares, the most important part is Pricing. Without pricing a CPQ software is of no use, Agree?

Today we are going to learn about the Salesforce CPQ Pricing Waterfall model and different price fields available on quote lines.

Following diagram best represents the Pricing Waterfall model of Salesforce CPQ.

 

The above image depicts different price fields which gets populated by default or as a result of some discounting.

Now, let us learn about each field.

Note: In all the examples given below, we have taken an example of Subscription product but in order to avoid the confusion the prices getting calculated are shown without getting multiplied by subscription term. In real life, the pricing coming will be multiplied by whatever subscription term is defined at quote level.

• Original Price - This field will get populated by the price that we have specified on the price book entry. 

Example: A company is selling a subscription product and has defined price as $10 at Price Book Entry level. In this case the Original Price will get populated with $10 as an amount.

 

• List Price - Initial this field will get its price copied from original price which can later gets override from followings:

• Block Price

• List Price Override from Price Rule

• Manual Price Change

Example: Let's say a product has regular price as $10. Sales Rep is flexible enough to sell it to $9 in order to close the deal with customer, so Sales Rep is overriding the price to $9 from $10. In this case Original price will remain $10 but List Price becomes $9.

 

• Special Price - This field will get populated with the price that is coming from Cost + Markup, Contract Price or Option Discounts.

Example: The sales rep has provided price override $9 on list price, but customer already has a contracted price created for the same product which defines that whenever customer purchases the same product, It will be sold on $8 per unit. In this case Special Price becomes $8.

 

• Pro-Rated List Price - This field will get populated based on the value that is coming as a result of Pro-Rate Multiplier * Special Price.

Example: Now let's say the special price is $8 and Product is getting sold for 24 months.  Based on quote subscription term, a Pro-rate multiplier will get calculated for the product quote line and based on 'Pro-Rate Multiplier * Special Price' formula the Pro-Rated List Price will get calculated.

 

In our case let's assume the Pro-Rate multiplier is 2 then the Pro-Rated List Price will be $8 * 2 = $16.

 

• Regular Price - This field is getting populated with price which is coming after discount schedules are applied.

Example: Once the Pro-Rated List price got calculated, consider there is a discount schedule assigned to the product which is discounting a product by 10% if the product is being sold for more then a year.  So now the Regular Price will become $16 - $1.6 = $14.4.       

 

• Customer Price - This field is getting populated with price which is coming after Customer Discounts are applied.

Example: On top of Regular Price ($14.4) , Sales rep has decided to 5% additional discount. Now In that case the Customer Price will become $14.4 - 0.72 (5% of $14.4) = $13.68.

 

• Partner Price - This field is getting populated with price which is coming after Partner Discounts are applied.

Example: On top of Customer Price, Sales Reps decides to provide 10% Partner Discounts. In that case the Partner Price will become $13.68 - $1.36 = $12.32.

 

• Net Price - This field is getting populate as a final price that is a customer will be charged against the product that customer bought.

As Partner Price is $12.32 which is the final price in system, The Net Price will also become $12.32 and customer will be expected to pay this price for the product. 

I Hope this article may have helped you to better understand the pricing waterfall model of Salesforce CPQ.

Please reach out if you have any feedback/query/suggestion.

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Thanks,
Mehul Parmar