Salesforce CPQ Price Waterfall is a calculation sequence to arrive at the net price for the customer. There are many types of prices and discounts available in Salesforce CPQ. Salesforce CPQ Price Waterfall defines a sequence to treat different prices with the end goal of arriving at the net price charged to the customer. I have defined the Price Waterfall in my last blog along with Scenario 1. You can read it here.
Scenario 2– Tango foods has been offering Lunchbox at a List price of $15. Things have now changed due to COVID and the objective is to have a special price for some quantity blocks. So, Tango foods is offering a special price $150 for 15-20 boxes and $175 for 21-25 boxes. On top of that there is 10% discount for26-50 qty and 20% discount for any quantity above 50. These are the base rates. From June to Oct 2020 – Tango Foods will also offer additional 5% discount on the order. Kitchen Foods gets an additional partner discount of 10%. Jerry Kale is a partner and distributor and gets a 6% distributor discount.
Let us use Salesforce CPQ Price Waterfall and see what the price will be for Kitchen Foods and Jerry Kale. Qty ordered is 35.
a) Block Price– List price of $15 is set in the pricebook entry for Lunchbox. This Price will not be applicable in this case. In this case, Block Price will become the List price for the specified blocks. Block price is $150 for a quantity between 15-20 and $175 for quantity between 21-25.
b) Regular price is determined – Block Price for upto 25 boxes is $175. For additional 10 boxes List price of $15 per box will be used. So, the price for additional 10 boxes is $150 (15×10). There is a 10% system discount on this so price of these 10 boxes after 10% discount is $135(13.5 *10). The total regular price is $175 + $135 = $310 for 35 boxes.
c) Calculation of customer price– Regular price minus additional discount = 5% of $310 is $16.5, so Customer price = $310-$16.5= $293.5
d) Calculation of Partner price– Customer price minus partner discount = 10% of $293.5= $264.15 (This becomes the net price for Kitchen Foods)
Price for Jerry Kale (Jerry Kale is a Partner and Distributor)
e) Calculation of Distributor Price = Partner Price minus distributor discount = 6% of 264.15, So distributor price = 264.15- 15.846 = $248.30
($248.30 becomes the net price for Jerry Kale)
Scenario 3– Tango Foods offers Lunchbox at a List Price of $15. Kitchen Foods has been a major buyer of ‘Lunchboxes’. Tango foods has gone into a special contracted pricing arrangement with Kitchen Foods where each Lunchbox will cost $12 to KitchenFoods. During Covid they get regular system discount of 5% for 50-60 boxes and 10% for 61-70 boxes. They also get a partner discount of 5 %. Jerry Kale is a partner and a distributor and gets an additional 8 % distributor discount. Jerry Kale does not get any special contracted price.
Let us use Salesforce CPQ Price Waterfall and see what the price will be for Kitchen Foods and Jerry Kale. Qty ordered is 65.
Price for Kitchen Foods
a) Contracted Price– List price of $15 is set in the pricebook entry for Lunchbox. This Price will not be applicable in this case. In this case, Contracted Price will override the List price for Lunchbox. Contracted Price is $12 for Kitchen Foods. If you want to learn how to set Contracted price, you can refer my blog here.
b) Regular price is determined– Contracted Price for 65 boxes is $780 (65 *12). System discount of $10% will be applicable on the contracted price of $780 which is $702(780 minus 78). Regular price is $702
c) Calculation of customer price– Regular price minus additional discount = 5% of $702 is $35.1, so Customer price = $702-$35.1= $666.9($667 appx)
d) Calculation of Partner price– Customer price minus partner discount = 5 % of $667 = $33.35 Partner Price is $667 -$33.35 = $633.65 (This becomes the net price for Kitchen Foods)
Price for Jerry Kale (Jerry Kale is a Partner and Distributor)
e) List Price –> Contracted price is not applicable for Jerry Kale. Base price will be List Price of $15. List price for 65 boxes will be $975 (65*15)
f) Regular Price –> List Price minus System discount = $975 minus (10% of 975) = $877.5. Regular price is $877.5
g) Customer Price –> Regular Price minus Additional discount = $877.5 minus (5% of 877.5) = $843.88 ($844). Customer price is $844
h) Partner Price –> Customer Price minus Partner Discount = $844 minus (5% of $844) = $802. Partner price is $802
i) Distributor Price –> Partner Price minus Distributor Discount = $802 minus (8% of 802) = $738.
j) Net Price –> Net Price for Jerry Kale is $738
Scenario 4– Tango Foods offers Lunchbox at a List Price of $15. Tango Foods has decided to use cost-based pricing as they are contemplating to change their business model to become non-profit. All mark ups to go towards covering operating expenses. The cost of a Lunchbox is $10 per box. Salesperson can only mark up 40% of the cost. There is a nominal discount available through discount schedules. 3% discount if 25-50 boxes and 5% if anything quantity above 50 is purchased. There is no special contracted price for KitchenFoods, but they get a 5% partner discount and there is an additional discount of 5% available for all customers. Jerry Kale gets a distributor discount of 3%.
Let us use Salesforce CPQ Price Waterfall and see what the price will be for Kitchen Foods and Jerry Kale. Qty ordered is 75.
Price for Kitchen Foods
a) Cost Plus Markup Price– List price of $15 is set in the pricebook entry for Lunchbox. This Price will not be applicable in this case. In this case, cost plus pricing will override the List price for Lunchbox provided this is set as the pricing method and costs are defined. Cost is $10 per box. If you want to learn more about Cost price, you can refer my blog here. There is a 40% mark up allowed so the Cost-Plus Markup price becomes $14 (40% of 10 is 4 and 10 +4=14)
b) Regular price– CostplusMarkup Price for 75 boxes is $1050 ($14 *75). System discount of 5% will be applicable on the Costplusmarkup price of $1050 which is $997.5(1050 minus 52.5). Regular price is $997.5. Regular price = CostplusMarkup minus System Discount. Note*- For easy calculations rounding off regular price to $998
c) Calculation of customer price– Regular price minus additional discount = 5% of $998 is $49.90, so Customer price = $998-$49.90 = $948.10($948 approx868)
d) Calculation of Partner price– Customer price minus partner discount = 5 % of $948 = $47.40 Partner Price is $948 -$47.40 = $900.60(This becomes the net price for Kitchen Foods)
Price for Jerry Kale (Jerry Kale is a Partner and Distributor)
e) Partner Price –> Partner Price is $900.60. For calculation sake let’s round it off to $901.
f) Distributor Price –> Partner Price minus Distributor discount = $901 minus (3% of 901) = $874 (approx.). Net price for Jerry Kale is $874
Scenario 5– Tango Foods offers Lunchbox at a List Price of $15. Lunchbox is a subscription product, it is subscribed monthly and is delivered weekly. There is a system discount of 10% (discount schedule) applicable on it for 20-25 and 15% for 26-35qty ordered per month. There is an additional Covid discount of 5% available. Kitchen Foods gets 5% additional partner discount on subscription and Jerry Kale gets 3% distributor discount.
Let us use Salesforce CPQ Price Waterfall and see what the total price will be for Kitchen Foods and Jerry Kale. Qty ordered is 32 every moth for a 6 months subscription
Price for Kitchen Foods
This is a vanilla case involving a subscription product:
a) List Price– Monthly List price of $15 applicable for Lunchbox. List price is $15* 32 = $480
b) Regular price– List Price minus system discount (discount schedule) = $480 minus (15% of 480) = $408, 15% discount applicable as the quantity ordered in 32. Monthly Regular price is $408
c) Calculation of customer price– Regular price minus additional discount = $408 minus (5% of $408), so Customer price = $387. 6 Monthly customer price is $387.6 (Rounded of to $387)
d) Calculation of Partner price– Customer price minus partner discount = 5 % of $387 = $19.3. Monthly Partner Price is $387 -$19.3 = $367.7 (This becomes the monthly net price for Kitchen Foods)
e) Total Subscription Price for 6 months is $367.7 x6 = $2202.2
Monthly and Total subscription Price for Jerry Kale (Jerry Kale is a Partner and Distributor)
e) Partner Price –> MonthlyPartner Price is $367.7. For calculation sake let’s round it off to $368.
f) Distributor Price –> Partner Price minus Distributor discount = $368 minus (3% of 368) = $357 (approx.). Net monthly price for Jerry Kale is $357
g) Total subscription price for 6 months is $357 * 6 = $1872
I am hoping that I am able to explain make the concept of Salesforce CPQ Price Waterfall easy and simply to understand with various scenarios. In the next blog we will see the exception to the standard sequence of pricing calculation in Price Waterfall.
Your likes, shares and comments will motivate me to keep writing.
0 Comments