Calculation Sequence of Salesforce CPQ Price Waterfall

The standard calculation sequence of Salesforce CPQ Price Waterfall is as follows:

List Price->Regular Price->Customer Price->Partner Price->Distributor Price->Net Price

Partner price is calculated fourth in the sequence and is derived by deducting Partner discount from the Customer price. If you want to know more about the basics of Salesforce CPQ Price Waterfall then please visit my blog here.

What is Partner Discount?

Partner discounts are given to Business partners or Business channel partners. These discounts are given to push the products down the sales value chain so that they can reach the end customer. For example a factory producing goods can have a distributor, dealer and then a dealer or a distributor can have a retailer who may then the pass product to end customer. Distributors, partners, traders and  dealers are all business partners and are given different discounts.

Partner discount is used in CPQ Price Waterfall to derive Partner Price. Partner discount is a category of discount which is deducted from the Customer unit price to arrive at the Partner Unit Price and then this price is multiplied by the quantity ordered to arrive at the total partner price. It is important to understand that the CPQ Standard Price Waterfall calculation sequence does not end at Partner Price. From the Partner price, Distributor price is ascertained.  

What is the case of calculating Partner Discount first in the Salesforce CPQ Price Waterfall?

In business and scenarios where a partner must be given more importance can use Partner Price first. This is because Partner gets the maximum benefit of the discount as it is calculated from the List Price (Highest denomination of the price). This is useful in B2B business scenarios.

Impact of calculating Partner discount first in Salesforce CPQ Pricing Waterfall

Let’s understand the impact through an example and also see how renewal pricing gets affected with the last calculation of Partner Discount first.

Example – Tango Foods offers Lunchbox at a List Price of $15. Kitchen Foods has been a major buyer of ‘Lunchboxes’. Kitchen foods gets into a 12 Months contract with Tango Foods wherein the subscription term is monthly and Renewal term is also Monthly. There is a system discount of 20% for quantities between 30 and 40. There is an additional 10% discount. KitchenFoods gets a partner discount of 5 %.  

 Let’s calculate the Partner Discount and Net Price in a normal standard way for an order of 35 Lunchboxes

a) List Price –> List price per unit is $15. For 35 units list price will be 35 * 15 = $525

b) Regular Price –> Let us first calculate the Regular Price per unit. Regular price per unitwill be List Unit Price minus system discount = $15 minus (20% of 15) = $12.  Regular price for 35 Lunchboxes will be 35*12= $420

c) Customer Price –> Since, customer price is calculated next, Customer Priceper unit will be Regular Price per unit minus Additional discount = $12 minus (10% of 12) = $10.80.Customer Price per unit is $10.80. Total customer price is $10.80 * 35 = $378

d)  Partner Price –> Since, Partner price has to be calculated next, Partner Priceper unit will be Customer price per unit minus Partner discount = $10.8 minus (5% of 10.80) = $10.26.Partner Price per unit is $10.26. Total partner price is $10.26 * 35 = $359.10

e)  Net Price–> Since there is no distributor price, the net price here is $359.10.  

Let’s calculate Partner Price first and evaluate the different between calculating it the standard way and first:

a) List Price–> List price per unit is $15. For 35 units list price will be 35 * 15 = $525.  

b) Partner Price –> List Price per Unit minus Partner Discount which is $15 minus (5% of 15) = $14.25. Total Partner Price is $14.25 * 35 = $498.75. Here the total partner discount is  $26.25 while in the above scenario the total partner discount is $18.90.

c)  Regular Price –> Let us first calculate the Regular Price per unit. Regular price per unitwill be Partner Price minus system discount = $14.25 minus (20% of 14.25) = $11.41.  Regular price for 35 Lunchboxes will be 35*11.41= $399.35

d) Customer Price –> Since, customer price is calculated next, Customer Priceper unit will be Regular Price per unit minus Additional discount = $11.41 minus (10% of 11.41) = $10.27.Customer Price per unit is $10.27. Total customer price is $10.27 * 35 = $359.45

e) Net Price–> Since there is no distributor price, the net price here is $359.45. 

Summary– The difference between the net price in the standard calculation of Partner Price and Custom calculation is about $0.35. Tango Foods is able to achieve an increase in the Net price and is also able to pass more discount to the Partners

Impact of calculating Additional discount last on Renewal Pricing

If you want to know more about how renewal pricing works in the context of CPQ Price Waterfall then you can refer my blog here.

Renewal Pricing Method – Same – Here the ‘Same’ renewal method will work a little differently. It will bring over the Partner Price in the renewal quote as the partner price is calculated first. It will not bring over the distributor discount.

a) List Price, Regular and Customer Price –> Customer Unit Price of $10.27 and total price of $359.45 will be bought over.

b) Distributor Price–>  This will either have to be applied manually or through Price Action.

Renewal Pricing Method – List – This will only get the system discounts. So it will take the List price applicable at the time of the renewal and get the system discount of 20% for 35 units in the renewal quote. Rest of the price has to be either applied manually or through price action. If partner Price has to be applied, then a price action or a custom procedure has to be written.

a) List Price, Regular Price–> List price per unit is $15 at the time of renewal. For 35 units list price will be 35 * 15 = $520. Regular price is $15 minus (20% of 15) = $12. Total regular price will be $12 * 35 = $420.

$420 is what will come over in the renewal and the rest of the discounts will have to be manually applied

Renewal Pricing Method – Uplift – Here it will work like ‘Same’ renewal pricing method. The only change will be that Uplift if applicable will be applied to the Customer Price. So, let’s see how this works for an uplift of 10%.

 a) List Price, Regular and Customer Price –> Customer Unit Price of $10.27 and total price of $359.45 will be bought over.

b) Uplift on Customer price (Customer Price on Renewal quote) –>   10.27 Plus (10% of 10.27) = $11.29. Total Customer Price will be 11.29 * 35 = $395.15

I hope that I have been able to make these exceptions clear to understand for all of you. Your likes, shares and comments will motivate me to keep writing.