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Renewals: When a customer buys again in continuation with the last sale then it can be termed as renewal. Renewal can also be called as renewal of the last sale.

Let’s take some examples to understand Renewal process in CPQ.

Example 1– Tango Foods sells to KitchenFoods regularly. KitchenFoods has entered into a renewable monthly subscription of 60 Lunchboxes per month for 6 months. This means that the subscription length is monthly, and it is renewed every month automatically. In this case each time a subscription is renewed, there is a renewable quote created. In this blog we will see how the renewable quote is affected and intron effects the Price Waterfall. This is an example of renewable subscriptions.

Example 2– Tango Foods gets into a contract with Kitchen Foods. The contract has a List price along with a partner discount fixed. It is a one-year contract. After one year the contract has to be renewed. So, in this case the sales cycle will start from renewable opportunity to renewable quote and then contract and orders. As you can make out, each time a contract is renewed, a renewable quote has to be created. In this blog we will see the behaviour of renewable quote based on certain settings and it’s impact on Price waterfall. This is an example of renewable Contract.

How does the renewal work in CPQ org?

In case of renewable subscriptions, a renewable quote is created, it inherits certain values from the last quote. This can also be termed as renewal automation. This is set in the org through the ‘Subscription Type’ field on subscription product. The value of this should ‘Renewable’. In case of a renewable contract, after the end of the contract is up for renewal through a renewable opportunity which is created from the original opportunity and then a renewable quote resulting in acceptance of the quote and then creation of a contract from where orders can be created and the contract can be monitored. This is set up through contract fields. There is a ‘Renewal Term’ field on the Contract and the value of this field determines the time after which the contract will be renewed. For example, if it is 12 then contract is renewable after 12 months. There is also a “Renewal Uplift” field which states the percentage by which states the percentage by which the renewal quote will be bumped.

Renewal Scenarios

Renewal scenarios control the price on the renewed quote. Renewal scenarios also control the way various price types will be treated on the renewal and directly impact the Price Waterfall. If you want to know more about CPQ Price Waterfall then you can refer my blog here. Renewal scenarios are as follows:

Same: This means that the price on the renewal quote will pretty much be the same as the original quote. There are some specific conditions which we will see in calculations later in this blog.

List: This means the price will be as per the List price whenever the renewal quote is created. It will not reflect prices from the original quote

Uplift: This means that that renewal price will be the same as original quote with an uplift. This can be defined in the contract.

The setup of the above-mentioned renewal scenarios are fundamental to how renewal work in CPQ. The above set up is done in the Account object in the ‘Renewal Pricing Method” field and this controls the renewals for an Account. There are other fields discussed above for subscription and contract which are set based on requirements.

Renewal Impact on Pricing Waterfall

Let us understand the above-mentioned renewal scenarios with the help of  examples and see how they impact the Net price.

Example 1 – 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 understand this from a renewal perspective for Renewal scenario ‘Same’

First quote for the subscription of the first month

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 –> Let us first calculate the Customer Price per unit. Customer Priceper unit will be Regular price per unit minus Additional discount = $12 minus (10% of 12) = $10.8.Customer Price per unit is $10.8. Total customer price is $10.8 * 35 = $378

d)  Partner Price –> Let us first calculate the Partner Price per unit. Partner Priceper unit will be Customer price per unit minus Partner discount = $10.8 minus (5% of 10.8) = $10.26.Partner Price per unit is $10.26. Total customer price is $10.26 * 35 = $359.1

Since there is no distributor price, the net price here is $359.1

Renewal quote for the subscription in the second month (Quantity changed to 40)

Customer Price –> Customer Price will Map to the $10.8. Same as the price on the first quote.

Regular Price- Regular price will be mapped to $12. Same as the price on the first quote

Additional Discount– It will ne Regular Price minus Customer Price per unit which will be 12- 10.8 = $1.2. Total Additional discount will be $1.2 * 40= $48

Total Customer Price– Unit customer price * 40 = 10.8 * 40= $432

Partner discount– Partner discount do not come through with Renewal quotes so they need to added. Unit Partner Price will be Unit customer price minus Partner discount which is $10.8 – (5% of 10.8) = $10.24. Total Partner Price will be $10.24 * 40 = $409.6

Net Price – Net price is equal to $409.6

Example 2 – 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 understand this from a renewal perspective for Renewal scenario ‘List’.  The List price at the time of renewal has changed to $14 per Lunchbox. This is reflected in the a new pricebook.

First quote for the subscription of the first month

Net Price à Calculation for the first quote will remain same as given in Example 1.  Net price as per the calculation above is $359.1

Renewal quote for the subscription in the second month (Quantity changed to 40)

As the renewal method is ‘List’. Renewal pricing will be based on the list price applicable at the time of renewal. The price form the priginal quoted will not be replicated.

a) List Price –> List price per unit is $14. List Price per unit has changed to $14. For 40 units list price will be 40 * 14 = $560

b) Regular Price –> Let us first calculate the Regular Price per unit. Regular price per unitwill be List Unit Price minus system discount = $14 minus (20% of 14) = $11.2.  Regular price for 40 Lunchboxes will be 40*11.2= $448

c) Customer Price –> Let us first calculate the Customer Price per unit. Customer Priceper unit will be Regular price per unit minus Additional discount = $11.2 minus (10% of 11.2) = $10.08.Customer Price per unit is $10.08. Total customer price is $10.08 * 40 = $403.2

d)  Partner Price –> Let us first calculate the Partner Price per unit. Partner Priceper unit will be Customer price per unit minus Partner discount = $10.08 minus (5% of 10.08) = $9.57.Partner Price per unit is $9.57. Total customer price is $9.57 * 40 = $383.04

Since there is no distributor price, the net price here is $383.04

Example 3 – 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 understand this from a renewal perspective for Renewal scenario ‘Uplift’. The Uplift % is 10. Renewal Quantity is 40. Quantity on original quote in 35.

First quote for the subscription of the first month

Net Price– Calculation for the first quote will remain same as given in Example 1.  Net price as per the calculation above is $359.1

Customer Unit Price- Customer Unit price from the original quote is $10.8

Renewal quote for the subscription in the second month (Quantity changed to 40)

As the renewal method is ‘Uplift’ and the Uplift % is 10, renewal pricing will be same as the original quote with the exception of application of Uplift % on the renewable quote. List price will come from the original quote. Uplift can be set on subscriptions or contracts.

Note* We will look at the Prorated List Price in a later blog

Let’s start with the Customer Price for Example 3

a)  Customer Price –> Customer Price Per unit from the original quote is $10.8. Applying uplift of 10% on 10.8 = $11.88. Total Customer Price is $11.88 * 40 = $475.20

b)  Partner Price –> Let us first calculate the Partner Price per unit. Partner Priceper unit will be Customer price per unit minus Partner discount = $11.88 minus (5% of $11.88) = $11.29.Partner Price per unit is $11.29. Total customer price is $11.29 * 40 = $451.60

Since there is no distributor price, the Net price in this case is $451.60

I hope, I have been able to make the concept of Renewals easier to understand. Your likes, comments and shares will motivate me to keep writing.