Configure Usage Pricing
Learning Objectives
After completing this unit, you’ll be able to:
- Summarize how usage pricing works in Industries EPC.
- Describe the purpose of estimated usage in quotes and orders.
- Explain how to set up usage pricing.
Price Based on Customer Usage
In Industries EPC, you can price catalog offerings based on a customer’s usage or consumption of a certain product or service. Energy and utilities companies often use this strategy to price commodities like electricity, water, or gas. The service provider tracks the customer’s utilization of the product and then calculates total charges using a rate price. Unlike fixed charges, which are predefined, usage-based pricing rates and charges often fluctuate over time. At the end of a designated period, such as a billing cycle, the customer receives a bill for the total calculated amount.
You’re probably familiar with this concept if you’ve ever subscribed to or purchased any of the following products or services.
- Internet data plans
- Cloud storage and backup services
- Utility services, including electricity, gas, or water
- Long-distance calls
So, if usage rates constantly change, how can you accurately quote the price of a product or service for potential customers?
Hello Wei Leung
Like Eliza at Infiwave, Wei Leung, a developer at Ursa Major Solar, is searching for ways to adopt advanced pricing techniques in Industries EPC.
She’s currently exploring how to price her company’s line of energy products, including solar electricity. According to sales reps, customers are often confused about what rate they’ll pay for each kilowatt-hour (kWh) they use. Wei knows this price depends on many factors, such as the time of day and the customer’s location. What the customers really need is a price estimate during the order process so they know generally how much they can expect to pay. This way, they won’t be blindsided when their bill arrives each month.
Estimated Usage
By creating usage estimates in EPC, you can give your customer a general idea of what they’ll pay each billing period. After purchase, order management fulfills the product or service, and back-office systems handle the administration and billing using the actual usage rate.
In this example, you can see how estimated usage and actual usage may vary.
Notice that the estimated kilowatt-hour usage is less than the customer’s actual electricity consumption. The customer’s gas usage is slightly lower than the estimate.
Wei must create pricing for a fixed rate electricity product. Just like it sounds, the rate for the product won’t change during the length of the plan, even if electricity market prices fluctuate. This sounds pretty simple, but there are a few more considerations. The price must be based on past consumption data for the customer’s location, include a component for electricity as a commodity, and use a standing charge for service to the customer’s household.
To meet this need, Wei creates a new product bundle called Fixed Energy that contains two child products: Unit Rate and Standing Charges.
- The Unit Rate product represents the rate the customer pays based on their estimated usage.
- The Standing Charges product represents the standard fee to supply the location or service point with electricity service.
This way, when customers order the bundle in the Industries CPQ Cart, they can view the estimated price they’ll pay.
This estimate is made possible by setting up a calculation that multiplies the Estimated Usage Quantity by the Usage Price and returns the Usage Price Total amount. The total price rolls up with the prices of the other child products in the bundle.
Wei configures attribute-based pricing to account for the customer’s location and payment method.
Usage Pricing Configuration
Here are the steps essential in creating usage pricing:
- Enable usage pricing.
- Create charge measurements and assign usage pricing to products.
- Configure an attribute and attribute binding for Estimated Usage Quantity.
Before you proceed through these steps, let’s learn more about each of the components you’ll set up.
Now follow along with Wei as she implements and configures usage pricing for products using the Implement Usage Pricing practice guide.
Test Usage Pricing in the Cart
Wei likes to test everything before signing off. To ensure usage pricing is working the right way, she creates a new order and adds the Fixed Energy bundle to the Cart. Then, she clicks Configure from the action menu of the new line item.
In the product configuration window, Wei sees the Customer Category, Unit Rate Estimated Usage Quantity, and Standing Charges Estimated Usage Quantity fields. The attribute binding is working!
She fills in some sample data, and the pricing engine calculates the Usage Price Total for the line item and updates its price accordingly. Woo hoo! Wei is happy and celebrates with a cup of coffee.
Attribute-based Usage Pricing
In many Energy & Utilities deployments, usage pricing alone isn't enough. The cost of energy commodities fluctuates and will vary based on customers’ geographic location. Therefore, in addition to usage pricing, Wei must use attribute-based pricing and create a decision matrix to change the usage price of the Unit Rate and Standing Charges products.
Refer to the Configure Attribute-based Usage Pricing practice guide to extend attribute-based pricing to work with new usage pricing variables.
Wrap Up
In this module, you learned advanced pricing methods in Industries CPQ to help you to price products in unique ways, while keeping Shared Catalog data to a minimum. Just like Eliza and Wei, you’re ready to handle any selling scenario that comes your way.