Identify Exceptions to Standard Pricing
After completing this unit, you’ll be able to:
- Describe how Salesforce CPQ extends pricing beyond standard price books.
- Identify the main CPQ pricing tools and how they affect pricing.
- Describe how prices in the price waterfall represent various pricing adjustments.
Right now, you probably use price books to maintain lists of prices for your products. As a reminder, a price book entry is a price for a specific product, and a price book is a collection of price book entries. If you have three different types of customers, such as academic, government, and commercial, you could feasibly create three price books, each with their own price book entries. Then, when a sales rep works on an opportunity for a government entity, they would choose the government price book. In a lot of cases, this works well.
But now imagine that you have a lot of different types of customers, and each type requires different pricing. You could create a price book for each customer type, but that means maintaining more data, which means more work for you. Worse yet is if a price book only has a few changes for a specific customer. Handling pricing exceptions is a challenge when using only price books.
Here’s where Salesforce CPQ comes to the rescue. When you create a quote using Salesforce CPQ, it uses the selected price book like normal, but it then layers on pricing exceptions when needed. This allows you to use fewer price books and still see specific pricing for specific customers and situations. Furthermore, you can implement fancy pricing adjustments that aren’t supported by price books. For example, a product that’s sold as part of a bundle can have a different price than one sold on its own. Same product, same price book, two different prices based on the situation.
Although Salesforce CPQ gives us a lot of tools for adjusting prices beyond the price book price, it still needs a starting point—something to actually adjust. For that reason price books are still necessary when using Salesforce CPQ. In fact, if your quote is using a price book that’s missing a price book entry for a product, that product won’t appear in the product selection page, and can’t be added to the quote.
Your CPQ-enabled Developer Org already has price book entries for every product. You may notice that some products are priced at $0. That can mean two things: Either there is no charge for the product, or the price will be replaced using a Salesforce CPQ pricing method. In the second example, the $0 fulfills the requirement of having a price book entry. Remember to also create a price book entry when you create a new product so that the product can be added to quotes.
Let’s take a high-level look at what Salesforce CPQ can do to adjust or replace the prices it gets from price books. In later units, we look closely at how each tool can be configured, but for now let’s focus on what kinds of tools we have on hand.
||Uses a flat price for a range of quantities instead of multiplying by number of units.
||A streaming video service is $9 a month for 1–3 concurrent viewers, and $15 a month for 4–10 concurrent viewers.
|Percent of Total (PoT) Pricing
||Looks to the sum of other product prices, then takes a percent of that sum.
||The tip for your pizza delivery is 15% of the overall amount of your order.
|Option Pricing Override
||Replaces the price of a product only when it’s within a bundle.
||The price of a drink is $1 when bought in a combo meal, but $1.35 when bought alone.
|Cost Plus Markup Pricing
||Allows sales reps to add value on top of a product’s cost.
||A car costs the dealer $30,000, and it’s marked up to $34,000 to make commission.
||Sets account-specific prices for individual products or categories of products.
||Your customer Edge Communications pays $200 for a printer while everyone else pays $275.
You may notice that these pricing tools don’t really mention discounts. Discounting is typically handled after we’ve established the starting price of the product. You can learn more about applying discounts in the Discounting Tools in Salesforce CPQ Trailhead module.
Many things can happen to affect a given quote line’s price. For example, Salesforce CPQ can apply contracted pricing, while the sales rep applies a manual discount. To keep track of everything that happens, CPQ uses multiple pricing fields on the quote line, each field representing specific pricing adjustments.
|Pricing Field||What It Represents|
||Price book price
||Price book price, block price, percent of total price, or option price override
||Cost plus markup price, contracted price, or option discount
||Result of volume-based discounts
||Result of manually editable discounts
||Result of partner discount, set manually or through automation
||Result of distributor discount, set manually or through automation
This list of prices is often referred to as the price waterfall because each price from top to bottom effects the next price down. For example, CPQ takes the special price and deducts the volume-based discounts to calculate the regular price. Then, it takes regular price and deducts manual discounts to calculate customer price, and so on.
It’s good to be familiar with the price waterfall, but in this module we mainly focus on how list price and special price obtain their values. These values flow down to the net price, which is what we actually ask the customer to pay for a given product, and what is synchronized to the opportunity product price.
Now that we know the different ways that Salesforce CPQ can adjust prices, and how it keeps track of those adjustments, let’s take a closer look at each pricing tool and learn how to configure them.