Salesforce CPQ Pricing Models

This post briefly covers the different pricing models which Salesforce CPQ has currently :-

1. Discount Schedule

It has two types :-

    a> Slab
    b> Range

Steps to implement :-

- Create a discount schedule record , select slab or Range as type and Percent/Amount as discount unit.
- Create discount tiers with the unit range.

Tier Name	Lower Boundary	Upper Boundary	Discount(%)
1-10 Units	1	11	0
11-20 Units	11	21	5
21-30 Units	21	31	10
30+ Units	31	41	15

 - Add this discount schedule to the Product you want to apply the pricing.

Calculation :-

if Type = Slab , List price = $100 and Quantity = 11
Total Price = Tier 1 Quantity * List Price * (1- Disc.%) + Tier 2 Quantity * List Price * (1- Disc. %)
                  =  10 * 100 * (1-0)  + 1* 100 * (1-0.05)
                  =  1000 + 85 = $ 1085

if Type = Range, List price = $100 and Quantity = 11
Total Price = Total Quantity* List Price * (1- Disc.%)
                  =  11 * 100 * (1- 0.05) = $ 935

Note : -

• Upper boundary excludes the value , say for example for Tier Name (1-10 Unit) has upper bound = 11 , so 11 is excluded.
• Discount Schedule at Product Feature level get precedent over the Discount Schedule at Product Option Level.

2. Block Pricing + Overage Rate

Steps to implement :-

- Go to product record and update the "Pricing Method" field to BLOCK.
- Create Block Prices record , this would be a related record on the product.
- Associate the block price records to a price-book.

Tier Name	Lower Boundary	Upper Boundary	Price	Overage Rate
1-10 Units	1	11	15
11-20 Units	11	21	30
21-30 Units	21	31	45
30+ Units	31	41	50	$25

- Create a custom field on "Block Price" object called "Overage Rate" as mentioned in the table above.

Calculation :-

If Quantity(Number of units) =  31
Block Price = Price of block + (Quantity - minimum quantity of block)* Overage
                    = $50 + (31-30)* 25 = $75
                   
3. Block Pricing+ Discount

You can use it as an alternative approach to Block + Overage

Steps to implement :-

- Go to product record and update the "Pricing Method" field to BLOCK.
- Create Block Prices record , this would be a related record on the product.
- Associate the block price records to a price-book.

Tier Name	Lower Boundary	Upper Boundary	Discount(%)	Price
1-10 Units	1	11		$100
11-20 Units	11	21		$150
21-30 Units	21	31	45%
30+ Units	31	41	50%

- Create a discount Schedule records on the product and add the last two rows highlighted in BLUE
   as Discount Tier Records.

Calculation :-

Unit Price =  $10
if quantity(# units) =  32
Total Price = Block Price + Extra Unit * Unit Price * Discount Percent
                  = $150 + 2 *10* 0.45 = $150 +$9 = $159

4. Multi Dimensional Quoting

If there are different multiple yearly/monthly segments to a subscription product this method is your method of choice.

Steps to implement :-

- Create the price dimension (related list on Product) records.

Dimension Name	Type	Unit Price
Maintenance	Yearly
Activation	One-Time	$50

5. Compound Discount

This pricing method applies the discount on each unit of product.

Steps to implement :-

- Update the "Compound Discount (%)" field on Product.

Calculation :-

Discount Percent  =  1 / Quantity^(Compound Discount/100)
If Unit Price = $100 , Quantity = 2 & Discount = 25%

Discount Percent = 1/2 ^(25/100) = 1/2^0.25 = 0.84
Net Price =  Unit Price * Discount Percent = $100 * 0.84 = $ 84

6. Percent of Total Pricing

This pricing model will apply when Subscription Pricing is selected as "Percent of total"  for a product.
It applies on the list price.

Steps to implement :-

Update these fields on Product
Subscription Pricing = Percent of Total
Percent of total Base = List

Calculation :-

Percent of total (%) = 15
Total Price = $100

A maintenance product option is set to percent of total with above mentioned configuration
Maintenance price = Total price * Percent of total(%)
                                = $100 * 0.15 = $15


7. Cost + Markup

Steps to implement :-

- For this pricing model please select "Pricing method" field on product to COST

Calculation :-

if Cost price = $100 , Discount = 15 %  ,  Markup = $10 & Quantity =11
Total Price  = (Cost Price * (1- Discount%) + Markup) * Quantity
                   = ($100 * (1-0.15) + $10 ) * 11
                   = $95 * 11 = $1,045