Sales and marketing managers face many challenges in the effective management of pricing and discounting. There are very few single issues that command as much attention and discussion among salespeople, sales managers, marketing and product managers and to some degree, almost anyone in the selling organization.
CPQ will help you ensure the proper discount is applied under the proper circumstances … Salespeople won’t have to call in for special permission, and customers will feel rewarded when they see “their” discount automatically applied.
It doesn’t matter if you’re selling lard or locomotives, saucepans or satellite systems, passionate pricing opinions will demand to be heard.
Once the subject of pricing has been adequately discussed, the conversation will almost always pivot toward discounting. Reps will ask how much can I discount, when can I discount, who can I offer discounts to and what approvals do I need to offer a discount. Those questions are all very important, and management should take them seriously.
One factor that will frustrate everyone concerned with pricing and discounting is the capricious application of discounting rules or policies. It is critical that pricing and discounting be formalized and process-driven. Digital technology offers several tools to help us oversee and manage the implementation and maintenance of a pricing and discounting plan.
What Is the List Price? CPQ Answers That Question
List prices are the one-off prices charged for products sold to everyday customers in quantities of one. The list price should be published (at least internally), and it should be the basis for all other pricing and discounting developed for a product. List prices are maintained within CPQ and serve as the basis for calculating prices for all quotes and proposals.
Specific country price lists are considered list prices within the applicable country, but the adjustment made to the home office list price may require something more than a simple currency conversion of pounds to dollars, pesos or whatever the case may be. CPQ automatically invokes the correct national or country price list based on the geographical location of the buyer and seller.
Special Price lists
In addition to the standard list price based on country or trading area, CPQ can maintain other price lists for GSA and other customer classifications such as national accounts or special contract accounts. Additionally, CPQ can accurately handle sales tax and other localized taxes such as VAT, although this may require some interface linkage with local financial systems.
When your salesperson in Topeka gets a request for a quote from a local office of the US Department of Agriculture, CPQ will record the name and address of the buyer and produce pricing from the current GSA contract. Those prices will be quoted in accordance with the government contracting vehicle applicable to the account. There is no approval needed for this discounting because the pricing was agreed to when the contract was awarded to your company.
The same process is invoked when a national account customer requests pricing. As soon as the account is entered into CPQ and linked to a quote, CPQ will select the applicable price list for your buyer. Use of either of those special price lists for non-qualified buyers is restricted and protected within CPQ.
Volume Discounting
Pricing for most products requires some accommodation for purchases of multiple units of the product. Eggs are cheaper by the dozen, and so are automobiles and radios. Volume discounting can be offered in a variety of ways. The basic element is that the more copies you buy, the lower the unit price.
Structuring volume discounts can be a complicated process or quite simple. Step-through, step-up and committed quantity-over-time prices are all different types of transactions that feature different calculation processes for prices associated with a specific transaction.
Regardless of how the price might be calculated, the underlying logic can be built into CPQ and automatically invoked during a transaction. The rep and the customer are assured that the correct price for the number of units purchased will be quoted.
Special Promotional Pricing
New products or products with some specific utility over a period of time are candidates for promotional or introductory pricing. For example, after the first of the year, all of the tax calculation software product vendors will be offering special pricing for their income tax filing products in “celebration” of the pending income tax filing deadline. If the vendor happens to be introducing a new product for people to report income from home-based businesses, they may offer a special incentive pricing for existing customers who sign up to try the product out.
Usually some specific condition must exist to qualify customers for the promo pricing. Customers must be new customers, already have product X installed or be located in some specific area. Regardless, the qualification must be identified and established before CPQ will extend the discount to the customer.
The other factor is that almost always, promotional pricing is relevant with time. The promotion has an expiration date, and the transaction must be completed on or before a specific date. CPQ will automatically turn off the promotional pricing once that date has past.
When the promotion expires, the deal expires also.
CPQ Automatically Applies Applicable Discounts and Promotions
Not only will CPQ make each of these individual discounts and pricing constructs work automatically, it will also mix and apply the individual discounts as required by the situation. For example, a promotional price may be offered in conjunction with a volume discount in three different countries, or a government customer will qualify for a GSA discount and a volume discount when buying multiple copies of a qualified product.
Effective discounting makes for good business. Discounting that is haphazard, applied by mood or other arbitrary factors will devalue your product and eventually devalue your reputation within your business arena.
CPQ will help you ensure the proper discount is applied under the proper circumstances. Discounting “just to get the order” will be limited, if not eliminated entirely. Salespeople won’t have to call in for special permission, and customers will feel rewarded when they see “their” discount automatically applied.
With CPQ, you know the price is right!
