Configuring derived pricing
Automatically set the pricing for a product by deriving its pricing from other products or pricing sources such as transactional values in quotes or orders.
Derived pricing overview
As a pricing admin or manager, you can define rules for deriving product pricing dynamically, relative to other products or transactional values such as the total contract value (TCV) or annual contract value (ACV). When products with derived pricing are added to a transaction, such as a quote or order, the derived pricing is applied automatically. The system manages the lifecycle of derived lines by adding new system-generated lines when pricing rules require them, updating existing lines when pricing conditions change, and removing lines that no longer apply.
Derived pricing can be used in various scenarios. For example:
| Pricing scenario | Industry use case |
|---|---|
| Price accessories relative to related base equipment | Manufacturing: Sell an extended warranty that is 10% of the price of a high-end industrial machine. |
| Price add-ons that are based on Product X and Y total | Telecom: Sell 24x7 support as an add-on that is 10% of all the subscription products in a quote. |
| Price add-ons based on a percentage of all products purchased | SaaS: Sell product support service as an add-on that is 15% of subscription fees for all software products purchased. |
Derived pricing for a product involves the following items, which you manage through the Derived Pricing Matrix:
| Item | Description |
|---|---|
| Target product offering | Product offering for which pricing is derived. |
| Source product offering | One or more product offerings whose pricing is the basis for the target offering. |
| Transaction header value \(context variable\) | Field from the header for a transaction, such as quote, that is used as the pricing basis to calculate the derived price, such as the annual contract value \(ACV\). |
| Scope | Level from which the context variable is used:- Bundle - Cart - Account |
| Formula calculation | Percentage used to calculate the derived pricing |
| Price point | Price at which the product is sold: - Unit list price - Unit net price - Cumulative net price - Monthly recurring price - Annual recurring price |
| Aggregate | Formulas \(SUM, MIN, MAX, AVG\) used to determine a single derived product price when pricing is derived from more than one source product. Percentages and price floor and ceiling amounts are then applied as pricing adjustments to calculate the final derived product price. |
Scope: Quotes and orders
Derived pricing applies to both quotes and orders. When you configure rules in the Derived Pricing Matrix, the system automatically applies those rules to derived line items in both transaction types. The system handles all line-level changes (adds, updates, and removals) without requiring manual edits from agents.
Limitations for derived pricing
Derived pricing does not work for quotes of type sales agreements.
Setting up derived pricing
To implement derived pricing, complete these tasks:
| Task | Description | Role |
|---|---|---|
| Enable related (derived) pricing for a price list line | When creating a price list line, select the Derive price option.You can also set the Floor price and Ceiling price for a price list line. | Pricing admin or manager |
| Create rules for derived product pricing | Use the Derived Pricing Matrix to define the product relationships and calculations used when deriving product pricing. | Pricing admin or manager |