Pricing your products with Salesforce

Salesforce is a flexible and powerful cloud platform with support for a broad range of business functions. Included in this is the ability to manage products and pricing which has evolved over the years starting with basic pricing as part of CRM opportunity management, through to eCommerce shopping carts and complex B2B pricing mechanisms using CPQ (Configure, Price, Quote) capabilities. This article reviews these product pricing options within Salesforce and can hopefully serve as guide to the business user as to which Salesforce Cloud or function would best meet their requirements.

The Salesforce story starts with what is now referred to as Sales Cloud. This is an entry point to the core Salesforce platform with out of the box capabilities for the sales process from lead capture, through to opportunity pipeline management and eventual sales closure. As part of opportunity management Sales Cloud provides basic product and pricing capabilities which can be used for customer quotation and price discounting.

The data relationships shown below controls how this works:

• Product records contain details of each named product with optional attributes such as product code and product family grouping.
• Price books are separate records, one of which is selected in order to provide the price information relevant to the sales opportunity you are building.
• Price book entries contain the specific pricing details for each product against each price book. Products may or may not have a price book entry for each price book. Prices can be supplied for each currency supported within the Salesforce system for each price book entry. Again, not every price book entry may be available with every currency.

So you can see that the products available for opportunity pricing are determined by the choice of price book and the choice of currency associated with the opportunity. These are selected separately at the opportunity level.

• The price offered by the price book entry is labelled the list price. It’s important to note that the available list prices are determined from a single price book. So there is no capability to mix and match prices from separate price books. This will be discussed later when we talk about the other system options available.

Products and their list prices are added to a Salesforce opportunity through related opportunity product records. Once we have we have an opportunity product associated with an opportunity the following updates to price can be made

• A separate sales price can be entered over-riding the list price
• An absolute discount to the list price can be specified producing a discounted sale price
• A percentage discount to the list price can be specified producing a discounted sale price
• Quantity can also be specified.

Once the opportunity products are processed as above the total price (sum of the sale price and quantity) is presented at the opportunity level as the total opportunity amount.

An additional feature of Sales Cloud is the use of quotes and quote line items to allow separate collections of products and pricing [and currency options] to be setup for comparison purposes. A single quote is specified as the primary which is then presented at the opportunity level and this can be changed. The opportunity currency will always be the same as the primary quote currency.

Any specific additional rules around product selection, and pricing discounts can be built with other Salesforce automations, and required validations enforced using validation rules (eg. limit percentage discount to 10% of list price).

Many Salesforce customers have used the above techniques to build sophisticated pricing mechanisms to make the customer quoting process streamlined and efficient. This extra customisation does require additional overheads and added costs for building and maintaining the system. To help reduce these costs and extend the native capabilities of the system Salesforce introduced Salesforce CPQ (originally a 3rd party managed product from Steelbrick) which is a rich package of functions delivering product configure, price and quote capabilities. These functions provide sophisticated product bundling options, a range of pricing mechanisms, and quote document production capabilities.

The principal pricing mechanisms introduced in Salesforce CPQ are:

• Product Options. This enables grouping or bundling products which can control or guide product selection Additionally From a pricing perspective this means we can set a special price for a bundled product, or set a zero price for a bundled product with pricing being set at the product bundle level.

• Discount Schedules. Using product quantity bands to drive volume purchase discounts. These can be based on either the total quantity or calculated as you move from band to band.

• Cost Base. Pricing starting with cost and manually adding a markup to arrive a customer price. Typically used with supplier based pricing.

• Block pricing. Pricing per quantity block eg a single price for block of up to 100 purchased, and another price if buying between 100 and 200.

• Multi Dimensional Quoting. Used with subscription pricing to segment by time and apply a price per time unit. eg 3 months at 50% discount then list price for remainder

• Contract Pricing. Establish specific product pricing by customer account.

• Percent of Total. Calculate a price based on percent of total from other product prices on the quote. eg sum up hardware prices to arrive at a price for a support service.

• Price Rules. Custom rules which can be configured to adjust and set prices based on a range of inputs. This allows for automated dynamic pricing based on for example attributes on the specific customer quote being prepared.

Salesforce CPQ still uses the fundamental product and price book entities from Sales Cloud. But it extends these significantly using the above capabilities which allow extra layers of configuration capability to automate and simplify the quoting process from an end user and system administration perspective.

Salesforce CPQ does add additional complexity especially when Price Rules are configured because of their implicit flexible nature. For this reason the advice when using Salesforce CPQ is to try and rationalise the organisations existing existing price mechanisms to fit wherever possible the pricing mechanisms shown above. Otherwise there is a risk of adding onerous complexity and getting back to the customised complexity of the basic product and price book system.

As Salesforce extended into areas such as eCommerce and high volume pricing requirements, additional capabilities were added which further enhanced the established product and price book architectures with new approaches to product and pricing which were more fit for purpose for these specialised areas.

One addition is the Salesforce B2B Commerce Cloud capability (originally a 3rd party managed package from Cloudcraze) which is aimed at presenting prices directly to business customers through an eCommerce site with ability to deliver special pricing around products or for specific groups of customers.

• Salesforce B2B Commerce uses product, price books, and price book entries objects coupled with catalogs and buyer groups to determine what products appear on the eCommerce Store and at what price for a specific customer.

Price books are constructed for specific products and buyer groups. When a customer views their eCommerce shopping cart they can see a product price based on

• Best price OR
• Priority price

This is calculated from the available price books, catalogs and buyer groups setup for that specific eCommerce store.

In this way special pricing for selected products can be managed without having to re-adjust price entries across multiple price books.

eg. a promotion for a single product for a specific group of buyers can be accomplished using a new price book and price book entry containing that one product and making that price book available to the required buyer group.

Using this pricing model enables pricing to be quickly updated and used as part of promotional campaigns targeted at specific audiences to take advantage of the fast pace of eCommerce.

Another Salesforce Cloud, Salesforce Industries (originally a managed product from Vlocity), applies similar techniques and capabilities as above in order to price large volumes of transactions with flexibility around special prices and promotions.

The Salesforce Industries/Vlocity shopping cart can be seen below and shows some of the elements to support pricing:

• Product Catalogue
• Promotions
• Discounts
• Price Lists

From the above we can see how Salesforce product pricing capabilities has evolved from the initial Sales Cloud product and price book model to complex CPQ and eCommerce environments through Salesforce CPQ (now branded Revenue Cloud), Commerce Cloud, and Salesforce Industries. Principal drivers behind this evolution have been the requirements for the system to support the range of complex price models required by customers, as well as the ability to provide eCommerce dynamic pricing for promotions, and ultimately scale the system to support large numbers of transactions with complex pricing, promotions and discounting. Also as shown, much of this evolution has been through the acquiring of additional 3rd party products to supplement the fundamentals delivered within Sales Cloud.

Colin Campbell is a Salesforce Solution Architect and Consultant and has worked on over 30 Salesforce projects.