A simple but flexible way to consider the impact of rebates on product price calculations.

How easy it is to use simple price reduction tactics! No complicated formulas, no big Excel sheets needed to calculate their costs. You want to give 10% off? Just take the price * 10% * the planned volume… but wait, which price exactly? 10% of the base/list price? Gross price? Net price? Retailer Shelf Price? And what’s the difference between them in the first place?

No customers would usually pay the list price of a product, there are always some kind of incentives active. Even outside of short term promotions, there are probably some long term agreements active to optimize your partnership. So if you’re promising 10% off for a week, making it 10% of the list price would only be confusing for your customer – he doesn’t think about this price outside LTA negotiations, so why would it suddenly be the base for a rebate?

From organization to organization, how exactly rebates influence the product prices differs vastly. This is a challenge not only Salesforce TPM has, but pretty much every application that needs to determine a price for certain products and dates. You will find the same issue in the Salesforce Retail Execution app as well as in ERPs like SAP. Luckily, most of these apps use a very similar concept to solve this challenge: A base price affected by pricing conditions in a predefined order, forming a price waterfall. This is not only flexible enough to support all common business requirements for price calculations, it also allows different systems to connect with each other, by simply exchanging pricing conditions.

How it works

Let’s start with a base or list price of 10€. This is our starting point, there must be some price to start our calculation with. From there, we can now let various pricing conditions reduce or even increase our price. Each pricing condition represents one specific rebate for a specific timeframe, for example there are logistical incentives that reduce all prices by 2% of the base price for a whole year. With this information, you can easily use a KPI to calculate that this condition means a price reduction of 20 cents. The result after considering all long term agreements could be considered the gross price, and further rebates can use this sub sum as a base for their percentage price reduction instead of the base price. But why stop there, there could be multiple such rebates!

Salesforce TPM allows you to build up a complete price waterfall considering various rebates and sub sums, no matter if they are integrated from other systems or defined within TPM promotions. This concept is flexible enough to cover even the most complex rebate types, as long as they can be mapped out into formulas.

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