WKS 9 - Product Pricing and Discount Structure

Workshop on 21 May 2025 to cover structure of product pricing and discounts .

Participants

Goal

This workshop is for capturing modeling the price structure for the sold product within the configuration process.

Workshop materials

Topic	Document	Comment
Pricing Structure	screenshot	Valio’s Pricing Waterfall Components
Segment Price Lists structure		Structure of output tables in Price Manager

Main results

Pricing Logic / Pricing Waterfall Components

• Start with MSP (total purchasing cost)

• Apply various strategies in Zilliant to derive a Global List Price

  • This is anchor point from where we come down to other prices

• Distribution Channel List Price

  • Cash and Carry (stores)

    • PIQ for non-negotiation guidance (incl elasticity > optimal price)

  • Delivery (currently 2 channels but goal is to have a unified channel)

    • Valio Direct

    • FSD Channel wholesale business that Valio bought to grow and expand

• Segment Price Lists – open to all customers currently; which price is paid, is determined at the sales order time depending on which prices are available. SAP compares and takes lowest / strongest condition. So, we end up having multiple prices available.

  • Product Segment Price Lists, eg

    • Fruit & Veg

    • Fish/Meat

    • Wines and Spirits

    • …

  • Customer Segment Price Lists, eg

    • Pizzeria

    • Cafeteria (S/M/L)

    • …

• Matrix Price

  • Comes from PIQ. Product Group Level 3 x Parent Customer Level

  • In CPQ we define Product Group Discounts – this is the ‘promise’, but the specific discounts come from the PIQ matrix price directly into SAP (matrix price)

  • Product Group Discounts in CPQ will fall before the Matrix Price; Applicable to Distribution Channel Price List

• Agreement Price in Waterfall = Net Price set in CPQ

• CSP list 1 and 2 are something exceptional, try not to use them

  • 1) Price-Product in Agreement

  •  2) Adjust matrix value discount on product group

• Agreement discount – typically we don’t do them

Manual Price > eg mistake in picking, wrong products, costly for us we offer some discount to customer – SAP, not relevant for CPQ

Detailed meeting notes below.

Pricing Strategy Overview

• Workshop focuses on calculating product pricing and understanding pricing strategies for executing sales process and generating quotes.

• Pricing strategy starts with minimum selling price (MSP) and develops price waterfall from there. 

• Company uses multiple strategies to derive global list price as an anchor point for further pricing. 

• Pricing varies across distribution channels: custom carry business, direct value SAP, and FSD wholesaling business. 

• Currently no product bundling or 'buy more, pay less' pricing strategies are implemented. 

• Plan to develop price lists with different tiers for customer segments (large, medium, small) 

• Pricing strategy to cascade from global price to distribution channel, campaigns, segment pricing, and customer-specific agreements 

• Company wants to optimize pricing by providing strategic discounts instead of blanket percentage reductions. 

• Matrix pricing strategy aims to avoid complex discount communication that customers might not understand. 

Customer Segmentation and Price Lists

• Segment price lists are based on product segments like fruits, vegetables, meat, and potentially spirits. 

• Future pricing strategy may include differentiated pricing for different customer groups and deals. 

• Proposal to create customer-specific price lists segmented by business type (pizzerias, restaurants, street food, lunch places) 

• Customer-specific price lists serve as backup tools to manage profitability and adjust pricing 

• Two primary pricing adjustment methods: Product/agreement price and matrix value discounts 

• Plan to implement product group discounts in CPQ system based on customer profiles 

• Product group discounts are meaningful for customer pricing strategies. 

• Current master data lacks detailed customer segmentation beyond basic group classification

• Future goal to simplify and align price list setup with project segments 

CPQ System Integration

• CPQ to display net price from Price IQ with sales rep override capability, tracking distribution channel. 

• Distribution channel price lists will serve as reference points for pricing. 

• Ideal CPQ functionality would pull segment price list information for specific customers and products. 

• Goal is to provide flexible pricing views that sales reps can customize based on customer segment and quoting needs. 

• Product discounts in CPQ will represent a minimum guaranteed discount to customers. 

• Sales team seeks net price visibility across channels and segments, recommends Price IQ targeting. 

• CPQ will query pricing data on-demand instead of replicating entire dataset 

• Team discussing price list configuration across product groups and supplier levels 

• Price lists created and mapped to specific customers 

• New customer addition process involves adding customers to existing price lists

Pricing Visualization and Context

• Plan to include company internal guidance values and competition authority restrictions in background lookup tables

• Sales want guidance values and ability to see pricing for similar customers, potentially through visual timeline graph

• Exploring button at line level that displays pricing graph for additional context 

Action list

Decisions

List of requirements

• Display relevant list prices (distribution channel, customer segment, product segment) for the sales rep to analyse when setting the agreement net prices in CPQ

• Display net price S/T/F recommendation

• Display the additional guidance – from authority, and valio (discussed in previous workshop)

• Ability to define and select the different views in CPQ - for the Net Prices screen

• Ability to see peer pricing - scatter plot with transactions showing how much similar customers have historically paid for that product. ( x=time, y=price, S/T/F > Zilliant has promised this viz in CPQ (user story at least – how to implement is TBD; possibly having Z team building and publishing the graph in tableau and then from CPQ we do a call for the given product and customer)

• CPQ integration with Price Manager to use product-customer combination for price lookups across the various price lists

Session recording

https://tldv.io/app/meetings/682d7a1d2612c900133512aa/

Related pages