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Pricing & Discounts
Managing pricing and discounts
The selling price of an item is the base price at which you sell the item to your customer. The difference between the cost of the item and the selling price is your gross margin of profit. Item pricing in BusinessAhead allows you to:
- Select from three different methods of price calculations.
- Specify different prices for different customer levels.
- Specify different prices for different quantity levels.
- Set up discount schemes for the item based on quantity or customer.
- Define promotional schemes.
Selling prices set up in the Item profile can be changed in individual sales documents.
The 3 methods of Price Calculation
In this method, the selling price of the item is fixed. Besides the base selling price, you can specify the selling prices for each customer level as well. If you do not specify a selling price for a level, the base selling price will be applied to all customers in that level.
The fixed selling price option is normally used for items with stable margins, where there are no major fluctuations in item costs.
Percent Mark-up on Cost
In this method, the selling price is calculated by marking up the item cost by a specified percentage. Example: If you specify the mark-up percent as 10% of cost, the item's selling price would be Rs.110, when cost is Rs.100.
Besides the base mark-up percentage, you can specify different mark-up percentages for each customer level. If you do not specify a mark-up percentage for a level, the base mark-up percent will be applied to all customers in that level.
The Percent mark-up on cost method of computing selling price is normally used for items with frequent fluctuations in costs and on which it is important to keep gross margins constant.
Based on Sales Total
In this method, the selling price is calculated as a percentage of the total value of all other items added to the document prior to this item. Items of type Based on Sales Total are excluded when calculating the total value.
Example: Consider a document which has a total of 5 items. The first 3 items are regular items, the 4th item is Installation Charge (a BOST item @10%) and the 5th item is Commissioning Charge (another BOST item @5%). Total value of first 3 items is Rs.1000. The selling price of Installation Charge will be Rs.100 (@10% of Rs.1000) and the selling price of Commissioning Charge will be Rs.50 (@5% of Rs.1000).
You can also specify a minimum amount to be billed, if the calculated price is less than the minimum amount.
The Based on sales total method for selling price calculation is normally used for service items like installation charges, testing & commissioning charges, etc. For example, if you are selling items such as refrigerator, air conditioner, washing machine, etc. there may be additional charges for installation, wiring, plumbing, window slot cutting which you may bill as a percentage of total sales value.
Item Pricing and Customer Levels
BusinessAhead allows you to categorize customers into any number of levels. This is for the purpose of assigning a special price to a customer belonging to a particular level. Each item can have level wise pricing defined, so that a customer of a particular level becomes entitled to the special prices or discounts defined for any item in that level.
Further, for a specific customer you can define additional discount percentage to apply on all items, over and above the price calculation arrived at after taking care of all other methods. This can be set up in the customer's business terms.
This method of price setup is easy to manage if you are dealing with too many items. BusinessAhead will simply apply discount percent on base price as per a customer's level. Further, if the customer's business terms specifies additional discount percent, this discount will be applied over and above the level wise discount.
Example: Item XYZ has a base price of Rs.100. Customer ABC Ltd. is assigned Level 5. For Level 5 a 10% discount is specified. Further, in ABC's business terms you have further given additional discount of 2% to ABC. Under this situation, the price applied to customer ABC will be as follows:
Rs.100 less 10% discount = Rs.90. Plus additional discount of 2% on Rs.90, which is Rs.1.80. Net price = Rs.88.20
The above is a smaller picture of what BusinessAhead is capable of. For companies that want much more flexibility in pricing and discount structures, BusinessAhead provides multiple ways of specifying pricing and discounts that take care of virtually any type of pricing strategy that you may like to implement.
In the larger picture, BusinessAhead provides you the flexibility to define a pricing and discount structure that is based on quantity, customer levels, or a combination of both. You can also design special pricing schemes for an item, item category, brand or customer. Pricing and discounts can be defined at the following places:
Item Profile - Sales Parameters & Pricing
The item sales parameters & pricing interface in the items module allows you to -
- Define a base price for the item
- Define customer level wise discounted prices.
- For each customer level, further define quantity based discounts.
- For each item define quantity based pricing that will apply to all customers at all levels.
Customer Level Setup
The Customer Discount Levels setup in the sales module allows you to define various customer levels and assign a flat discount percentage for each level.
Customer Profile - Business Terms
The Customer Business Terms interface in the sales module allows you to assign a level to each customer and also provides a further option to give the customer an additional discount percent over and above the calculated price of items arrived at by applying all other methods.
The Customer Pricing interface in the items module allows you to define pricing schemes tailored for a single customer for an item or an item category or for an item brand or for items of a brand in a particular category. The pricing methods available here are:
- Fixed price - Where a fixed discounted price is charged to the customer.
- Discount percent from list - Where a discount is given from the price of the item. The price considered here is the price calculated for the item after considering the customer, customer level and the quantity. BusinessAhead calculates prices using all available pricing schemes for the customer and uses the least.
- Mark-up over last cost - Where the price charged to the customer is a specified percent mark-up over the item's last cost.
- Mark-up over average cost - Where the price charged to the customer is a specified percent mark-up over the item's average cost.
- Fixed amount over last cost - Where the price charged to the customer is a specified amount over the item's last cost.
- Level Pricing - Where the customer, even though belonging to a customer level, is charged the selling price defined for another level.
The Promotional Pricing interface in the items module allows you to define promotional pricing schemes for specific items for a specified time period. Promotional pricing is used either for introductory offers or for stock clearance.
The various promotional pricing methods are:
Buy X quantity at price Y and get Z quantity of the same item free.
Example: Buy 2 at Rs.25 and get 1 free
Buy P quantity at price Q and get R quantity at S% discount
Example: Buy 5 at Rs.125 and get 3 more for 20% less
Unit price of Rs.X - The selling price of all units of the item sold in the specified period would be at this price.
Discount percent - Sales of this item in the specified period would be given the stipulated discount.
The Coupon Discount interface in the items module allows you to define one or more coupon discount schemes. Multiple Affiliates/Sales Representatives can be attached to each coupon. BusinessAhead generates unique coupon code for each affiliate so that when a customer uses a coupon the associated affiliate gets a commission. You have lot of flexibility in defining your coupon discount scheme. A coupon can give discount on a specified item, or on all items in a specified brand, or on all items in an item category, or on all items in a specified brand falling under a specified category. You can also define a coupon offering a flat discount on the overall order value, with a limit set on the minimum order value above which the discount will be applicable.
A coupon's life span can be defined in terms of start and end dates and also in terms of maximum number of coupons consumed. Additionally, you can specify whether the coupon can be used only once by a customer or can be used any number of times.