Pricing mechanisms

This documentation provides an overview of the flexible pricing mechanisms available in Propeller, focusing on product-based pricing and customer-based pricing. It explains specific pricing models, volume discounts and promotional pricing

Why It's Important

Propeller's pricing system empowers businesses to implement tailored pricing strategies that meet diverse customer needs. By utilizing Propeller's robust pricing features, businesses can effectively boost sales, enhance customer satisfaction and optimize revenue streams.

Core terms and definitions

Key terms and concepts used in Propeller's pricing system are defined here for reference.

List price
- The default sales price of a product, used as the baseline for discounts.
- It is the price applied if no discounts or special pricing rules are valid.
Cost price
- The base cost of a product, typically representing the purchase or production cost.
- Cost prices can vary by order quantity, allowing for volume-based cost pricing.
DiscountType
- Defines the method used to calculate discounts. The three available types are:
Volume based / Order volume
- Discounts that vary based on the quantity of a product ordered.
Date range
- Specifies the start and end dates for when a discount is valid.
Final price
- The price ultimately applied to the product after evaluating all pricing rules, discounts, and priorities.

Pricing options

Propeller provides three primary pricing options to cater to different business requirements:

Product-based pricing
Product-based pricing is defined at the product level. This includes:
- Default product prices: Each product has a ListPrice, which serves as the default sales price if no discounts are applied
- Product price calculation based on a discount/margin percentage or a net price
- Volume discounts
- Discounts with specific date ranges enabling discounts to be valid only during specific periods
Customer-based pricing
Customer-based pricing is managed through Pricesheets, which define prices for single products, products within categories, or groups of products. These price sheets are then assigned to companies, contacts, customers, or user groups. They also support advanced discounting methods such as:
- Volume discounts
- Discounts with specific date ranges for validity.
API-Based Pricing
Propeller allows businesses to connect to external APIs to fetch pricing dynamically. This option is ideal for scenarios where pricing depends on external data, such as real-time market rates, competitor analysis, or custom pricing algorithms hosted on third-party systems.

Note: This document focuses on Product-based pricing and Customer-based pricing. API-Based Pricing is not discussed in detail here.

Price calculation and discount types

At the core of Propeller's pricing system is a flexible discount mechanism that applies to both product-based pricing and customer-based pricing. The system determines which discount to use based on the DiscountType.

Discount types

The DiscountType determines the calculation method for discounts. It has three possible values:

COST_PRICE_PLUS:
- Discounts are calculated by adding a margin to the CostPrice.
- Example:
  - Cost price: $40
  - Margin: 25%
  - Final price = $40 + ($40 × 0.25) = $50
LIST_PRICE_MIN:
- Discounts are calculated as a percentage reduction from the ListPrice.
- Example:
  - List price: $100
  - Discount: 20%
  - Final price = $100 - ($100 × 0.20) = $80
NET_PRICE:
- The final price is specified directly as a net price, without any discount calculation.
- Example:
  - List price: $100
  - Net price: $75
  - Final price = $75

Product-based pricing

Key features

List price
Cost prices
Bulk cost price margins
Bulk price discounts/net prices

1. List price

The ListPrice serves as the default sales price if no discounts are applied. It also acts as the base price for the LIST_PRICE_MIN discount type, where the final price is determined by applying a percentage reduction to the ListPrice.

2. Cost prices

Cost prices are defined based on order volumes for each product. These volume-based cost prices establish the base cost of a product at different order quantities.

This setup allows businesses to adjust their cost prices based on the quantity ordered by customers. As customers order more items, the cost per item decreases, enabling businesses to optimize their margins while offering volume-based pricing incentives to customers.

Example Cost Prices table:

Ordered quantity	Cost price
1–10	$50
11–50	$45
51+	$40

To calculate final prices using volume-based cost prices, cost price margins must also be configured.

3. Cost price margins

Price calculation based on the discount type COST_PRICE_PLUS requires configuring one or more cost prices (as discussed in item 2) as well as configuring cost price margins. Using a combination of the two — the cost price as a monetary value and the cost price margin as a percentage — Propeller calculates the final price.

Both cost price and cost price margins are volume-based but independent, allowing for varying levels of discount.

Example configuration for Bulk Cost Prices:

Ordered quantity	Cost price	Cost price margin	Valid from	Valid to
1	$40	30%	2024-01-01	2024-01-07
1–10	$50	25%	2024-01-01
11–50	$45	20%	2024-01-01
51+	$40	20%	2024-01-01

Calculation examples:

Within the date range:
- Ordered quantity: 20 units
- Date: 2024-01-03
- Cost price = $40
- Margin = 30%
- Final price = $40 + ($40 * 30%) = $52 per unit
Outside the date range:
- Ordered quantity: 20 units
- Date: 2024-02-01
- Cost price = $45 (for 11–50 units)
- Margin = 20%
- Final price = $45 + ($45 * 15%) = $54 per unit

4. Bulk prices

Bulk prices enable businesses to offer discounts based on order quantity. Bulk prices can either be specified as a percentage discount based on the ListPrice or as a fixed monetary value.

1. List Price Min

A percentage discount is applied to the ListPrice. The discount is defined per order quantity and can be active for specific date ranges. When multiple price tiers overlap, the lowest applicable price is selected.

Example configuration for List Price Min:

Volume	List price	Discount percentage	Valid from	Valid to
1+	$100	25%	2024-01-01	2024-01-07
1+	$100	5%	2024-01-01
10+	$100	10%	2024-01-01
51+	$100	15%	2024-01-01

Calculation examples:

Within the date range:
- Ordered quantity: 5 units
- Date: 2024-01-03
- List Price = $100
- Discount = 25%
- Final Price = $100 - ($100 * 25%) = $75 per unit
Outside the date range:
- Ordered quantity: 5 units
- Date: 2024-02-01
- List Price = $100
- Discount = 5% (for 1–10 units)
- Final Price = $100 - ($100 * 5%) = $95 per unit

2. Net Price

A fixed monetary value is specified for specific quantities and can be active for specific date ranges. When multiple price tiers overlap, the lowest applicable price is selected.

Example configuration for net price:

Volume	Net price	Valid from	Valid to
1+	$75	2024-01-01	2024-01-07
1+	$95	2024-01-01
10+	$90	2024-01-01
50+	$85	2024-01-01

Calculation examples:

Within the date range:
- Ordered quantity: 5 units
- Date: 2024-01-03
- Net price = $75
- Final price = $75 per unit
Outside the date range:
- Ordered quantity: 5 units
- Date: 2024-02-01
- Net price = $95 (for 1–10 units)
- Final price = $95 per unit

Customer-Based Pricing

Key Features

Price sheets
- Pricesheets are used to define discounts on products, and/or groups of products
- Multiple price sheets can be assigned to Companies, Contacts, Customers, or User Groups.
Discount items
- Each price sheet can contain multiple discount items, which define the specific discounts and their applicability.
- Support for volume-based discounts
- Support for date ranges, enabling discounts to be valid only during specific periods.
Application
- Discounts can be applied to:
  - Specific Products.
  - Product Categories.
  - Groups of Products.

1. Pricesheets

A price sheet serves as a container for discount items. Key attributes of a price sheet include:

Name, Description, and Code: Used for identification in the system.
Priority: Determines which price sheet takes precedence when multiple price sheets are active and valid for the same user/product.
- A lower priority number indicates that the price sheet takes precedence over others.

Example configuration:

Pricesheet name	Code	Priority	Assigned to	Description
General Discount	PS_GEN_01	1	All Companies	General discounts for all users.
VIP Discount	PS_VIP_01	0	VIP Customers	Exclusive discounts for VIP customers.

Scenario example:

A VIP Discount price sheet (priority 0) and a General Discount price sheet (priority 1) are both assigned to a contact.
Result: The VIP Discount price sheet applies due to its higher priority (lower number).

2. Discount items

Discount items define how discounts are applied within a price sheet. These items target specific products, product categories, or product groups.

Key Components of Discounts:

Discount Type:
1. Cost Price Plus: Adds a percentage to the cost price.
2. List Price Min: Applies a discount as a percentage reduction from the list price.
3. Net Price: Directly specifies the final price as a fixed monetary value.
Discounts can be applied to:
- Specific products.
- Product Categories (Cost Price Plus and List Price Min only).
- Groups of products (Cost Price Plus and List Price Min only).

Example configuration for discounts:

Discount type	Target	Value	Valid from	Valid to
Cost Price Plus	Product Group Y	10%	2024-01-01	2024-03-31
List Price Min	Product Category X	15%	2024-01-01
Net Price	Product A	$50	2024-01-01	2024-02-28

Example calculations for discounts:

List Price Min Value:
- Target: Product Category X
- Value: 15% discount on the list price
- Date Range: 2024-01-01 onwards (no end date)
- If the list price of a product in Category X is $100, the final price will be:
  - Final price = $100 - ($100 * 15%) = $85 per unit
Net Price Value:
- Target: Product A
- Value: $50 net price
- Date Range: 2024-01-01 to 2024-02-28
- The final price for product A will be:
  - Final price = $50 per unit
Cost Price Plus Value:
- Target: Product Group Y
- Value: 10% margin on the cost price
- Date Range: 2024-01-01 to 2024-03-31
- If the cost price of a product in Group Y is $40, the final price will be:
  - Final price = $40 + ($40 * 10%) = $44 per unit (if within the date range)

Pricing hierarchy and fallback logic

Propeller's pricing system is designed to handle multiple pricing rules effectively while ensuring a clear fallback mechanism when no specific pricing rules apply.

Pricing hierarchy
- When both Customer-based pricing and Product-based pricing are valid for a product:
  - Customer-based pricing takes precedence over Product-based pricing if an applicable price sheet is assigned to the customer, company, contact, or user group.
  - Within Customer-based pricing, price sheets with lower priority numbers are applied first.
  - If multiple applicable price sheets with the same priority apply, the lowest price is used as final price.
Volume based discounts
- If the ordered quantity is outside the range of any volume-based discount, the system defaults to the list price of the product.
  - For example:
    
    Volume Net price Valid from Valid to
    2+ $95 2024-01-01
    10+ $90 2024-01-01
    50+ $85 2024-01-01
    1. Order quantity is within the volume-based discount
    - Ordered quantity: 5 units
    - Net price = $95
    - Final price = $95 per unit
    1. Order quantity is not within the volume-based discount
      - Ordered quantity: 1 units
      - No volume discount available
      - Final price = product list price
Volume based discounts with overlapping date ranges
- When multiple volume-based discounts are valid for the same product but have overlapping date ranges, the system resolves the conflict by by applying the discount that results in the lowest price.
- If two discounts overlap fully and are both valid, the system applies the discount that results in the lowest price.
  
  Example configuration with overlapping dates:
  
  Volume Net price Valid from Valid to
  2+ $95 2024-01-01 2024-02-01
  2+ $90 2024-01-15 2024-02-15
  1. Date within the first range only
  - Ordered quantity: 3 units
  - Date: 2024-01-10
  - Net price = $95
  - Final price = $95 per unit
  1. Date within both ranges
  - Ordered quantity: 3 units
  - Date: 2024-01-20
  - Both discounts are valid
  - Net price = $90 (lowest price between the two ranges)
  - Final price = $90 per unit
  1. Outside both date ranges
  - Ordered quantity: 3 units
  - Date: 2024-03-01
  - No discounts available
  - Final price = product list price
Fallback logic
- If no valid price sheets or discounts apply, the system defaults to the List price of the product.

Pricing mechanisms

Why It's Important​

Core terms and definitions​

Pricing options​

Price calculation and discount types​

Discount types​

Product-based pricing​

Key features​

1. List price​

2. Cost prices​

3. Cost price margins​

4. Bulk prices​

Customer-Based Pricing​

Key Features​

1. Pricesheets​

2. Discount items​

Key Components of Discounts:​

Example calculations for discounts:​

Pricing hierarchy and fallback logic​

Why It's Important

Core terms and definitions

Pricing options

Price calculation and discount types

Discount types

Product-based pricing

Key features

1. List price

2. Cost prices

3. Cost price margins

4. Bulk prices

Customer-Based Pricing

Key Features

1. Pricesheets

2. Discount items

Key Components of Discounts:

Example calculations for discounts:

Pricing hierarchy and fallback logic