Sales

Put strategy behind product pricing

Published: January 1, 2008

Microsoft Dynamics CRM includes a pricing engine that you can use to calculate product prices based on a variety of pricing methods. The person who maintains the product catalog, such as the sales manager, can select from different pricing methods for products that are based on a combination of product pricing and price-list configuration.

For example, by using a pricing method that is based on a percent of your organization's current cost for the product, you can automatically adjust the sales prices on quotes, orders, and invoices when the product cost fluctuates. The combination of product pricing and costing data and pricing method ultimately determines how customer-facing unit prices are calculated on quotes, orders, and invoices.

The Product form includes the following optional price fields:

List Price

Represents the price that you will charge the customer for the product.
Standard Cost

Represents what you typically pay for the product. If you have products with frequently fluctuating costs, the standard cost can be based on an average costing mechanism to determine the final unit price. The standard cost is not updated as frequently as the current cost.
Current Cost

Represents what you are currently paying for the product. For products that have frequently fluctuating costs, the current cost should be updated every time that a new shipment of products is received.

Determine the costs of a product

Adventure Works is a low-cost bicycle retailer that is selling an inexpensive, multi-terrain bicycle. The company imports the parts every month and then assembles the bicycle at the Adventure Works retail store. Typically, Adventure Works pays $50 per bicycle. But the manufacturer has raised the price $10 per bicycle because of a temporary reduction in the manufacturer's inventory. The price and costs for the bicycle are reflected in the Microsoft Dynamics CRM product form.

List Price:

The list price for the multi-terrain bicycle is $100.
Standard Cost:

The parts for the multi-terrain bike normally cost Adventure Works $50.
Current Cost:

Due to the manufacturer's inventory issues, the parts for the multi-terrain bike temporarily cost $60.

Note

Before this product can be added to a sales document, such as a quote, order, or invoice, a price list and price list item must be associated with it. For more information about how to add a price list to a product, see the Microsoft Dynamics CRM Help.

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Select a pricing method

When you add the product to a price list item, there are six different pricing methods to select from that will determine how the unit price is calculated.

Tip

You create and manage price lists in the Settings area.

In the Navigation Pane, click Settings, click Product Catalog, and then click Price Lists.

The Currency Amount pricing method

When you select the Currency Amount pricing method, the unit price of the product is determined as a fixed amount. This is the simplest pricing method and does not require a percentage or rounding policy. When you select this method, you must provide an amount in the Amount box. Then, Microsoft Dynamics CRM will only use that price and not the prices entered in the List Price, Standard Cost, and Current Cost boxes on the General tab in the Product form.

The Percent of List pricing method

When you select the Percent of List pricing method, the unit price of the product is determined as a percent of the price that was entered in the List Price field on the Product form. For example, when you enter 110 in the Percentage box, the Total Amount field of a single multi-terrain bicycle when it is added to quotes, orders, and invoices is $110.