Pricing Event – 

Differential Pricing Models

Process Flow, Calculation and Working

                                                                                                                                        

 

 

Introduction

 

Differential pricing:


It is a method of charging different prices for the same type of a product, and for the same number of quantities from different customers based on the product form, payment terms, time of delivery, customer segment, etc. The companies adopt the differential pricing method with an objective to maximize the profit of an organization.

There are 4 different types of pricing Models available in Vin e-Retail:
 

  1. Default model
  2. N.O.T model
  3. N.R.V model
  4. Outright model

     

The companies can apply these pricing methods by following any of the strategies viz. Charging a separate price to customers based on their intensity of demand, charging less from the buyers who consumes in bulk, or charging different prices for a different class of buyers.
 

 

Business Use case:
 

Pricing Event is a B2B use case, where the user decides on the differential pricing to be imposed on its customers. The user sets a margin in either Percentage or Absolute value, to the customers in its B2B business. Pricing Event can be set for temporary i.e., for specified duration, and Permanent i.e., the end date of the Pricing event is not specified. 

The users can set the differential pricing event in the system according to the selected business model from the Pricing Event screen on Vin e-Retail to choose best price for the B2B customers.


Pricing Event on system:


The Pricing Event is set using the Pricing Event screen in Vin e-Retail.

A dropdown is added to the screen where the user can select the particular type of Business Model to be applied for the calculation of final Unit Price in the event.

 

The user should navigate to the screen-

Vin e-Retail>>Masters>>Miscellaneous>>Pricing Event

 

 

 

Types of Pricing Models

 

There are 4 different pricing models available in Vin e-Retail system for the users.

All 4 models have different calculations to obtain the final unit price. The unit price differs arithmetically in each model except for the Default model.
 

  • Once a pricing Event is created and saved, the Pricing Model cannot be changed.
  • GST is considered as per the actuals (SKU Master).

 

  •  Consider an example where we have an SKU = SKU1, a B2B customer = Cust1, an order where the MRP = 1000, GST = 10%, and the user wants to set the margin of 10% mark-down for its vendor. The margin will be picked from the customer master set by the user for its customer. 
  • Here, for calculating the Net Amount, we use Reverse Calculation i.e., [MRP/(100+tax) x 100].
  • For calculating the margin to be imposed, for the Mark-up % or amount value will be added and for Mark-down it will be deduced from the MRP/ Net depending upon the business model selected from the dropdown.
  • The Unit price on the order creation screen in the system should show the final invoice amount calculated according to the business model selected by the user.

Now, 

Calculations as per the 4 different business models: 

  1. Default model
  2. N.O.T model
  3. N.R.V model
  4. Outright model

 

1. For Default business model:

 MRP = 1000, GST= 10%, Margin=10% (mark-down)

Net amount will turn out to be = 1000-10% = 900/-.

This net amount is inclusive of the 10% GST.

Thus, the final invoice Amount = 900/-.


Table Description automatically generated
 

 

2. For N.O.T business model:

MRP = 1000, GST= 10%, Margin=10% (mark-down)

As per the reverse calculation,

Net Amount = [1000/(100+10) x 100] = 909.09/-, where 10 is the GST%.

Now, the margin = 10% of MRP = 100/-.

Thus, Taxable amount = Net amount – Margin = 909.09-100 = 808.09/-.

Now, GST = 10%, 10% of 809.09 = 80.909/-.

Final invoice amount = taxable amount + GST = (809.09 +80.909) = 890/- 

 

 

  

3. For N.R.V business model:

MRP = 1000, GST= 10%, Margin=10% (mark-down)

As per the reverse calculation,

Net Amount = [1000/ (100+10) x 100] = 909.09/-, where 10 is the GST%.

Now, the margin = 10% of Net amount = 90.909/-.

Taxable amount = Net amount – margin = (909.09 - 90.909) = 818.181/-.

GST = 10% of taxable amount = 81.8181/-.

Final invoice amount = taxable amount + GST = (818.181 + 81.8181) = 899.9991/-


4. For Outright business model:

MRP = 1000, GST= 10%, Margin=10% (mark-down)

Margin = 10% on MRP/Net amount = [(10 x 1000)/100] = 100/-

Taxable amount = Net amount – Margin = 1000 – 100 = 900/-

GST = 10% of taxable amount = [(10 x 900)/100] = 90/-

Final invoice amount = taxable amount + GST = 900+90 = 990/-

 

Table Description automatically generated



Comparative calculations of all 4 Models: