Using Microsoft Dynamics CRM to price products

Published: September 8, 2006

Microsoft Dynamics CRM 3.0 includes a flexible 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

Consider a simple scenario. Adventure Works is a low-cost bicycle retailer that is selling an inexpensive, multi-terrain bicycle. The company imports the parts from outside the United States 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 Microsoft Dynamics CRM product form.

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. The following figure illustrates these pricing options on the Price List Item form.

Currency Amount: 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 Product form.

Percent of List: 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 inexpensive, multi-terrain bicycle when it is added to quotes, orders, and invoices is $110.