What does “contracted pricing” mean?
According to contracted pricing, the terms, conditions, and costs of a good or service are set by a contract between two parties, usually a buyer and a seller.
When you set prices this way, both parties know they will get a certain amount for the things or services they are trading. It also gives you security and predictability when making budgets for costs and sales.
Synonyms
- CPQ contracted to price
- Client pricing
Why contracted pricing is important
Different kinds of contracted pricing depend on the business and transaction.
For instance, some contracts may say that certain goods must always be bought at a specific price, even if the price on the market changes over time.
In some contracts, discounts or other benefits may be given based on how many goods or services are bought within a specific time frame. These contracts can sometimes help sellers and customers come to long-term deals where prices stay the same throughout the contract.
A contract price can also help protect both parties from changes in the economy and changes in demand that are out of their control.
There is less risk when there are unstable market forces like recessions or inflation because these deals are set up to provide fixed prices for set amounts of goods or services over a long period of time.
This makes it easier for businesses to plan for future projects and keep track of their spending over time.
Things to watch out for when using contact pricing agreements
Both sides need to know everything about making and keeping the deal when negotiating contracted pricing deals.
What is in the agreement, any requirements that must be met before buying, payment terms, shipping schedules, quality standards, and how to settle disagreements should all be made clear.
Before signing a contract, all necessary corporate regulations should be considered to ensure they align with laws and rules.
Taking care of contracted prices
An essential part of sales processes is keeping track of agreed-upon prices. Several steps need to be taken to manage contracted prices well:
Type of Contract
- To begin, it is essential to know the different kinds of contracts that are out there and how they work. There are three main types of contracts: agreements with a set price, agreements based on usage, and agreements with a variable price.
- Depending on the wants and situation of the business, each type has its benefits. Companies that sign a fixed-price contract pay a set amount for each unit they buy, no matter how long they use it. This gives both the seller and the customer stability.
- Usage-based contracts charge based on how much or how often the product is used. This makes people want to use the product more, but knowing how much will be used beforehand can be complex.
- Finally, variable price deals let businesses change their rates based on how the market is doing.
What the Contract Says
All parties involved must know what is expected of each side and how the terms will affect them going forward once an agreement has been made between the two parties about how they will handle their contracted price.
This includes any agreed-upon service levels or timelines and any discounts or other benefits for buying in specific amounts or during certain times.
Companies should make sure that everyone who needs to know knows how these guidelines will affect their work, that way there are no surprises when bills are due or deadlines need to be met.
Make use of CPQ software.
CPQ systems let sales teams choose agreed-upon prices that are applied to quotes and orders as they are being made.
This reduces the time needed to put prices into orders by hand while ensuring the process is done correctly.
Put tracking in place.
Lastly, proper tracking needs to be put in place. Companies should use contract management software to keep track of contracts so that everyone can always see the same information. This way, parties don’t have to go through the trouble of emailing or doing things by hand whenever data needs to be checked or updated.
This also makes it easier to see how much money is spent in different areas and how healthy contracts meet expectations. This way, management can make intelligent choices about future purchases while ensuring they stay within budget.
Price Agreements in CPQ
Within the Configure Price Quote (CPQ) software, contracted pricing lets sales reps pick a price they’ve agreed for a product and use that price on all future contracts.
The agreed-upon price can be chosen for new, renewal, and change quotes. Because of this, CPQ is an essential tool for controlling contracted prices.
Within the contracted pricing tool in CPQ, sales reps can keep track of pricing exceptions and deals for each customer.
Take the case of a salesperson who adds a price to a bill. If that happens, the CPQ system will check the buyer record for errors to see if the price needs to be changed.
Setting up price agreements
There are a few important things that users must think about when putting up contracted pricing in CPQ systems:
- price breaks or levels
- price cuts
- shipping and handling costs
- product benefits and improvements
- length of the contract ·method of delivering invoices ·criteria for accepting orders
These parts may need to be considered when setting up how orders are priced in your CPQ system and how long those prices will be reasonable, depending on the contract.
What CPQ’s Blocked Prices Can Do
With contracted pricing, sales reps can use the prices they’ve agreed to on accounts. When they add a product to a quote with a contracted price, the sales price is changed immediately to match the price.
If you have CPQ software, the contracted price function can be used in the following ways:
- You can set prices for goods for different accounts without keeping separate price books for each account.
- Use the agreed-upon prices for related items.
- Make a unique deal price for a product record for each customer.
- Date groups can be used to limit when agreed-upon prices can be used.
- Do not let agreed-upon prices overlap.
