Pricing in Sales

Sales & Distribution

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 Topics

1. Introduction

2. Condition Technique

3. Pricing in Sales Documents

4. Special Pricing Functions

5. Pricing Report & Analysis

 Introduction

 Pricing is an intrinsic part of Sales & Distribution. System

has provided extensive features to map various pricing
scenarios in business environment.
 ‘Pricing’ term is used to explain the calculation of prices
for customers or vendors and costs for internal
purposes.
 ‘Conditions’ are extensively used in pricing. These
represent a set of circumstances that apply when a price
is calculated. These are based on many variable factors
like Customer, Material, Order quantity, Period etc.
 Condition technique is main basis of pricing in sales.
 Condition Technique

 Condition Technique is method designed in SAP which is

utilized in various functionalities. In Pricing this method is
used by system to determine prices.
 There are various elements used in
condition technique, which are setup and
controlled in customizing.
 A variety of important information like which gross price
and what discounts are applicable to which customer in
sales order is determined by condition technique in
system.
 It is an universal technique, the basic elements of which
remain same in different functionalities of Sales &
Distribution.
 Condition Technique

 Elements used in Condition Technique – Following

elements are used in condition technique in pricing
 Condition Types

Condition type is representation in system of some aspect of

daily pricing activities in business environment. For each kind of
price in business transaction a condition type can be created in
customizing. Example for Prices, Surcharge, Discount etc.
Various Controls are provided in condition type definition in
customizing to suit the numerous price types.

System has predefined condition types for all categories of price

types. These are utilized in the standard pricing procedures used
for standard scenarios. Few of them are as under:
 Condition Technique

Condition Description
Type
PR00 Price
K005 Customer/Material
HB00 Discount
Discount Value (Manual)
KF00 Freight
MWST Output Tax
UTX1 State Tax
UTX2 County Tax
UTX3 City Tax

Standard condition types are normally copied to new customer

condition types and modified to suit specific pricing requirements
in business transactions.
 Condition Technique
 Condition Table
Condition table defines combination of fields that identify a
condition record. Specific condition data is stored in system as
condition record.

Example: Condition table ‘005’ is used for customer specific

material prices. Key fields of this table are displayed below:
In this table first two fields identify
organizational data and last two fields
describe relationship between customer
and selected materials.
 Condition Technique
 Access Sequences
Access Sequence is a search strategy used by system to find
valid condition record for particular condition type. It determines
the sequence in which search is conducted.

Access sequence consists of one or more accesses. This

sequence establishes which condition records have priority and
it tells the system where to look first, second and so on till a
valid record is found.

Access sequence contains the condition tables and the standard

procedure to maintain the sequence of condition table is from
‘Most Specific’ to ‘General’.
 Condition Technique

Example of Access Sequence:

PR00 is standard access sequence used for condition type Price.

As seen above the access is arranged from ‘Most Specific’

(Customer/Material) to ‘General’ (Material).

Additional controls are explained in customizing guide

 Condition Technique
 Pricing Procedures
Pricing Procedure is a group of condition types arranged in
particular sequence to have correct prices being determined in a
sales document.

Various controls of pricing are setup in Pricing procedure like

 Processing condition types manually
 Requirements for specific condition types
 Printing of Condition types
etc.

Standard system contains many pre-defined pricing procedures

for various business scenarios. These contain frequently used
condition types again pre-defined in system.
 Condition Technique

Example of Standard Pricing Procedure in system

 Condition Technique

 Relationship between
elements in condition
technique explained
in figure →
 Pricing in Sales Documents

 Pricing Elements in business transactions are defined

as condition types in system. These elements can be
classified in four basic categories
1. Prices
Price is basic gross or net price of item in sales document.
This element forms the basis of pricing. In standard system
Material Price, Price List type & Customer Specific Price are
predefined.
2. Surcharges and Discounts
Business requires variety of surcharges and discounts in sales
processing and wide range of Condition types are predefined
in system to suit the requirements. These condition types can
be copied to new one’s and customized to match specific
requirements.
 Pricing in Sales Documents

3. Freight Charges
Freight costs relate to Shipping which are used to pass on the
costs to customer and displayed in Billing documents. In
Standard system there are predefined condition types for
Freight based on Incoterms which are internationally
recognized shipping terms.

4. Sales taxes
Taxes form key element in any business transaction and
system provides for condition types for the same. Example for
tax determination in US there are condition types available for
State, County and City sales taxes as well as on jurisdiction
codes.
 Pricing in Sales Documents

 Graphical example of Pricing in Sales document

 Pricing in Sales Documents

 Header & Item Conditions

These are basic categorization of condition types.

Header Condition
Header conditions are one’s that apply to header of sales
document. These have no condition records maintained and
are entered manually in sales document. No access sequence
is maintained for these condition types. Example- Freight,
Absolute Discount etc.

 Item Condition
Condition types used only at item level are called item
conditions. Most of condition types are item conditions and
automatic pricing is carried out for them. Example- Material
price, Customer Price, Customer Discount etc.
 Special Pricing Functions

 There are many special Pricing Functions provided in

system to map various business pricing requirements.
Some of the important one’s are explained here.
 Promotional Pricing Agreements

There are two types of agreements for carrying out marketing

programs with wide-ranging discount structures i.e. promotions
and sales deals
a. Promotion – It represents a high-level marketing plan for
particular products or product lines, like for a specific period
some products may need to be promoted.
b. Sales Deal – Sales Deal is fine-tuning of a promotion and can
contain specific condition records for the sales deal. These can
be product line specific, multiple sales deals could exist for a
promotion.
 Special Pricing Functions
 Customer Expected Price
Extended pricing functionality enables to take into account the
Customer’s expected price which can be displayed in Billing
documents. These can be used to avoid customer disputes for
prices especially in industries like Consumer Packaged
Industries.

Two condition types are predefined in system where data can be

entered manually.
Condition Type Description
EDI1 Customer Expected Price
EDI2 Customer Expected Value

It can be customized that during order entry if expected price

and actual price differ beyond specified amount, order can be
marked incomplete and hence not processed to delivery or
billing.
 Special Pricing Functions
 Cost
During Pricing business may want to compare prices with cost or
view margin contribution, system has predefined condition for
this.

Condition type ‘VPRS – Cost’ is available which can be used in

Pricing. Condition category ‘G’ is assigned to this condition type
by which system copies the valuation data from material master
to the condition. The Standard or Moving Average Price is
copied depending on material master maintenance.
 Special Pricing Functions
 Group Conditions
Some conditions are used as basis for determining scale value
from several items. For such scenario system has provided
Group condition and routine.
Following figure demonstrates group condition in sales.

Here group condition type

K029 exists for which
Condition record is
maintained for material
group ’02’ which applies
to both materials.
 Special Pricing Functions
 Condition Exclusion
In pricing for sales and billing documents, more than one
condition record may apply to a particular item at any one time,
condition exclusion process can be used to compare possible
conditions in order to determine such things as the best price for
a customer.

The system can use condition exclusion to select the best price
or discount in six different ways:
 Selecting the best condition record of a particular condition type
from within one exclusion group
 Selecting the most unsuitable condition from within one exclusion
group
 Selecting the best condition record for a condition type
 Selecting the most unsuitable condition record for a condition type
 Selecting the best conditions from different exclusion groups
 Excluding all condition types in the second exclusion group if a
particular condition type in the first exclusion group exists in the
document
 Pricing Analysis & Reports
 Pricing Analysis
Pricing being extensive and complex to an extent,
system has provided for an important tool called Pricing
Analysis.

In Item Conditions screen in sales document option is

provided to analyze pricing information which allows user
to check how system has calculated various pricing
elements of an item.

The tool is extremely useful when pricing is not

determined as customized and further analysis needs to
be done.
 Pricing Analysis & Reports

 Pricing Reports
Pricing data stored in system can get very extensive and
for extracting information on such data, pricing reports
are created.

Pricing reports put together information about condition

records, condition types, and condition tables according
to various different criteria, like for example
 Customer specific agreements for certain period.
 Condition record for customers in specific region or country.

Pricing Reports are created in customizing and can be executed

via application menu.