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Foundations

Realized price

5 min on the light depth

The frame

Every price has a starting point and an ending point. The starting point is the list price, the published figure in your pricebook, the schedule of list prices for everything you sell. The ending point is the realized price: what a customer pays per unit after every discount, concession and old contract term has been applied. Between them come the discount waterfall, the sequence of discounts a price passes through on its way from list to the invoice, and every exception granted at the table. A quote shows a net price, the figure after discounts on that one deal. The pricebook also implies a scheduled net price, the price the architecture intends for a given commitment.

The gap between list price and realized price is the first number to ask for. It shows what your pricing is doing today, by Customer Group. Most companies cannot produce it: the price list is in one system, the closed deals are in another, and nobody has read the second against the first. Until you can see the gap, a price increase changes a number nobody pays, and the discounts absorb it before it reaches an invoice.

The list-or-net piece argues that list price and net price both matter, and that a predictable relationship between them is the lever. The corridor piece argues that a starting, target and floor price leave the space between them unpriced, so every deal negotiates the same ground and the floor becomes the destination. A pricing surface, every price a customer can be charged at any commitment, prices that whole space. The corridor is the band the pricebook intends; the surface is what the customer can be charged.

What are your customers paying per unit today, after every discount, and how far is that from your price list?

Three things to say in the room this week

  • Before we touch the price list, I want to see what customers are paying today, after every discount.
  • Show me the deals that closed off the pricebook and who decided each one should.
  • A list price change that the discounts absorb has not changed our price.

Core reading

Go deeper: the heavy depth

Read the core in this order.

  • List price or net price, which is more important: the starting frame. List price is where every buyer begins and net price is what they pay; when the relationship between the two is predictable, buyers trust the price and negotiations shorten.
  • Pricing corridor versus pricing surface: why a starting, target and floor price are approval gates around unpriced space, and what a surface that prices every commitment does in its place.

Then the shelf, each piece adding one reading of the same gap.

  • Pricebook deviation: the gap between what the pricebook specifies for a configuration and what closed deals record, and why a systematic gap means the architecture has stopped governing.
  • How to raise prices on existing customers: why an increase applied to list is absorbed before it reaches the invoice, and why realized price on the same cohort, before and after, is the measure.
  • Pricing exceptions: a deal priced off the surface by discretion, and what each one does to the record a pricing model learns from.
  • Margin-calibrated discounting: where stepped volume discounts came from, why software kept the staircase and lost the reasons, and what a surface calibrated against gross margin replaces.
  • Price elasticity in B2B software: why a demand curve fitted to your own deal history measures your discount waterfall, and what to build in its place.

Glossary pages to open: realized price, net price and scheduled net price (the layer stack, list to scheduled to realized), discount waterfall, pricebook and pricing surface. The research hub on quantity discounts and volume pricing holds the peer-reviewed work behind the volume steps in a waterfall, each study read in full with a written ceiling on what it supports.

The shelf

Terms

Which depth did you take?