Pricing and Discounts by Material
Table of Contents
Use Case:
Organizations need to monitor pricing and discount activity to ensure it aligns with company policies, commercial expectations, and applicable regulations. Unusual pricing or discount patterns for specific materials may indicate inconsistent application of pricing rules, favoritism, fraud, bribery, or anti-competitive behavior. For example, a material that is repeatedly sold at a significantly lower price or with substantially higher discounts than comparable materials may warrant further review to confirm that the pricing is appropriate and properly supported.
The Pricing and Discounts by Material analytic identifies unusual pricing and discount patterns at the material level. It can evaluate activity based on factors such as the number and value of discounted transactions, discounts as a percentage of total transaction value, and differences between net and expected pricing. By analyzing these patterns across comparable materials, the analytic helps organizations detect excessive discounts, unusual price variances, inconsistent pricing practices, and other activity that may create financial, compliance, or reputational risk.
| Description | Identifies materials with unusual pricing or discount activity based on configured detection patterns, including discounted transaction volume, discount values, discount percentages, and variances between net and expected pricing. |
| Domain(s) | Customer Revenue |
| Analysis Type | Context Flag |
| Focus Area | Favor |
| Score Methodology | Material activity is ranked relative to comparable materials for the selected detection pattern. |
Default Scoring Criteria
Importance: 3 (default)
Enabled: True (default)
No rules are configured by default. Rules must be set by user.
Rule Configuration
To configure a rule for this risk analysis:
1. From the Admin page, navigate to Risk Settings > Risk Analysis Settings > Pricing and Discounts by Material (Customer Domain). Then, click Add A Rule.
2. Complete the following required rule fields:
| Rule Field | Description | Settings Options |
|---|---|---|
| Name | Name for the specific rule | Free text |
| Description | Description of the rule | Free text |
| Comparison Dimension | Defines how transactions are grouped for comparison when evaluating pricing and discount activity | No Dimension, Company/Business Unit, Company Country, Subject Country, or Organizational Unit |
| Context Period in Days | The period of time, from the transaction date, for which transactions are considered by the rule | 1 to 365 Days |
| Minimum Materials in Cohort Required | The minimum number of comparable materials required to evaluate activity and generate a risk result | 1 to 100,000 Materials |
| Discount (Gross) Pattern | Identifies materials based on the total value of discounts applied across eligible transactions | Enabled or Disabled |
| Discount (Percentage) Pattern | Identifies materials based on discounts as a percentage of the total transaction value | Enabled or Disabled |
| Variance of Pricing (Gross) Pattern | Identifies materials based on the difference between the expected (anchor) price and the net price | Enabled or Disabled |
| Variance of Pricing (Percentage) Pattern | Identifies materials based on the percentage difference between the expected (anchor) price and the net price | Enabled or Disabled |
| Discount (Count) Pattern | Identifies materials based on the number of discounted transactions | Enabled or Disabled |
| Detection pattern | Determines which pricing or discount metric is evaluated by the rule. | Percentile |
3. Click Add A Rule Component.
4. To set a component, select a Field and Search Type from the dropdowns.
The Value field will appear after you select a Field and Search Type.
See a description of Field, Search Type and Value below:
| Field | Search Type | Value Type |
|---|---|---|
| Company | Includes OR Excludes | List is populated from customer data* |
| Company Country | Includes OR Excludes | Preset list |
| Customer (Payer) | Includes OR Excludes | List is populated from customer data* |
| Customer Group | Includes OR Excludes | Preset list |
| Distribution Channel | Includes OR Excludes | Preset list |
| Has Free of Charge Item | Includes OR Excludes | Yes/No |
| Is Free of Charge (Line Item Only) | Includes OR Excludes | Yes/No |
| Material (Line Item Only) | Includes OR Excludes | List is populated from customer data* |
| Material Type | Includes OR Excludes | Preset list |
| Sales Division | Includes OR Excludes | List is populated from customer data* |
| Sales Group | Includes OR Excludes | List is populated from customer data* |
| Sales Office | Includes OR Excludes | List is populated from customer data* |
| Sales Organization | Includes OR Excludes | List is populated from customer data* |
| Subject (Payer) Country | Includes OR Excludes | Preset list |
| Subject Account Group | Includes OR Excludes | List is populated from customer data* |
| Subject Classification | Includes OR Excludes | List is populated from customer data* |
| Transaction Reason | Includes OR Excludes | Preset List |
| Transaction Type | Includes OR Excludes | List is populated from customer data* |
*For values populated from customer data, value lists will not populate if data is not available.
Note: Where multiple rule components are set, they operate only in an “and” manner.
5. Click the Save Changes button at the bottom of the page to save your rule.
Exclusions
You can configure exclusions that remove certain transactions from the comparable data used to determine risk results. Available exclusions include:
- Transaction Amount: transactions with a total value of $100 or less are excluded.
- Transaction Type: only transactions classified as Sales are included.
- Transaction Reason: specific transaction reasons, such as certain goods, services, corrections, returns, financial adjustments, or donations, can be excluded.
- Payer Classification 1: specific customer classifications can be excluded.
- Payer Classification 2: additional customer classifications can be excluded.
Transactions originating from financial documents rather than billing documents do not contain the pricing conditions required by the analytic and are therefore ineligible for a risk result.
Transactions marked as no longer valid are excluded from the aggregated comparison data.