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Make Your Pricing Strategy Competitive with Smart Rounding in Microsoft Dynamics AX 2012

Human psychology plays a vital role in people’s buying habits, and the price tag is the most important psychological barrier that prevents people from buying. Psychological pricing is a marketing/business concept which is used to influence the consumer’s buying power – customers respond better to certain type of prices, and they are more likely to buy with certain price levels. For example, psychological prices often end with a “9” – such as 99.99, 9999.99, 99,999.99, etc.

This pricing naturally does not have any real effect on the money that we are going to pay – if an item is $999.99, we are  essentially paying $1,000.00. But this kind of pricing affects the consumer’s buying behaviour in that it gives the consumer a different mind-set at first sight. When the customer sees an item priced at $10,000, it seems like quite a large amount; but seeing that item at $9,999.99 makes it feel less, or like we’re getting a bargain. That one penny difference can be a major determining factor in getting a customer to purchase.

Wherever we go, we see this psychological pricing: at clothing stores, grocery stores, electronics shops, etc. In fact, it is so common and widespread that most people don’t think twice about purchasing at these pricing levels.

The smart rounding concept in Microsoft Dynamics AX 2012 supports psychological pricing by allowing businesses to round sales prices of items by whatever specification they create. You can apply smart rounding after a bulk adjustment of trade agreements, or automatically apply it after a unit price is calculated, based on a generic currency and an exchange rate. By using smart rounding, you can make the market more ready to buy your products.

Set Up Smart Rounding

The smart rounding rules are static and rarely change; they are also currency dependent. This means that one currency can follow one set of rules and another currency can follow another set of rules. For example, all products for US Dollars (USD) end with 99 cents, and all products for Pound Sterling (GBP) end with 95 pence.

To set up smart rounding, follow these steps:

  1. Open Sales and marketing > Setup > Price/discount > Smart rounding.

    Navigation path for Smart Rounding

    Fig 1: Navigation path for Smart Rounding

  2. Click New.

    Click “New” to create a new Smart Rounding Rule

    Fig 2: Click “New” to create a new Smart Rounding Rule

  3. Type the Rounding version and Name into the appropriate fields.

    Enter the Rounding version and Name for the Smart Rounding Rule

    Fig 3: Enter the Rounding version and Name for the Smart Rounding Rule

  4. Click Add to create a new Smart Rounding Rule.

    Click “Add” to create a new Smart Rounding Rule

    Fig 4: Click “Add” to create a new Smart Rounding Rule

  5. Type the from and to price in the Unit Price From and Unit Price To fields.
  6. Type the syntax to be used for the smart rounding in the Syntax field.
  7. Enter the rounding limit points. Type the lower limit for rounding down in the Lower Limit field and type the upper limit for rounding up in the Upper Limit field.

    Enter different criteria for the Smart Rounding Rule

    Fig 5: Enter different criteria for the Smart Rounding Rule

  8. Repeat steps 4 through 7 to add more lines to the rounding rule.

    Enter separate lines for entering criteria for the Smart Rounding Rule

    Fig 6: Enter separate lines for entering criteria for the Smart Rounding Rule

  9. In the Rounding Version Members FastTab, click Add

    Click “Add” to select currencies for which the Smart Rounding Rule is applicable

    Fig 7: Click “Add” to select currencies for which the Smart Rounding Rule is applicable

  10. Click the Currency drop-down box and select the currency in which the smart rounding should apply.

    Add currencies for which the Smart Rounding Rule is applicable

    Fig 8: Add currencies for which the Smart Rounding Rule is applicable

Create Multiple Smart Rounding Rules

You can create multiple Smart Rounding Rules and select the multiple currencies in which the smart rounding should apply using the above steps.

Multiple Smart Rounding Rules

Fig 9: Multiple Smart Rounding Rules

Currencies for Multiple Smart Rounding Rules

Fig 10: Currencies for Multiple Smart Rounding Rules

Check Price with Smart Rounding Rule Simulation

You can check the price after rounding by entering a price in the Price Example Before Rounding field. You can view the rounding off price as per the Smart Rounding Rule in Price Example After Rounding field.

For example, I have entered the value 145.20 in the Price Example Before Rounding field, and the value according to the rounding rule is showing 149.99 in the Price Example After Rounding field.

Check price simulation with the created Smart Rounding Rule

Fig 11: Check price simulation with the created Smart Rounding Rule

Apply Smart Rounding Automatically

To apply smart rounding automatically after currency conversion, select the “Apply smart rounding after currency conversion” option. Find this option on the Prices tab in the Accounts receivable parameters form.

Select the “Apply smart rounding after currency conversion” option to apply smart rounding automatically

Fig 12: Select the “Apply smart rounding after currency conversion” option to apply smart rounding automatically

Apply Smart Rounding Manually

To apply smart rounding manually to a trade agreement, click Adjustment, and then Apply Smart Rounding on the journal lines, price/discount agreement form.

Apply smart rounding manually to a trade agreement

Fig 13: Apply smart rounding manually to a trade agreement

Example of Manual Smart rounding

Create a price/discount agreement journal in Sales and Marketing. In the journal lines, enter the value 145.20. Click Adjustment, and then Apply Smart Rounding on the journal lines.

Enter the trade agreement price in the journal lines and apply smart rounding manually

Fig 14: Enter the trade agreement price in the journal lines and apply smart rounding manually

The Smart Rounding Rule version NinetyNine (Unit price ending with .99) covers this, and when you apply smart rounding the price changes.

Price changes as per the Smart Rounding Rule when applied manually

Fig 15: Price changes as per the Smart Rounding Rule when applied manually

When you create a sales order with the item, the sales order line also populates with the smart rounded amount.

A sales order line populates with the smart rounded amount for an item

Fig. 16: A sales order line populates with the smart rounded amount for an item

Conclusion

Now you can use the smart rounding functionality in Microsoft Dynamics AX 2012 to break the psychological price barrier between your customers and your products, and make them eager to buy.

If you have any questions about how Microsoft Dynamics AX 2012 can help with your pricing processes, please email us at dynamics@ignify.com.

Partha Chattopadhyay is a Manager in the Microsoft Dynamics AX practice at Ignify. Ignify is a leading provider of Microsoft Dynamics ERP solutions to mid-market and Enterprise businesses. Ignify has been ranked as Microsoft Partner of the Year Winner in 2012, 2011 and 2010, and in the Microsoft Dynamics Inner Circle, Microsoft Dynamics Presidents Club in 2009. Ignify has offices and team members in Southern California, Northern California, Arizona, Tennessee, Illinois, Washington, Canada, Singapore, Malaysia, India, Philippines, and Jakarta.