Guide
Pricing and Discount Leakage
Pricing and discount leakage is revenue lost between the price you set and the price you actually bill and collect. It comes from discounts above policy, price increases applied late or never, prices billed below contract and rep-level discounting that drifts above the norm. Each gap is small on one invoice line, and together they cost real margin every month.
Last updated:
By the korppi team, Cemal Tosun and Emin Genisol
What Is Pricing and Discount Leakage?
Pricing leakage is the part of revenue leakage that happens on the price itself. The product was delivered and invoiced, but at a lower net price than the company's own rules allow. Discount leakage is the most common form: discounts that are larger, longer lasting or more widely applied than the policy intended.
It matters because price goes almost straight to profit. A lost point of price has no cost saving attached to it, so even small gaps on high volumes change the operating result.
8.7%
A 1% better price lifts operating profit by about 8.7%.
The Price Waterfall: From List Price to Pocket Price
The price waterfall is the path from list price to the money the company actually keeps, its pocket price. On the way, price is given away through contract prices, on-invoice discounts, rebates, free goods, payment terms and returns. Each step is a place where price can leak, and each one should have an owner.
Most companies watch the top of the waterfall closely and the lower steps hardly at all. That is where an old list stays active after an increase, a promotion outlives its end date or a rebate is paid without the volume behind it.
Discount Above Policy
A discount above policy is a discount larger than the customer's segment, product group or order size allows. It usually starts as an approved exception for one deal and then stays on the customer card for every later order, long after anyone remembers why.
Price Increase Not Applied
When a new price list is announced, the increase only exists once it is live in the ERP for every customer and product it covers. Until then, the system bills the old price without any error. Customer-specific prices and fixed-price contracts can quietly hold the old level for months, so the increase the board approved is only partly what the business collects.
43%
Companies keep on average only 43% of a planned price increase.
92%
of companies lose at least 1% of affected revenue to slow price changes.
Price Billed Below Contract
A contract price is only enforced if it lives in the system and belongs to the right customer. When it sits in a signed PDF, or when the customer has a second code in the master data, invoices fall back to another price and the agreed value never reaches the books. This is why master data quality and pricing are the same conversation.
Discount by Sales Rep: How to Spot Drift
Discounting rarely goes wrong in one big decision. It drifts, one deal at a time, and it drifts differently for each sales rep. A rep who discounts more than colleagues is not automatically wrong, because they may manage larger or more strategic accounts. The useful question is which customers and deals carry the extra discount, and whether anyone chose to give it.
Answering that fairly takes context: comparable customers, the right price at the time of each order and the exceptions that were properly approved. Without it, the conversation with sales turns into an argument about averages instead of a review of specific invoice lines.
How to Measure Pricing and Discount Leakage
Pricing leakage is hard to measure from ERP data because every price on an invoice looks legitimate. The rule it should have followed lives in a contract, a price list that changed mid-year or a discount approved by email, and the same customer may appear under several codes. Separating real leakage from agreed exceptions takes experience with both your ERP and your commercial practice.
That is the work korppi does for finance and pricing teams. If you want to know how much price is leaking in your own business, start with a short conversation with us.
What korppi Delivers
korppi works from a read-only standard export of your ERP and never writes back to it. It shows where price and discount leak down to the invoice line, puts a money amount on each finding and gives it an owner. Every figure is calculated from your own lines and linked to the invoice lines behind it.
korppilot, the AI assistant, answers questions such as which customers carry the most extra discount, but it explains the results and never invents numbers. Every answer links to the invoice lines behind it. To make policies stick, see data governance.
See It on Your Own Data
Pricing leakage is easiest to understand on your own invoices. Request a demo and we will show you korppi Revenue Intelligence, or ask for a Data Health Report to see line-level evidence of where your price and discounts slip away.
Frequently Asked Questions
What is the difference between pricing leakage and revenue leakage?
Revenue leakage covers all revenue earned but not billed or collected, including late interest, returns and unbilled items. Pricing and discount leakage is the part that happens on the price: list, contract and discount levels that were not applied as intended.
What is a price waterfall?
A price waterfall is a step-by-step view from list price to pocket price, the amount the company actually keeps. Each step, such as contract price, on-invoice discounts, rebates and payment terms, shows how much price is given away and where.
How do you calculate discount leakage?
In principle it is the discount given beyond what your policy allows, expressed as money. In practice the hard part is knowing which policy, price and approval applied to each line. korppi calculates it from your own invoice lines and links every amount to the lines behind it.
Why are price increases not fully applied?
Common reasons are prices updated late in the ERP, customer-specific prices that override the new list, contracts with fixed prices nobody reviewed and exceptions granted by sales. The result is that only part of the planned increase reaches the invoices.
Is a sales rep with high discounts always a problem?
No. A rep may manage larger or more strategic accounts. The goal is a fair, specific conversation about which customers and deals carry the extra discount, backed by invoice lines rather than averages.