What is a price waterfall?

In short. A price waterfall is a step-by-step view from list price down to pocket price. It shows each discount and concession along the way, so you see where revenue leaks.

Example in a B2B tech company

The waterfall shows most margin is lost to free implementation, not to the headline discount.

How it works

Start at list price. Subtract the standard discount and the deal discount to reach the invoice price. Subtract what is not on the invoice, such as free months, free services, payment terms, rebates and partner fees, to reach the pocket price. Build it per deal, then compare segments, reps or regions.

What it is for

Finding the biggest leaks, checking that discount guardrails hold, and deciding which concessions to make conditional.

Watch out for

Concessions that sit in contracts, billing or finance systems instead of the CRM, so the waterfall needs data from more than one place.

Common questions

How often should you review it?

At least once per pricing cycle, for example each quarter, and after any packaging change.

What is the difference between a price waterfall and pocket price?

Pocket price is the end point. The waterfall shows how you got there.

Related terms

Pocket price: What the company actually keeps after all discounts, free months, rebates and other concessions.
List price: The standard published or internal price before any discount.
Conditional discount: A discount given only when the buyer meets a condition.
Discount variance: How much discounts differ between similar deals.

Browse all 60 terms in the pricing glossary.

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Last updated: 14 October 2026.