Free Goods

In SAP, a free good refers to a product delivered to the customer without any charge. This practice is typically used for promotional purposes, sample shipments, sales-boosting campaigns, or simply to enhance customer satisfaction. Free goods can be configured in two ways:

• Inclusive Free Goods

  1. Free goods included with item generation

  2. Free goods included without item generation

• Exclusive Free Goods

The image below displays a promotional poster from a company aiming to boost its sales. This poster includes examples of both inclusive and exclusive free goods. Based on this example, I will explain step by step how to configure the system in SAP so that free goods are defined automatically, rather than being entered manually each time.

Inclusive free goods refer to a situation where the free products provided to the customer are included within the total quantity ordered. For example, let’s say a company offers a “Buy 5, Pay for 4” promotion, and the customer orders 20 units. In this case, the customer will only pay for 16 units but will still receive all 20. So, this scenario becomes “Buy 20, Get 4 Free (Inclusive).”

As mentioned above, there are two types of inclusive free goods: with item generation and without item generation.

a. Inclusive Free Goods with Item Generation

This is when the free goods are included in the total ordered quantity but are displayed as a separate line item in the sales order or invoice.

Example Scenario:

In the image above, two line items are shown:

1st line: 48 packs of coffee (charged)

2nd line: 12 packs of coffee (free of charge, price = 0)

The total quantity delivered = 60 packs of coffee, but only 48 are invoiced.

This method is preferred when the goal is to clearly show the free goods provided to the customer and to manage inventory tracking and sales reporting with separate line items.

b. Inclusive Free Goods without Item Generation

This means that additional free goods are given within the quantity ordered by the customer, but no separate line item is created in the sales order or invoice for the free goods.

Example Scenario:

In the image above, only one line item is shown.

For a “Buy 10, Pay for 8” promotion, the item line indicates that 10 units were ordered. Within the SAP system, only 8 of these are invoiced, and 2 are considered free of charge. However, these free goods are not separately listed. This method is used when a clean and simple sales document layout is preferred or when the free goods do not need to be listed explicitly.

Exclusive Free Goods refer to additional free items given on top of the quantity ordered by the customer. In other words, the customer receives more than they ordered but is only invoiced for the ordered quantity.

For example, consider a promotion like “Buy 10, Get 2 Free”. The customer orders 10 units but receives 12 units in total. Only 10 units are invoiced. The additional 2 units are free and are provided in addition to the order.

The key difference from inclusive free goods is that the quantity delivered is more than the quantity ordered.

Here are the main differences between Inclusive and Exclusive Free Goods.

1. Inclusive Free Goods

In an inclusive free goods scenario, the free quantity is included in the ordered quantity.

Example scenario:

A coffee company offers 2 free filter coffees for every 10 ordered. A customer places an order for 60 coffees.

• Campaign: 2 free filter coffees for every 10 → 20%

• Total delivery: 60 filter coffees

• Free goods: 12 filter coffees

• Billed quantity: 60 × 0.80 = 48 filter coffees

• Sales order: A single item line is created for 60 coffees, and the price is calculated based on 48 units.

A. Inclusive Free Goods with Item Generation

• Creating a Condition Table

A condition table is created to define which fields will be used to store data related to the condition type. In the pricing procedure, the system uses the fields in this table to determine the appropriate pricing.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Condition Technique for Free Goods → Maintain Condition Tables

The relevant fields are selected, and then the Execute icon is clicked.

• Creating an Access Sequence

An access sequence determines where and in what order SAP should look for information such as price, discounts, or free goods during sales order processing.

It sequentially searches the condition tables where the condition records are stored.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Condition Technique for Free Goods → Maintain Access Sequences

An access sequence was created with the code name ZSFG.

• Defining a Condition Type

In SAP, pricing operations are based on condition types.

To enable the system to automatically determine free goods, a specific condition type must be defined for such campaigns.

This condition type:

• Ensures that a free goods item is generated,

• Sets the price to zero (0),

• Works in conjunction with the relevant access sequence and condition tables.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Condition Technique for Free Goods → Maintain Condition Types

A condition type was created with the code name ZS00.

• Defining the Pricing Procedure

The pricing procedure is a set of rules and steps that define how the system calculates components such as price, discounts, taxes, and free goods during a sales transaction.

It determines the sequence in which these elements are applied and how they interact.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Condition Technique for Free Goods → Maintain Pricing Procedure

A pricing procedure was created with the code name ZS0001.

Now, the previously created condition type ZS00 is added to this procedure.

• Activating the Free Goods Procedure

Activating the free goods procedure in SAP ensures that the system automatically applies the free goods logic during sales document processing.

This step is part of the SAP customization process and is one of the key components of the free goods determination workflow.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Condition Technique for Free Goods → Activate Free Goods Determination

The Sales Organization, Distribution Channel, Division, and the Free Goods Procedure are assigned to each other.

This step ensures that the correct free goods determination procedure is used during sales order processing for the specified sales area.

• Item Category for Free Goods

In SAP, the item category for free goods defines how the system processes materials given free of charge in a sales order. This category ensures that free goods:

• Are not invoiced,

• Have different quantity and value controls,

• Are handled with distinct stock movements.

To define free goods within a sales order, the system assigns them a special item category, typically TANN.

With this item category:

• The material is processed with zero price (net value = 0),

• No billing is carried out (billing relevance: “B”),

• The free item is automatically added by the system as a sub-item derived from the main item.

It’s important to check whether the Pricing field of item category TANN is set to “B”.

The item category group of the material is usually NORM. However, the free good is not derived from the material master itself, but instead comes from the free goods determination rule defined by the campaign.

• Determining Item Category for Free Goods Item

The item category in SAP controls how each sales item is processed.

Determining the item category for a free goods item defines which item category the system should use when adding the free goods line to the sales order.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Determine Item Category For Free Goods Determination

The following fields are filled in appropriately.

It is important to enter “Free” in the Item Usage field, as this allows the system to recognize that the item (line) is a free good.

• Defining 100% Discount for the Condition Type

This step ensures that the free goods are processed with a 100% discount, meaning the system sets the price of the free item to zero during pricing.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Control Free Goods Pricing → Maintain Condition Type For 100% Discount

• Defining Pricing Procedure for Pricing (Specific to Free Goods)

This step is used to define the pricing procedure that controls how pricing is handled specifically for free goods. It ensures that the pricing logic applies correctly when free goods are determined and processed.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Control Free Goods Pricing → Maintain Pricing Procedure For Pricing

For Z100, the requirement is “55”.

Requirement “55” checks whether the Pricing field in the item category is set to “B” (which means not relevant for pricing, used for free goods).

The Alternative Base Type “28” helps reduce the total net value of the free goods item in the pricing calculation.

• Creating a Condition Record

In SAP free goods scenarios, creating a condition record is essential so that the system knows which campaigns apply to which customers or products.

• VBN1: Create free goods condition

• VBN2: Change free goods condition

• VBN3: Display free goods condition

First, enter the relevant data such as sales organization, distribution channel, customer, and the material for which the free goods scenario will be applied.

• Minimum quantity: The minimum order quantity the customer must place to qualify for free goods.

• “For” quantity: The base quantity used to calculate how many free goods will be provided.

• Free quantity: The number of items that will be given for free.

Fill in these fields accordingly.

In the next column, you will see the Calculation Rule. This determines how the free goods quantity is calculated. There are 3 types of rules:

• Pro Rata

• Unit Reference

• Whole Unit

🔹 Pro Rata:

Calculation is based on the proportion between the ordered quantity and the “for” quantity.

Example: You offer 2 free items for every 10 sold. If the customer orders 180 units, they receive 36 free items.

🔹 Unit Reference:

The “for” quantity is treated as a complete unit. The customer must order full multiples of the “for” quantity to qualify.

Example: For 10 units, 2 are given free. If the customer orders 125 units:

• 120 units qualify → 24 free items

• The remaining 5 do not qualify.

🔹 Whole Unit:

Free goods are only granted if the ordered quantity is exactly divisible by the “for” quantity.

Example: 10/10, 20/10, 50/10 → valid

25/10, 35/10 → not valid, no free goods given.

• Free goods category: This field determines whether the free goods are inclusive or exclusive, and whether item generation is used. Enter “1” for inclusive with item generation.

• Free goods delivery control: Controls how the free item is delivered. Enter “E” which means:

  E = In relation to the main item.

Finally, save the condition record.

• Creating a Sales Order

Now let’s verify by creating a sales order.

In the sales order screen:

• The first line item represents the billed quantity.

• The second line item represents the free goods quantity.

For example:

• 60 units were ordered in total

• 48 units were invoiced

• 12 units were delivered free of charge

This confirms that the free goods configuration is working correctly in the system.

Let’s open the second line item (the free goods item) and check the Conditions tab to verify if everything is correct:

• The Net Value should be 0, confirming that the item is not billed.

• The Z100 condition type should appear in the pricing conditions list, indicating that the 100% discount rule has been applied correctly.

If both are in place, the free goods configuration has been successfully implemented. ✅

B. Inclusive Free Goods Without Item Generation

The configuration for inclusive free goods without item generation is mostly the same as with item generation, except for the pricing procedure.

• Creating a Condition Type

In SAP, pricing processes rely on condition types. To enable the system to automatically determine free goods in such campaigns, a condition type specific to this scenario must be created.

This condition type should:

• Ensure no additional item line is created in the sales order

• Set the price to zero (0) for the free portion

• Work together with the relevant access sequence and condition tables

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Condition Technique for Free Goods → Maintain Condition Types

• Pricing for Inclusive Free Goods Without Item Generation

This step is used to configure pricing behavior when no separate item is created for the free goods in the sales order. The system internally adjusts the net value without showing a separate line.

Menu Path:

SPRO → SAP IMG → Sales and Distribution → Basic Functions → Free Goods → Pricing For Inclusive Free Goods Without Item Generation

“Requirement 59” checks whether the free goods category is set to “3” (which corresponds to inclusive free goods without item generation).

This ensures the condition is only applied in the correct scenario.

“Base Type 29” calculates the value of the free goods and subtracts it from the net value, ensuring the customer is only charged for the payable portion of the ordered quantity.

• Creating a Condition Record

In SAP free goods scenarios, creating a condition record is essential so the system knows which campaign applies to which customer or material.

You can use the following transactions:

• VBN1 – Create Free Goods Condition

• VBN2 – Change Free Goods Condition

• VBN3 – Display Free Goods Condition

On the screen that opens, the relevant fields are filled in as previously explained.

However, one key difference is that the Free Goods Category must be set to “3” (Inclusive Without Item Generation).

This ensures that no separate item is created in the sales order, and the free portion is reflected directly in the pricing of the main item.

• Verifying by Creating a Sales Order

When you create the sales order, you’ll see that only one line item appears.

By opening this item and navigating to the Conditions tab, you can verify that the free goods discount has been applied within the same item — meaning the pricing reflects both the paid and free portions without generating a separate line for the free goods.

2. Exclusive Free Goods

In an exclusive free goods scenario, the free goods quantity is not included in the order quantity. It is separate and independent from what the customer orders.

Example scenario:

A coffee manufacturer offers 1 free coffee cup for every 10 filter coffees ordered.

The customer places an order for 100 filter coffees.

• Campaign: 1 free coffee cup per 10 filter coffees

• Total delivery: 100 filter coffees + 10 coffee cups

• Invoiced quantity: 100 filter coffees

• Sales order: Coffee is one line item, the cup is a separate line item (free)

• Creating a Condition Record

In SAP, creating a condition record is essential for the system to determine which campaign applies to which customer or product.

Use the following transactions:

• VBN1 – Create free goods condition

• VBN2 – Change free goods condition

• VBN3 – Display free goods condition

On the screen that opens, click the Exclusive icon in the top left corner.

Then, fill in the relevant fields as explained earlier.

The key difference in this case is that in the Free Goods Category field, you must select “Exclusive”.

This setting ensures that the free goods will be added as a separate item in the sales order, independent of the ordered quantity.

• Verifying by Creating a Sales Document

To check the exclusive free goods configuration, create a sales order:

• In the first line item, enter 10 units of filter coffee as the ordered product.

• After confirming the entry, the system will automatically add a second line item for the free goods (Mug) based on the condition record.

This confirms that the exclusive free goods determination is working correctly — the free product is listed as a separate item with zero value.

Let’s check the Conditions tab of the Mug item:

• The Net Value should be 0, confirming that the item is not billed.

• A 100% discount condition (such as Z100 or a similar condition type) should appear, showing that the discount has been correctly applied.

This verifies that the exclusive free goods configuration is functioning as intended. ✅

For the first item (Filter Coffee), the ZRAB condition has been applied, and the net value is shown in the pricing section of the screen, as indicated in the visual.

This confirms that the paid item has been priced correctly while the free item (Mug) was handled with a 100% discount — completing the exclusive free goods scenario setup successfully. ✅