Common Use Case: Price Tier and Price Ramps
- Tiered Pricing: Use this when you need to charge different rates for different quantities. You promote sales by reducing the per volume price for a higher quantity of purchases.
- Example use cases for Tiered Pricing: Cell phone plans: $/minute rates change as usage crosses certain blocks (e.g., 0-100 mins, 101-200 mins, etc.).
- Software licenses: Buy 1-10 licenses at $100 each, 11-50 at $90 each, 51+ at $80 each.
- Rebate programs: Customers get higher rebates as their purchase volume increases.
- Use high-tier calculations if you want the highest achieved tier to apply to all qualifying products.
- Use rate-per-each-tier calculation if you want progressive discounts (e.g., first 100 units at one rate, next 100 at another).
- Make sure tier start and end values do not overlap.
- Ramp Pricing: Used when we need to charge different rates for different selling periods. It helps to incentive a long period of sales. Pricing is spread over a period, especially in a contractual obligation.
- Examples for Ramp Pricing:
- Subscription services: Year 1 at $1000, Year 2 at $950, Year 3 at $900 (discounts for longer commitment).
- Asset renewal: Price ramps with escalators for renewals or upgrades.
- Software bundles: Price ramps for options inside a bundle, where each option can have its own ramp.
- Use ramp pricing for service/subscription products where pricing needs to vary by time or quantity.
- Use price escalators to automate ramp creation and apply discounts/increases for each period.
- Clearly define ramp periods and ensure the correct frequency (monthly, quarterly, yearly, or custom).Note: You cannot simultaneously use Price Ramp and Price Tier.
| Use Case | Tiered Pricing | Ramp Pricing |
|---|---|---|
| Volume/usage discounts | ✔ | |
| Price changes over time | ✔ | |
| Subscription contracts | ✔ | |
| Usage-based billing | ✔ | ✔ (if usage varies by period) |
| Multi-year deals | ✔ | |
| Progressive rebates | ✔ |