Tiered pricing is a volume-based pricing model in which you define resource quantity tiers and assign per tier unit prices which usually decrease from one tier to the next.
For example:
- Tier 1 includes units 1-10 at $10 per unit; the total price for the first 10 purchased units is 10x$10=$100.
- Tier 2 includes units 11-20 at $5 per unit; the total price for the first 20 units is 10x$10+10x$5=$150.
- Tier 3 includes all units in excess of 20 at $3 per unit; the total price for the first 30 units is 10x$10+10x$5+10x$3=$180.
Within the Tiered pricing model, for each order and item ordered, the quantity ordered is mapped to the defined tiers (beginning with the tier determined by the quantity already owned within the subscription and ending with the tier determined by the quantity of units ordered plus units already owned within the subscription) and the total is the sum of tier prices multiplied by the corresponding quantities.
Tiered pricing can help you stimulate customers to buy more resources at a lower price or, in some cases, to reduce resource consumption (if you set higher prices for more resources purchased).
To configure Tiered pricing for a resource, you must define resource quantity tiers and corresponding prices.
How Tiered Pricing Applies to Selling Resources
Important: The Tiered Pricing model applies only to additionally purchased resource quantities and does not apply to resource quantities included in service plans (which are already included in the service plan price).
Example
A service plan includes 8 mailboxes. A customer subscribes to the service plan and purchases 33 additional mailboxes. The total price for the additional mailboxes will be calculated as follows:
- 8 included units: Tiered Pricing is not applicable
- Purchasing 33 additional units:
- 10 units are purchased at $10 per unit (Tier 1): $10x10=$100
- 10 units are purchased at $5 per unit (Tier 2): $5x10=$50
- 13 units are purchased at $3 per unit (Tier 3): $3x13=$39
- The total price for the additional mailboxes is $100+$50+$39=$189
How Tiered Pricing Applies to Upsizing or Downsizing Resources
Tiered pricing also applies to resource upsizing and downsizing within already existing subscriptions.
Important: When a resource of an existing subscription is upsized or downsized, the change order total calculation is based on the tier which corresponds to the total resource quantity owned within the subscription minus resource quantity included in the subscription.
Example 1: Upsizing a Resource
A customer owns 16 mailboxes, 8 of which are included in the service plan, and wants to purchase 14 more within the same subscription. Tiers 1-3 are configured as described above. The total price for the additional mailboxes will be calculated as follows:
- 8 included units: Tiered Pricing is not applicable
- 8 additional units owned (from the total of 16 owned units): owned at $10 per unit (tier 1, in the example above)
- Upsizing mailboxes by purchasing 14 additional units:
- 2 units are purchased at $10 per unit (Tier 1): $10x2=$20
- 10 units are purchased at $5 per unit (Tier 2): $5x10=$50
- 2 units are purchased at $3 per unit (Tier 3): $3x2=$6
- The total price for the additional mailboxes is $20+$50+$6=$56
Example 2: Downsizing a Resource
After upsizing mailboxes in the previous example, the customer owns 30 mailboxes, 8 of which are included in the service plan, and 2 of which fall into Tier 3 and were purchased at $3 per unit. Now the customer wants to return 5 mailboxes and receive a refund. The refund will be calculated as follows (with proration not considered):
- 8 included units: Tiered Pricing is not applicable
- 10 additional units: owned at $10 per unit (Tier 1)
- 10 additional units in excess of the first 10 units: owned at $5 per unit (Tier 2)
- 2 additional units in excess of the first 20 units: owned at $3 per unit (Tier 3)
- Downsizing mailboxes by returning 5 additional units:
- 2 units are returned at $3 per unit (Tier 3): $3x2=$6
- 3 units are returned at $5 per unit (Tier 2): $5x3=$15
- The total refund (before proration) is $6+$15=$21
Configuring Tiered Pricing for Setup, Overuse, and Recurring Fees
You can set Setup Fee, Overuse Fee and Recurring Fee to tiered pricing either per resource (for all its subscription periods) or for a particular period of a subscription to this resource. These fees are configured correspondingly through the Resource Rates settings of a resource belonging to a service plan or through the Resource Rates Periods settings.
The Resource Rates Periods settings (refer to the Configuring Tiered Prices per Resource Rates Period section) override those of the Resource Rates (refer to Configuring Tiered Prices per Resource). For example, you have simultaneously configured both types of settings for a particular resource belonging to a particular service plan as follows:
- for all the subscription periods applicable to this resource, you set (through the resource General tab) the Recurring fee to a fixed value.
- for one of the periods applicable to this resource, you set (through the Resource Rates Tab of this resource) the Recurring fee to be counted according to the tiered pricing algorithm.
In this case, when some newly created subscription has the same agreed period of resource usage as the period for which you have configured the Recurring fee, the fee settings configured specifically for this period, the tiered pricing ones, will be applied to this subscription.
Important: The tiered pricing settings and promotions settings are interdependent. That is, if you configure a promotion with the Overuse Fee set to a fixed value for a resource included into a particular service plan, you cannot set these fees to tiered pricing for this resource through the service plan settings.