Usage-based item pricing examples

There are numerous ways you can define pricing for usage-based items. This topic contains a few examples of how you could complete the Billing Price List Entry page to achieve common usage-based price scenarios.

Variable quantity - Tiered pricing

Tier pricing allows you to set different prices per unit for various quantities of an item, resulting in bulk discount pricing. This section shows pricing examples using the three available tier types:

• Step
• Volume
• Absolute

Step

Step pricing decrements the price as the quantity used or ordered "steps up" the tier ladder. Quantities are priced per unit within a range.

This example illustrates a 1-month service charge per device with three tier rates that correspond to the regular price, a 5% discount, and a 10% discount. In this example, the system counter starts at 0 after each invoice—the quantities don't accumulate month over month.

Field	What to enter:
Price type	Tiered
Tier pricing	Step
Reset usage quantity	After each invoice
Flat amount frequency	Accept the default. In this scenario, there is no flat amount, so the Flat amount frequency is not relevant.
Quantity is recurring	False
Start date	The date you want the price to become effective.
Flat amount	0
Included units	0
Tiers table	Begin quantity Tier rate 0 10.00 4 9.50 8 9.00

Usage price results

Quantity used	Price total
3 devices	(3 * 10.00) = 30.00
7 devices	(3 * 10.00 ) + (4 * 9.50) = 68.00
11 devices	(3 * 10.00) + (4 * 9.50) + (4 * 9.00 ) = 104.00

Volume

With Volume tiered pricing, the total quantity used is priced at the rate in the tier in which the quantity falls.

This example illustrates a 1-month service charge per device with three tier rates that correspond to the regular price, a 5% discount, and a 10% discount. In this example, the system counter starts at 0 after each invoice—the quantities don't accumulate.

Field	What to enter:
Price type	Tiered
Tier pricing	Volume
Reset usage quantity	After each invoice
Flat amount frequency	Accept the default. In this scenario, there is no flat amount, so the Flat amount frequency is not relevant.
Quantity is recurring	False
Start date	The date you want the price to become effective.
Flat amount	0
Included units	0
Tiers table	Begin quantity Tier rate 0 10.00 4 9.50 8 9.00

Usage price results

Quantity used each month	Price total
3 devices	3 * 10.00 = 30.00
7 devices	7 * 9.50 = 66.50
11 devices	11 * 9.00 = 99.00

Absolute

With Absolute tiered pricing, the system uses the specific amount in the tier in which the quantity falls for the price.

This example illustrates a 1-month service charge for devices used, with three tiers of differing specific amounts. Use up to 3 devices for first tier price, up to 7 devices for the second tier price, and use any number from 8 on to get the third tier price. In this example, the system counter starts at 0 after each invoice—the quantities don't accumulate.

Field	What to enter:
Price type	Tiered
Tier pricing	Absolute
Reset usage quantity	After each invoice
Flat amount frequency	Accept the default. In this scenario, there is no flat amount, so the Flat amount frequency is not relevant.
Quantity is recurring	False
Start date	The date you want the price to become effective.
Flat amount	0
Included units	0
Tiers table	Begin quantity Tier rate 0 30.00 4 63.00 8 89.00

Usage price results

Quantity used each month	Price total
2 devices	30.00
3 devices	30.00
4 devices	63.00
5 devices	63.00
6 devices	63.00
7 devices	63.00
8 devices	89.00
11 devices	89.00

Variable quantity - Range pricing

Range pricing lets you price high-volume items by groups. For example, price per thousands, price per hundreds, and so on.

This example illustrates a 1-month download service that charges 10 for every 100 downloads.

Field	What to enter:
Price type	Range
Reset usage quantity	After each invoice
Flat amount frequency	Accept the default. In this scenario, there is no flat amount, so the Flat amount frequency is not relevant.
Quantity is recurring	False
Variable unit divisor	100
Rounding	Choose Round up, Round down, or Standard. This example uses Standard.
Start date	The date you want the price to become effective.
Flat amount	0
Included units	0
Variable unit rate	10

Usage price results

Quantity used each month	Price total
630 file downloads	60.00
475 file downloads	50.00
250 file downloads	30.00

Variable quantity with included units (overage)

Set a base price that includes a certain number of units and then charge customers for extra usage.

This example illustrates a monthly download service that charges 10.00 a month for 100 downloads and usage resets every month. Any usage equal to or less than 100 results in a minimum of 10.00 billed. Usage over 100 is billed at the designated tier rate or variable unit rate.

Field	What to enter:
Price type	Tiered or Range. This example uses Tiered.
Tier pricing	Absolute, Step, or Volume. This example uses Volume.
Reset usage quantity	After each invoice
Flat amount frequency	Include with every invoice
Quantity is recurring	False
Start date	The date you want the price to become effective.
Flat amount	10.00
Included units	100
Tiers table	Begin quantity Tier rate 0 0.15 51 0.10 201 0.09

Usage price results

Month	Usage quantity	Total price
January	99	10.00
February	135	10.00 + (35 * 0.15) = 15.25
March	200	10.00 + (100 * 0.10) = 20.00
April	319	10.00 + (219 * 0.09) = 29.71
May	0	10.00

Variable quantity with flat amount

Usage-based item with monthly flat amount. For example, varying quantities of bottled vitamin water that requires a 7 shipping/service fee. The customer receives price breaks at 13 and 25 bottles of water.

Field	What to enter:
Price type	Tiered
Tier pricing	Choose the desired tier type. This example uses Volume.
Reset usage quantity	After each invoice.
Flat amount frequency	Include with every invoice
Quantity is recurring	False
Start date	The date you want the price to become effective.
Flat amount	7
Included units	0
Tiers table	Begin quantity Tier rate 0 1.5 13 1.25 25 1

Usage price results

Month	Usage quantity	Total price
January	12	7.00 + (12 * 1.50) = 25.00
February	15	7.00 + (15 * 1.25) = 25.75
March	26	7.00 + (26 * 1.00) = 33.00

Recurring quantity with flat amount

Usage-based item with monthly flat amount. The quantity used is often known, but the user can add or subtract as needed during the course of the contract. For example, a customer starts a contract for user licenses and uses 5 licenses in January. The item includes a 9.00 per month processing fee. There are price breaks at 4 and 7 user licenses.

Field	What to enter:
Price type	Tiered
Tier pricing	Choose the desired tier type. This example uses Volume.
Reset usage quantity	After each invoice.
Flat amount frequency	Include with every invoice
Quantity is recurring	True
Start date	The date you want the price to become effective.
Flat amount	9.00
Included units	0
Tiers table	Begin quantity Tier rate 0 50.00 4 45.00 7 40.00

Usage price results

In this scenario, the customer added 2 licenses in March. However, in June there were cutbacks, and the customer needed to drop 3 licenses.

Month	Usage quantity entered in system	Total price
January	5	9.00 + (5 * 50.00) = 259.00
February	0	9.00 + (5 * 50.00) = 259.00
March	2	9.00 + ((5 + 2)) * 40.00) = 289.00
April	0	9.00 + ((5 + 2)) * 40.00) = 289.00
May	0	9.00 + ((5 + 2)) * 40.00) = 289.00
June	-3	9.00 + ((5 + 2 - 3)) * 45.00 = 189.00

Variable third-party payment processor example

Say you are a third-party payment processor, and your customers set their own variable amounts on the transactions for which you supply payments. To do this, you would create an item to use for payments. Then define the billing price list entry so that each quantity used = 1.00.

Field	What to enter:
Price type	Tiered
Tier pricing	Volume or Step - either one will produce the same results. Do not choose Absolute.
Reset usage quantity	After each invoice
Flat amount frequency	Accept the default. In this scenario, there is no flat amount, so the Flat amount frequency is not relevant.
Quantity is recurring	False
Start date	The date you want the price to become effective.
Flat amount	0
Included units	0
Tiers table	Begin quantity Tier rate 0 1.00

Usage price results

Month	Usage quantity	Total price
January	125	125 * 1.00 = 125.00
February	353	353 * 1.00 = 353.00
March	1,549	1,549 * 1.00 = 1,549.00