Rate Plans

Rate-Plans define pricing. Each rate-plan must have a unique name within its product set. Furthermore the rate-plan defines currency, billing cycle, and how to handle billing events.

When creating a subscription a rate-plan is specified. This rate-plan dictates the default charges added to to the subscriptions recurring invoice.

Rate-plans API documentation 

Pricing

Prices are defined on a rate-plan via pricing-components. A rate-plan may have zero or more pricing-components where each pricing-component translates to an invoice-line on an invoice.

When purchasing a subscription the amount of units purchased for each component should be defined. The pricing amount is used to calculate the invoice cost. The number of units purchased can be changed in a number ways, typically these changes would occur when a customer upgrades or downgrades their entitlements.

For example:
A customer purchases 5 users on the Acme Inc app.
The rate-plan would have a single pricing-component named Users @ $5 a user.

The following invoice line would be created:
     /---------------------------------\
     | description | per/unit  | total | 
     | 5 users     | $5        | $25   |
     \---------------------------------/

Pricing Strategies

Each pricing-component is defined by one of three pricing strategies

  • Flat Fixed, non-variable cost. For example $10.
  • Tiered Cumulative pricing based on pricing tiers
  • Volume Pricing based on volume purchased

Multiple tiers of prices can be define for each pricing-component. This allows for discounting as greater units are purchased or to apply overage charges. Each pricing-component tier can be configured to be priced on a per-unit or fixed cost for the whole tier.

Okay, that's quite a bit to take in! Let's walk through some examples!


Flat Pricing

Flat pricing indicates a single fixed cost. This pricing strategy is best used when the commodity sold cannot vary. For example a monthly membership of $19.99 may be modeled as a fixed cost, this can also be used to represent the minimum charge associated with a subscription.

Note: Fixed-prices are not $X * N where N is the units purchased. The cost for is always $X regardless of N, i.e. $X * 1.


Tiered Pricing

Tiered pricing works in a similar manner to most tax systems. One or more tiers are defined, each representing a range of purchased units and associated cost. As the units purchased increase the price is accumulated from the different tiers. Tier ranges are defined as an inclusive range and must be contiguous. The final tier may allow infinite units.


Users pricing-component example
Upper threshold Lower threshold Cost Pricing
1 10 $2.00 Per Unit
11 20 $1.00 Per Unit
Question: What if I bought 7 users?

The first tier is defined as 1 -> 10, as tier ranges are inclusive no other tier is needed.

The pricing is $2.00 per a unit:
7 * $2.00 = $14.00 

The following invoice line would be created:
     /---------------------------------\
     | description | per/unit  | total | 
     | 7 users     | $2        | $14   |
     \---------------------------------/
Question: What if I bought 20 users?

The first 10 users fall into the first 1 -> 10 tier. The subsequent 10 users fall into the 11 -> 20 range.

For the first 10 units the pricing is $2.00 per a unit:
10 * $2.00 = $20.00 

For next 10 units the pricing is $1.00 per a unit:
10 * $1.00 = $10.00 

The total cost will be calculated as an accumulation of the two tiers:
1 -> 10 units pricing and the 11 -> 20 tier, thus $20 + $10 = $30.


The following invoice line would be created:
     /---------------------------------\
     | description | per/unit  | total | 
     | 20 users    | $1.50     | $30   |
     \---------------------------------/

Volume Pricing

Similar to tiered pricing but as the volume increases the entire cost is calculated using the matched price tier.


Users pricing-component example
Upper threshold Lower threshold Cost Pricing
1 10 $2.00 Per Unit
11 20 $1.00 Per Unit
Question: What if I bought 7 users?

The first tier is defined as 1 -> 10, as tier ranges are inclusive and 7 is in this range this will be our matching tier!

The pricing is $2.00 per a unit:
7 * $2.00 = $14.00 

The following invoice line would be created:
     /---------------------------------\
     | description | per/unit  | total | 
     | 7 users     | $2        | $14   |
     \---------------------------------/
Question: What if I bought 17 users?

17 falls into the 11 -> 20 range.

The pricing is $1.00 per a unit:
17 * $1.00 = $17.00 


The following invoice line would be created:
     /---------------------------------\
     | description | per/unit  | total | 
     | 17 users    | $1.00     | $17   |
     \---------------------------------/

Setup, In-Advance Costs, and Usage

  1. Setup & Installation: Charges on the first paid-for invoice of the subscription only. For example a charge for a one-time item, or setup fee.
  2. In Advance: Charges on every recurring and upgrades invoices. For example a fixed monthly fee or pre-delivered items for the billed-for period.
  3. Arrears & Usage: Charges for the previous billed-for period. For example the number of consumables used.

Structure

Note: This example also shows rate-plan & value association to a subscription

Structure and composition of rate-plan