Fixed-amount and percentage discount charges application to one regular charge
This topic explains how to apply both fixed-amount and percentage discounts to regular charges in a subscription, detailing the discount sequence, allocation, and MRR calculations.
This example demonstrates how two subscription level discounts (both a fixed-amount and percentage discounts) are allocated on the two regular charges of a subscription. You can see the following analysis in this example:
- The discount applying sequence
- The discount amount allocation
- The charge-level MRR calculation
- The subscription-level MRR calculation
Example:
Suppose your customer is to apply two subscription level discount charges to a one-quarter termed subscription, which has two regular recurring charges.
- Charge 1: Monthly regular charge: $5/month for the first month, $10 for the second, and $15 for the third. Effective range: 1/1/2019 - 4/1/2019.
- Charge 2: Monthly regular charge: $3/month. Effective range: 1/1/2019 - 4/1/2019.
- Charge 3 is a recurring 20% percentage discount charge to apply at the subscription level but limited to recurring charges only.
- Discount 1: Monthly fixed-amount discount charge: $6/month. Effective range: 1/15/2019 - 4/1/2019.
- Discount 2: Percentage discount: 10%. Effective range: 2/15/2019 - 4/1/2019.
- Discount 1 has a discount class of higher priority than that of Discount 2.
The discount applying sequence:
As the discount priority of Discount 1 is higher than that of Discount 2, when they apply to the same regular charge, Discount 1 (the fixed-amount discount) is applied first. Discount 2 (the percentage discount) is applied to a regular charge after Discount 1 has been applied. See Sequence of applying multiple discount charges to one regular charge.
When Discount 1 (the fixed-amount discount) is applied to both regular charges, because Charge 1 and Charge 2 have the same charge type (they are both regular charges) and Charge 1 has a smaller charge number (Charge 1< Charge 2), Charge 1 will get the discount allocation first. Charge 2 will get the remaining discount amount from Discount 1 if there is a discount balance. See Sequence of applying a fixed-amount discount charge to multiple regular charges .
The discount amount allocation:
1/15-2/1: Discount 1 is applied to Charge 1 first, and the amount applicable is $5/m at maximum (The net price of Charge 1 in this charge period is already 0 now. It cannot be a negative value). After that, the discount balance of Discount 1 is $1/m and is applied to Charge 2.
2/1-2/15: Discount 1 is applied to Charge 1 first, and the amount applicable is $6/m. After that, the discount balance of Discount 1 is 0. Therefore, no discount is allocated on Charge 2.
2/15-3/1: In this charge period,
- Discount 1 is applied to Charge 1 first, and the discount amount applicable is $6/m. After that, the discount balance of Discount 1 is 0. Therefore, no discount is allocated on Charge 2.
- Discount 2 (the percentage discount) is then applied to Charge 1 and Charge 2.
- When it is applied to Charge 1, the net price (after Discount 1 is applied) should be used to calculate the discount amount. Therefore, the discount amount applied to Charge 1 by Discount 2 is (10-6)*10%=$0.4/m.
- When it is applied to Charge 2, the discount amount is 3*10%=$0.3/m.
- In summary, the discount amount allocated to Charge 1 is 6+0.4=$6.4/m, and the discount amount allocated to Charge 2 is $0.3/m.
3/1 - 4/1: Similar as in the charge period above, in this charge period:
- Discount 1 is applied to Charge 1 first, and the discount amount applicable is $6/m. After that, the discount balance of Discount 1 is 0. Therefore, no discount is allocated on Charge 2.
- Discount 2 (the percentage discount) is then applied to Charge 1 and Charge 2.
- When it is applied to Charge 1, the net price (after Discount 1 is applied) should be used to calculate the discount amount. Therefore, the discount amount applied to Charge 1 by Discount 2 is (15-6)*10%=$0.9/m.
- When it is applied to Charge 2, the discount amount is 3*10%=$0.3/m.
- In summary, the discount amount allocated to Charge 1 is 6+0.9=$6.9/m, and the discount amount allocated to Charge 2 is $0.3/m.
The charge-level MRR calculation:
The Gross MRR, Discount MRR, and Net MRR of each charge segment and charge period are calculated as in the table below.
|
Charge Segment |
Charge Period |
Gross MRR |
Discount Charge |
Start Date |
End Date |
Applied Discount |
Discount MRR |
Net MRR |
|---|---|---|---|---|---|---|---|---|
|
Charge 1 Segment 1 |
Charge Period 1 |
5 |
n/a |
1/1 |
1/15 |
0 |
n/a |
5 |
|
Charge Period 2 |
Discount 1 (D1) |
1/15 |
2/1 |
-5 |
5 |
0 | ||
|
Charge 1 Segment 2 |
Charge Period 3 |
10 |
D1 |
2/1 |
2/15 |
-6 |
6 |
4 |
|
Charge Period 4 |
D1, Discount 2 (D2) |
2/15 |
3/1 |
-6.4 |
6.4 |
3.6 | ||
|
Charge 1 Segment 3 |
Charge Period 5 |
15 |
D1, D2 |
3/1 |
4/1 |
-6.9 |
6.9 |
8.1 |
|
Charge 2 Segment 1 |
Charge Period 1 |
3 |
n/a |
1/1 |
1/15 |
0 |
n/a |
3 |
|
Charge Period 2 |
D1 |
1/15 |
2/1 |
-1 |
1 |
2 | ||
|
Charge Period 3 |
D1 |
2/1 |
2/15 |
0 |
0 |
3 | ||
|
Charge Period 4 |
D2 |
2/15 |
3/1 |
-0.3 |
0.3 |
2.7 | ||
|
Charge Period 5 |
D2 |
3/1 |
4/1 |
-0.3 |
0.3 |
2.7 |
The subscription-level MRR calculation:
By adding up the MRRs of the charge segments or charge periods with the same start and end dates, the MRR of the subscription is as shown in the table below:
|
Start Date |
End Date |
Subscription Gross MRR |
Subscription Discount MRR |
Subscription Net MRR |
Segment or Charge Period Applicable |
|---|---|---|---|---|---|
|
1/1 |
1/15 |
8 |
n/a |
8 |
Charge 1/Charge Period 1, Charge 2/Charge Period 1 |
|
1/15 |
2/1 |
8 |
6 |
2 |
Charge 1/Charge Period 2, Charge 2/Charge Period 2 |
|
2/1 |
2/15 |
13 |
6 |
7 |
Charge 1/Charge Period 3, Charge 2/Charge Period 2 |
|
2/15 |
3/1 |
13 |
6.7 |
6.3 |
Charge 1/Charge Period 4, Charge 2/Charge Period 3 |
|
3/1 |
4/1 |
18 |
7.2 |
10.8 |
Charge 1/Charge Period 5, Charge 2 /Charge Period 4 |