Subscription level fixed-amount discount charge application to multiple regular charges
This topic explains how to apply a subscription level fixed-amount discount charge to multiple regular charges, detailing the discount applying sequence, amount allocation, and MRR calculations.
This example demonstrates how a subscription level fixed-amount discount charge is allocated on the four 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 has a half year termed subscription triggered on 1/1/2019. The subscription has 4 charges.
- R1: A recurring monthly regular charge of $300/month, effective from 1/1/2019
- O1: A one-time regular charge of $100 flat fee.
- R2: A recurring monthly regular charge of $300/month, effective from 1/16/2019
- O2: A one-time charge of $100 flat fee.
A subscription level fixed-amount discount charge of $650/month is added to the subscription for the first quarter.
The discounting logic and the MRR calculation for this example can be illustrated by the diagram below:
The discount applying sequence:
When applying the subscription-level discount, the regular charges in the subscription are sorted to the following order per the sequence of applying a fixed-amount discount charge to multiple regular charges:
-
R1
-
R2
-
O1
-
O2
The discount amount allocation:
The discount is first applied to R1 and then to R2.
- The price of R1 in the charge period from 1/1 to 4/1 is $300/m, so after the discount is applied to R1, the discount balance as a recurring charge is $350/m (650/m-300/m) in the charge period from 1/1 to 4/1.
- The discount balance is then applied to R2. As the price of R2 in the charge period from 1/16 to 4/1 is $300/m, so at maximum, a recurring discount charge of $300/m can be applied to R2. The discount balance as a recurring charge is $350/m in the charge period from 1/1 to 1/16 and $50 (calculated by 350-300=50) in the charge period from 1/16 to 4/1.
When applying a discount to a one-time charge, the discount is applied as a total amount for the discount charge's effective time frame. In this example, O1 and O2 are effective charges in January, the discount balance as a total amount for the monthly discount charge in January is 350-300*16/31 = 195.161.
The charge-level MRR calculation:
The Gross MRR, Discount MRR, and Net MRR of each regular charge segment or charge period are calculated as in the table below. O1 and O2 are one-time charges and are not counted in the MRR calculation. Note in this example, both R1 and R2 have only one charge segment.
| Charge | Charge Period | Gross MRR | Start Date | End Date | Applied Discount | Discount Balance | Discount MRR | Net MRR |
|---|---|---|---|---|---|---|---|---|
| R1 | Charge Period 1 | 300 | 1/1 | 4/1 | -300/m | 650/m-300/m=350/m | 300 | 0 |
| Charge Period 2 | 4/1 | 7/1 | 0 | n/a | n/a | 300 | ||
| R2 | Charge Period 1 |
300 | 1/16 | 4/1 | -300/m |
350/m-300/m=50/m (350/m for 1/1-1/16) | 300 | 0 |
| Charge Period 2 | 4/1 | 7/1 | 0 | n/a | n/a | 300 |
The subscription-level MRR calculation:
By adding up the MRR 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:
| tart Date | End Date | Subscription Gross MRR | Subscription Discount MRR | Subscription Net MRR | Charge Segment or Charge Period Applicable |
|---|---|---|---|---|---|
| 1/1 | 1/16 | 300 | 300 | 0 | R1 Charge Period1 |
| 1/16 | 4/1 | 600 | 600 | 0 | R1 Charge Period1 + R2 Charge Period 1 |
| 4/1 | 7/1 | 600 | n/a | 600 | R1 Charge Period 2 + R2 Charge Period 2 |