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Overview

Ramping is a pricing strategy which is used to gradually increase the cost of a subscription as the quantity of enabled units grows over the course of a contract. Let’s illustrate how ramping schedules work by pricing a single contract against two different pricing structures: flat-rate pricing and tiered pricing.

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Flat-rate ramping

Read more about flat-rate pricing here.

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Formula for cost calculation

To calculate the subtotal of each ramping period: unit price * quantity * duration

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Example - flat-rate ramping

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Contract terms

Start date: December 14, 2023 Contract period: 12 months

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Ramping schedule

Ramping periodStart dateQuantity
1stDecember 202350 units
2ndApril 2024100 units
3rdJuly 2024150 units

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Pricing structure

$39 per unit monthly

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Cost breakdown

Ramping periodDurationCost
1st4 months (December 14, 2023 - April 13, 2024)$39 * 50 units * 4 months = $7,800
2nd3 months (April 14, 2024 - July 13, 2024)$39 * 100 units * 3 months = $11,700
3rd5 months (July 14, 2024 - December 13, 2024)$39 * 150 units * 5 months = $29,250

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Grand total

$7,800 + $11,700 + $29,250 = $48,750

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Tiered ramping

Read more about tiered pricing here.

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Formula for cost calculation

To calculate the subtotal of each ramping period:
  • calculate the cost of each tier: unit price * qty
  • sum the cost of all tiers and multiply by the duration of the ramping period: sum of all tiers' costs * duration

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Example - tiered ramping

For this example, we’ll use the same contract terms and ramping schedule as the flat-rate example, except now using a tiered pricing structure.

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Contract terms

Start date: December 14, 2023 Contract period: 12 months

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Ramping schedule

Ramping periodStart dateQuantity
1stDecember 202350 units
2ndApril 2024100 units
3rdJuly 2024150 units

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Pricing structure

Quantity rangeMonthly unit price
1-39$39
40-79$35
80-129$29
130+$25

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Cost breakdown

Ramping periodDurationCost
1st4 months(December 14, 2023 - April 13, 2024)Units 1-39: $39 * 39 units = $1,521Units 40-50: $35 * 11 units = $385Subtotal: ($1,521 + $385) * 4 months = $7,624
2nd3 months(April 14, 2024 - July 13, 2024)Units 1-39: $39 * 39 units = $1,521Units 40-79: $35 * 40 units = $1,400Units 80-100: $29 * 21 units = $609Subtotal: ($1,521 + $1,400 + $609) * 3 months = $10,590
3rd5 months(July 14, 2024 - December 13, 2024)Units 1-39: $39 * 39 units = $1,521Units 40-79: $35 * 40 units = $1,400Units 80-129: $29 * 40 units = $1,160Units 130-150: $25 * 21 units = $525Subtotal: ($1,521 + $1,400 + $1,160 + $525) * 5 months = $23,030

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Grand total

$7,624 + $10,590 + $23,030 = $41,244