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.Flat-rate ramping
Formula for cost calculation
To calculate the subtotal of each ramping period:unit price * quantity * duration
Example - flat-rate ramping
Contract terms
Start date: December 14, 2023 Contract period: 12 monthsRamping schedule
Pricing structure
$39 per unit monthlyCost breakdown
Grand total
$7,800 + $11,700 + $29,250 = $48,750Tiered ramping
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
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.Contract terms
Start date: December 14, 2023 Contract period: 12 monthsRamping schedule
Pricing structure
Cost breakdown
| Ramping period | Duration | Cost |
|---|---|---|
| 1st | 4 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 |
| 2nd | 3 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 |
| 3rd | 5 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 |