Duration Discounts

Overview

Duration discounts provide an alternative deal shaping approach to line item discounts. This method involves applying an upfront discount for a portion of the contract term.

These discounts are calculated based on the order’s total contract value (TCV) and apply to subscription-based (recurring) bricks.

Setup

1. Create an order and select a product, plan, and bricks.

2. Under the “Discounts and billing” section, click “Add/Edit discount.”

3. Use the “Discounts by month” section to add a duration discount to the order.

How duration discounts work

• Contract-level discounts: Duration discounts are applied to the TCV, rather than individual line items.
• Recurring bricks only: Duration discounts apply to recurring charges (plan and/or subscription-based bricks), but excludes non-recurring charges such as usage and bricks charged one-time upfront.
• One-time discounts: Duration discounts are one-time discounts, and do not carry over into subsequent agreements.
  • Example 1: You close a 15-month initial contract with automatic renewal terms, and a 50% discount for the first 3 months.
    This order would autorenew as another 15-month contract (having inherited the original contract length). However, the duration discount from the initial deal would not apply to the renewal.
  • Example 2: You close a 7-month initial contract with automatic renewal terms, and a 100% discount for all 7 months.
    This order would autorenew as another 7-month contract with no duration discount applied.

Formula

Discount (in dollars) = grand total of subscription bricks × (n ÷ total contract months) × (r ÷ 100)

• n = number of months the discount applies
• r = discount rate

Example calculation:

• Grand total of subscription bricks: $1,000
• Total contract months: 12 months
• Number of discounted months (n): 6 months
• Discount rate (r): 10%
• Discount amount = $1,000 × (6 ÷ 12) × (10 ÷ 100) = $50

Use case 1

In this example, we apply duration discounts to a contract with a quarterly billing schedule.

Order details:

TCV	$1200
Duration discount	50% off the first 5 months
Total duration discount (Per month × rate × duration)	$250
Expected revenue (TCV - discounts)	$950

Invoices:

	Grand total	Total months discounted	Total period discount	Expected bill
Q1	$300	3	$150	$150
Q2	$300	2	$100	$200
Q3	$300	0	0	$300
Q4	$300	0	0	$300
			Total expected bill	$950
			Total discounted months	5

Alternatively, you may also apply a combination of discount durations and line item discounts to an order, such as in this example:

Order details:

TCV	$1200
Discount per line item	10% sales rate = $120
Adjusted TCV	$1080
Discount by duration	50% off the adjusted TCV for the first 5 months = $225
Expected revenue	$855

Invoices:

	Grand total (after line item discounts)	Total months discounted	Total period discount	Expected bill
Q1	$270	3	$135	$135
Q2	$270	2	$90	$180
Q3	$270	0	0	$270
Q4	$270	0	0	$270
			Total expected bill	$855
			Total discounted months	5

Use case 2

If you upsell a deal with duration discounts before the end of the discounted period, the duration discounts would not apply to the co-termed upgrade, but will continue to apply to the base deal.

Initial order details:

Start date	Jan 1 2024 - Jan 1 2025
TCV	$1200
Discount by duration	50% off the first 5 months = $250 or $50 per month
Expected revenue	$950

Upgrade order details:

Start date	Feb 1 2024 - Jan 1 2025
TCV	$1100

Invoices:

	Jan - March	Apr - June	Jul - Sep	Oct - Dec
Initial order	$150	$200	$300	$300
Upgrade order	$200 (prorated for Feb & March)	$300	$300	$300
Combined expected bill	$350	$500	$600	$600