1 min lesson
Pricing constructs you must be able to model
Put this idea into your own words: "Know what each one means for the rater and the revenue treatment."
Step 1 of 3
Pricing constructs you must be able to modelthe vocabulary of consumption deals
Enterprise consumption contracts stack several of these at once. Know what each one means for the rater and the revenue treatment.
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Construct
- Construct
- Per-unit
- How it bills
- Flat rate per unit consumed
- The subtlety
- Simplest to rate; rare alone at enterprise scale.
- Construct
- Tiered / volume
- How it bills
- Rate changes as volume crosses thresholds
- The subtlety
- Tiered prices each band separately; volume re-prices everything at the top band. Know which.
- Construct
- Prepaid credits / commitment
- How it bills
- Customer pre-buys a balance, draws it down
- The subtlety
- Cash up front, revenue on consumption. Unused balance is deferred revenue.
- Construct
- Overage
- How it bills
- Usage past the included amount bills extra
- The subtlety
- Requires the entitlement to define the included cap precisely.
- Construct
- True-up
- How it bills
- Periodic reconciliation to actual usage
- The subtlety
- Often lands after a period; collides with close.
- Construct
- Minimum / floor
- How it bills
- Customer pays at least a set amount
- The subtlety
- Bills the greater of usage and the floor; easy to mis-rate.
| Construct | How it bills | The subtlety |
|---|---|---|
| Per-unit | Flat rate per unit consumed | Simplest to rate; rare alone at enterprise scale. |
| Tiered / volume | Rate changes as volume crosses thresholds | Tiered prices each band separately; volume re-prices everything at the top band. Know which. |
| Prepaid credits / commitment | Customer pre-buys a balance, draws it down | Cash up front, revenue on consumption. Unused balance is deferred revenue. |
| Overage | Usage past the included amount bills extra | Requires the entitlement to define the included cap precisely. |
| True-up | Periodic reconciliation to actual usage | Often lands after a period; collides with close. |
| Minimum / floor | Customer pays at least a set amount | Bills the greater of usage and the floor; easy to mis-rate. |