Tiered_pricing_volume_pricing.jpg

This is the first in a mini-series of articles on "tiered, volume, and usage-based" pricing as part of metered price plans.

At Fusebill we've found that many companies believe they have a “complex” pricing model - not because of anything inherent in the model itself, but because they find it difficult to track manually.

We hope that these articles will provide better understanding of the different types of pricing within a metered price plan.

 


Complete_Guide_Icon.jpg

 

Complete Guide to Subscription Billing.

This guide will walk through the wide range of features required to automate your recurring billing, subscription management, and payment process.

FREE DOWNLOAD

 

 

 


 

What is tiered and volume pricing?

A good place to start is to answer the question, what is tiered pricing? This is important because most people think tiered pricing and volume pricing are the same - but actually, they are very different.

Tiered pricing defines a price PER unit within a range and volume pricing defines a price for ALL units within the range.

It’s easier to see how it works using an example. Let’s say you have just sold 60 widgets.

Volume Pricing
01-20 = $10 per widget

21-30 = $8.5 per widget
31-40 = $7 per widget
41+ = $5.5 per widget


Cost Breakdown
You have sold 60 widgets. This is in the range of 41+; all widgets will cost $5.5 each.

Tiered Pricing
01-20 = $10 per widget

21-30 = $8.5 per widget
31-40 = $7 per widget
41+ = $5.5 per widget


Cost Breakdown
First 20 widgets cost $10 each

Next 10 widgets cost $8.5 each
Next 10 widgets cost $7 each
Additional widgets cost $5.5 each

volume_vs_tired_pricing_fusebill.png

Calculation
Total cost = 60 x 5.5 = $330.00

Calculation
Total cost = (20 x 10) + (10 x 8.5) + (10 x 7) + (20x 5.5) = $465

 

DO YOU HAVE A QUESTION ABOUT TIERED AND VOLUME PRICING?

 

Tiered Pricing

With tiered pricing, once you fill up a ‘tier’ – in this case, the first 20 widgets – you move to the next tier and start charging a different price. The first 20 widgets will cost $10 each. Once you’ve sold all 20 from tier 1, the next tier costs $8.5 each, the next tier $7, and so on.

Volume Pricing

Volume pricing, on the other hand, means that as soon as you hit a particular number, all units will cost the lower price. If someone only buys 20 widgets, each widget will cost $10; but once they get over 20 widgets, the price of all the widgets in their purchase drops to $9 each; then to $8.

See the difference? If you were using volume pricing you would have made $330 for your 60 widgets, but when using tiered pricing you would make $465, and this difference is based on the cost of each widget.

Are you having recurring billing challenges? Learn how we can help you reduce errors and simplify your billing and invoicing by using real-time analytics and automated subscription and customer management.

Uberflip Case Study

"...it's the only platform that will satisfy our future needs..."

Read The Case Study
The Complete Guide to Subscription Billing

Exploring subscription billing solutions?

Get the Guide

Ready to Drive Rapid Growth with Subscription Billing?

Sign Up for Subscription Billing Trial

Start Your Free Trial
Learn More About Fusebill

.

.

.

.

.

Fusebill_complete_guide_to_subscription_billing_management.jpg
FREE DOWNLOAD

Newsletter Subscription

SNFacebook-Fusebill.png

Fusebill_subscription_management_and_recurring_payments_billing

Let Us Know What You Thought about this Post.

Put your Comment Below.