Zuora's Product Catalog contains two discount charge models that provide you the ability to handle discounts and promotions, as well as automatically control the duration of time the discount should be applied.
For example, you can discount a customer who signs up for a one year subscription by giving them one month free. After the first month, the discount will no longer be applied. Discount charges behave just like one-time or recurring charges: they can be set to trigger on a specific date (for example, contract effective or service activation), and the discount charge can be set to apply across one or more billing periods. In addition, if your company uses proration, discount charges will be prorated accordingly with all your subscription charges.
There is a limitation of 100 years maximum between the EffectiveStartDate and TermEndDate of termed subscriptions when using DiscountMetrics.
You can use the following charge models to apply discounts to your charges:
For further control, your discounts can be applied at the rate plan level, subscription level, or account level:
Zuora also tracks the fixed amount discount balance for every recurring billing period. This allows you to take advantage of available discounts, even in past periods even when the billing operation has advanced to the current billing period.
The methods that Zuora uses to apply discounts to invoices depends on the type of discount.
If you are using a percentage discount, for every charge, Zuora applies a specified percent as a discount.
For example, suppose a customer has a charge for $100 with a 10% discount, the customer is charged for $90 ($100 minus a $10 discount). If charge is later updated and lowered by half, the customer is charged for $45 based on the following calculation:
$50 for half of the original total charge minus $5 for half of the original 10% discount
When you apply a discount to a termed subscription, the discount applies only to the current term unless the subscription is renewed prior to generating the invoice. If a discount is on a subscription with a partial term, the discount will also be prorated.
For example, you have a subscription with a recurring charge of $100 per month. It's a termed subscription that expires on 15 September, and billing is monthly. You apply a $50 discount to the subscription in September. Because you have configured Zuora to bill recurring charges on subscriptions past the end of the term in anticipation of subscription renewal, the September invoice includes a prorated discount for the 16th through the 30th in anticipation of renewal. The amount of the discount is now $25. The discount is prorated because the discount is not applied to the portion of the subscription that has not yet been renewed. The "lost" $25 of the discount will not be applied to any future charges. The recurring charge is not prorated, and is applied to the full month of September in anticipation of the renewal.
You can choose to change the default behavior of percentage discounts in Zuora. The following choices are available in the Default Subscription Settings:
Zuora's rating and billing engine (RBE) will process subscription charges in the following order: Charges > Discount > Prepayment > Tax > Invoice.
If more than one discount can be applied to a subscription charge, RBE follows the order below to decide which discount is used:
Discount-Percentage > Discount-Fixed Amount
Rate Plan Level > Subscription Level > Account Level
The smallest charge number is applied to the subscription charge.
RBE processes the rating of regular charges first, then it applies discounts and any prepayments, before calculating tax, and generating the invoice. Zuora does not discount negative amounts. By design, discounts only apply to positive charge amounts. A canceled invoice will reverse the discount applied and return the amount to the discount balance.
If a customer has multiple percentage discounts that can be applied, the discount will be compounded.
You cannot create multiple discounts in a single rate plan.
The following example demonstrates how multiple percentage discounts are applied.
Customer B has a $1000 recurring subscription charge with three discounts that can be applied. The three discounts are:
The following example describes how the discount will be applied:
|Discount Order||Level||Discount %||Base Amount||Total Discount Amount||Amount Due (SubTotal)|
|Total Discounts $496.00|
|Total Amount Due After Discounts $504.00|
As with discounts, the methods that Zuora uses to apply prorated credits also depends on the type of discount used.
If a prorated credit occurs on a charge that received a percentage discount, Zuora will apply that credit pro rata between the original charge and the discount.
For example, for a charge of $100 with a 10% discount, the customer would be charged $90 ($100 minus a $10 discount). If the customer is later given a credit for half of the charge, the customer will receive a net credit of $50 for half of the total charge. Zuora does not consider the discount when returning credit to customers; Zuora will return a prorated amount up to the amount that the customer paid. In this example, Zuora would not return more than $90 to the customer, regardless of when they were given the credit.
If a prorated credit is triggered on a charge that received a fixed discount, Zuora will apply as much of the credit as possible towards original net payable amount (the original charge amount minus the fixed discount). Once the entire original net payable amount has been fully credited, any remaining credit will get applied to a "discount pool" for future use, should there be any further charges eligible for a discount in the same billing period.
|Original Charge||Discount||Net Payable Amount||50% Proration Credit |
on Original Charge
|Amount of Credit Due Back to Customer|
|$100||$100||$0||$50||$0 (all $50 goes back to discount pool for potential reuse)|
|$100||$60||$40||$50||$40 (with $10 back to discount pool for potential reuse)|
Because the original discount was applied based on the sequence of the unique charge numbers, the amount returned is also based on that sequence. Because of this, the amount that is returned can vary based on the order of the invoice item charges.
A discount charge, while being processed by the RBE, maintains an "open period" and a discount balance. This means that any invoice generated in the open period will be able to take advantage of the discount before its balance runs out. Canceling an invoice will reverse the discount applied on the invoice and return the discount amount to the discount balance.
For example, if you have a $100 monthly discount at the account level, and for the month of January you have only applied $10 of that discount, any additional invoices created in January may be discounted until the remaining $90 of the $100 monthly discount is fully applied.
Unused discounts cannot be rolled over to the next period. Because of this, the only option that you can select under Additional Options > Rollover is
Zuora tracks the fixed amount discount balance for every recurring billing period. This allows you to take advantage of available discounts, even in past (non-open) periods even when the billing operation has advanced to the current billing period. You can use apply a discount for billing within a past period for add-on products that you later added as amendments.
You can apply a discount to charges of a specific type: One-time, recurring, or usage.
The service period to use for the discount is always selected based on the service period of the recurring charge to which you are applying the discount.
A discount will always terminate at the end of a subscription term even if the subscription is set to auto-renew. However, if you run an invoice after the auto-renew has activated, the subscription term will be set to the next period.