Discount charge models
Zuora's product catalog provides discount charge models to help you manage discounts and promotions. A typical scenario is your customer subscribes to your product for one year, and you give them one month for free. After the first month, the discount expires, and regular charges apply.
When you apply a discount charge model to your product rate plan charge, you create a discount charge. A discount charge behaves in the same way as a onetime charge or recurring charge. It can be set to be triggered on a specific date, such as the contract effective date or service activation date; It can be set to apply to one or more billing periods. You can create multiple discount charges in a single product rate plan.
There are two discount charge models that you can use to handle discounts and promotions and automatically control the duration of time the discount should be applied. They are Discount  Fixed Amount charge model and Discount  Percentage charge model.
Fixed amount model and percentage model
The following table explains more about Discount  Fixed Amount charge model and Discount  Percentage charge model, which you can use on your product rate plan charges. For stepbystep instructions, see How do I handle discounts in Zuora.
Model  Description  Example  Note 

Discount  Fixed Amount  Allows you to give your customer a fixed amount of discount. Fixed amount discount behaves like a coupon.  You have a promotion that gives your customers a $100 discount if they sign up in January. To do that, you can set up a fixed amount discount charge of $100 only effective in January. 

Discount  Percentage  Allows you to give your customer a percentage of the charge amount as a discount.  You set up a 10% discount for a customer on a charge of 100$. The customer is then charged $90 (100 100*10%).  Percentage discount does not prorate. 
Specify the discount scope
The following table explains the scope of a discount charge in terms of the discount level, type of applied charges, and application details. For stepbystep instructions, see Specify the scope for discount charges to be applied.
Description  Example  

Discount level  Rate plan level discount  Apply a discount charge to a specific rate plan. At the rate plan level, the discount charge is bundled with other charges within that rate plan, and the discount is applied to the charges in the rate plan only.  Offer a 100$ discount to all regular charges in the same product rate plan as the discount charge. 
Subscription level discount  Apply a discount charge to a specific subscription and all charges contained in that subscription for a period of time.  Offer a promotion where the first 5 months are discounted for a 12month subscription.  
Account level discount 
Apply a discount charge to all the regular charges contained in the account (across all subscriptions).

Provide a VIP customer with a 15% discount off all purchases.  
Type of applied charges  Select the type of charges that should be discounted at any discount level.  Offer discounts to onetime setup fees only: select the OneTime check box and clear the Recurring and Usage check boxes.  
Application details  Specify specific product rate plans and product rate plan charges that a discount charge is applied to. The application details about discount charges are distinct at different discount levels. Even "All charges in the subscription" is selected, the discount will only be applied to the specific product rate plan charges, rather than all charges in the subscription.  Offer discounts to one specific or multiple regular charges in one product rate plan. 
Process discounts
If multiple discounts can be applied to a subscription charge, Zuora's rating and billing engine (RBE) uses the following sequence to decide on which discount to use:
 Order by discount classes: The discount charge with a higher discount class is applied first. The discount charge without any discount class is applied in the end.
 If the discount charges have no discount class or have the same discount class, order by discount charge model types: DiscountPercentage > DiscountFixed Amount
 If the discount charges have the same model type, order by the discount level: Rate Plan Level > Subscription Level > Account Level
 If the discount charges have the same model type and discount level, order by discount charge number: The smallest charge number is applied to the subscription charge.
Generally speaking, RBE processes subscription charges in the following order: Charges > Discount > Prepayment > Tax > Invoice.
RBE processes the rating of regular charges first, then it applies discounts and any prepayments, before calculating tax, and generating the invoice. By design, discount charges can only be applied to positive charge amounts. If a customer has multiple percentage discounts that can be applied, the discount will be compounded.
Multiple percentage discounts example
The following example shows how multiple percentage discounts are applied. Customer A has a $1000 recurring subscription charge with three discounts that can be applied. The three discounts are:
 A rate plan discount of 10% off
 A subscriptionlevel discount of 20% off
 An accountlevel discount of 30% off
The table below describes how the discounts will be applied:
Discount Order  Level  Discount %  Base Amount  Total Discount Amount  Amount Due (Sub Total) 

1  Rate Plan  10%  $1000  $100  $900 
2  Subscription  20%  $900  $180  $720 
3  Account  30%  $720  $216  $504 
Total Discounts: $496  
Total Amount Due After Discounts: $504 
Stacked discounts
When you create a discount charge based on the Discount  Percentage charge model, you can specify whether the discount charge is stackable. Stacked discounts provide you with the flexibility of combining multiple discounts together and applying them all at once to calculate the discount for a regular product rate plan charge instead of applying the discounts sequentially. In other words, each discount is applied directly to the original charge amount.
The following table explains different methods of how Zuora Billing calculates discounts based on whether a discount charge is marked as stacked. For example, there are three discount charges applied to a regular charge of $100. The discount percentage of the discount charges is 5%, 10%, and 15%, respectively.
 Stacked: When the three discount charges are marked as stacked, they are summed up together to derive the total discount percentage, which is then used to calculate the total discount.
 Nonstacked: When the three discount charges are not stacked discounts, they are applied to the regular charge one after another to calculate the discount respectively. The next discount charge is applied to a charge amount, which is calculated after the previous discount charge is applied instead of the original regular charge amount.
Calculation type  Calculation logic  Discount  Total 

Stacked 
$100 * (5%+10%+15%)  $30  $(10030)=$70 
Nonstacked (sequentially ) 

$5+$9.5+$12.83=$27.33  $(10027.33)=$72.67 
Fixed amount model and stacked discounts
There is another example to show you how stacked and nonstacked discount percentages are applied to a fixed amount rate plan charge.
As shown in the following graphic, a recurring charge based on the Fixed Amount charge model is added to a product rate plan. Then, a stacked discount of 30% is applied to this charge, followed by a stacked discount of 20%.
In contrast, another rate plan is created as follows. The only difference is that the discount of 30% and the discount of 20% are applied to the recurring fixed amount charge as nonstacked discounts.
Two subscriptions are created to subscribe to the above two rate plan charges respectively. When the bill run is created for the two subscriptions, the invoice amount for one month is listed as follows.
Rate plan name  Amount  Discount  Total 

Stacked Discount Rate Plan  100.00  50.00 = 100.00*(30%+20%)  50.00 
NonStacked Discount Rate Plan  100.00  44.00 = 100.00*30% + 70.00*20%  56.00 
How discounts work with prorated credits
As with discounts, how Zuora applies prorated credits depends on the discount charge model.
Percentage discount model
Consider the following scenario:
 Oneyear subscription with a $1,000 regular charge and a 50% discount.
 Service period is from 2021/04/01 to 2022/03/31.
On the invoice generated on 2021/03/09 for the service period of from 2021/04/01 to 2022/03/31:
 Regular charge is $1,000
 Discount charge is $500 = $1000 * 50%
Later the rate plan is removed effective 2021/05/01. On the invoice generated on 2021/04/09, a line item called “Proration Credit” for the service period of 2021/05/01 – 2022/03/31 appears with the following breakdown:
 Proration credit for the regular charge:  $916.67 = rounding ($1000/12 * 11)
 Proration credit for the discount charge: $458.33 = $500  ($1000  $916.67) * 50%
Fixed amount discount model (Coupon)
If a prorated credit is triggered on a charge with a fixedamount discount, by default Zuora applies as much of the credit as possible towards the original net amount (the original charge amount minus the fixed discount). Alternatively, Zuora also supports prorating the discount through the "Credit for Prorated Discounts (Fixedamount Discount Charge Only)” billing rule.
See Credit for prorated discounts for more information.
Discount balance
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 can use the discount before its balance runs out. Canceling an invoice will reverse the discount applied to 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 January, you have only applied $10 of that discount, any additional invoices created in January will be discounted until the remaining $90 of the $100 monthly discount is fully applied.
Apply discount to past billing periods
Zuora tracks the fixed amount discount balance for every recurring billing period. This allows you to take advantage of available discounts, even in past (nonopen) periods. You can apply a discount for billing in a past period for addon products that you later added as amendments.
You can apply a discount to charges of a specific type: Onetime, 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 apply the discount.
A discount will always terminate at the end of a subscription term, even if the subscription is set to autorenew. However, if you run an invoice after the autorenew has been activated, the subscription term will be set to the next period.