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How do I handle discounts in Zuora?

Overview

Discounts are a great way to attract new customers with the possibility of converting them to long-term subscribers. For instance, a customer signs up for one-year subscription, and you give them a discount by making the first month free.  After that, you charge them at the regular rate. With Zuora's application, this goal can be achieved by using our product catalog's discount charge models.

Discount charge models are special for the following reasons:

  • The discount can end after a preset time (in number of billing periods).
  • What charges the discount applies to can be configured.
  • Flat amount discount uses an up-to-amount calculation, providing a great way to limit the discount, while at the same time preventing unwanted credits.
  • The discount can have a separate accounting code and displays on the invoice as a separate line item.

This solution below will walk you through using the discount charge model using use cases. 

Solution

Zuora's product catalog provides two discount charge models - Discount-Fixed Amount and Discount-Percentage - which can be used to offer your customers a variety of discount options:

  1. Up to $100 off the first month of service.
  2. 50% off on all services for the first month of service.
  3. Offer $100 off on upgrade from monthly to annual rate plan.

Using Discount-Fixed Amount

A customer signs up for a monthly subscription and gets a $100 discount for their first billing period. Here are the steps:

1. Create a Discount Charge
  • Create another rate plan charge under the same product rate plan as the regular charge 
  • Set the new rate plan charge's Charge Model to Discount-Fixed Amount
  • Enter the discount amount (100) in the Discount Amount field
  • Set End Date to Fixed Period after the Charge is triggered, 1Months
  • Select All charges in the rate plan from the Apply Discount To list

As a result, your product should have one rate plan with two charges as shown below.

product1.png

2. Add the Rate Plan with Discount Charge to a Subscription

When you add the product to your subscription, it should have one rate plan with two rate plan charges as shown below.

subscription1.png


With this set up, the invoice for the first billing period will include a $100 discount to this rate plan, and this rate plan only.

Please note if your tenant has proration enabled, discount charges will be prorated accordingly with all your subscription charges.  For example, if the first invoice bills for a prorated period of 15 days so the monthly charge is prorated at $250, the discount amount is prorated at $50 as well.  The remaining $50 discount amount will be included in the next invoice.

Using Discount-Percentage

A customer purchases two different products, and you want to give them 50% off for both of these products for their first billing period.

Here are the Steps:

1. Create a Discount Charge
  • Create a new product
  • Add a rate plan
  • Add a recurring charge
  • Set the Charge Model field to Discount-Percentage
  • Enter the percentage (50) in the Discount Percentage field
  • Set End Date to Fixed Period after the Charge is triggered1Months
  • Select All charges in the subscription from the Apply Discount To list

As a result, your product should have one rate plan with one discount charge as shown below.

discount-percentage-product.png

2. Add the Rate Plan with Discount Charge to a Subscription

When you add two rate plans to your subscription, it should have three different rate plans as shown below.

subscription2.png

With this set up, the invoice for the first billing period will add a 50% discount to each charge in this subscription.

Add a Discount When Customers Upgrade Their Subscription

Discounts can also be used as a promotion for upselling your products.

You want to offer your customers who are on a monthly subscription a $100 discount if they upgrade to an annual subscription. Here are the steps:

You can add the discount as an additional product rate plan charge to the annual product which is used to replace the monthly product in your customer's subscription.

  • Add the $100 discount as another product rate plan charge to the annual product, please follow the instructions for creating a discount charge in use case A above.
  • Create an amendment (type = Remove a Product) to remove the monthly product from the customer's subscription
  • Create another amendment (type = New Product) to add the annual product with the discount charge to the customer's subscription.

With this set up, when the customer's subscription converts from a monthly to annual one, the customer will receive $100 discount.

Additional Considerations When Using the Discount Charge Models

See Discount Charge Models for information on:

  • Discount balances, rollovers, and applying discounts to past periods.
  • How Zuora's rating and billing engine processes subscription charges, including multiple discount charges. 

Handling Discounts When There are Negative Charges

If your subscription has negative charges and discounts which are supposed to apply to these charges, Zuora will not discount negative amounts. By design, discounts will apply to positive charge amounts only. Sometimes, negative charges are used to provide customers credit, and discounts have been designed to not give customers even more credit.

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