> ## Documentation Index
> Fetch the complete documentation index at: https://docs2.zenskar.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Tiered pricing

## Concepts

**Tiered pricing** rewards high-volume customers by lowering the unit cost for specific portions of their usage. This model ensures that as a customer’s consumption grows, they automatically access "bulk discounts" for the additional volume they send through the system.

### The logic of dimensions

Tiered pricing is a **1-Dimensional** model. It depends on a single factor: **Quantity** (Dimension 1).

Unlike a simple per-unit price, tiered pricing uses **price brackets**. You can think of this like a **staircase**: each step represents a "bucket" of usage with its own unique rate. As usage increases, it fills up the first bucket at the initial rate before "spilling over" into the next bucket at a lower rate.

### SaaS example: Cloud log storage

A monitoring platform charges based on the volume of logs ingested. In this graduated model, the bill is calculated by adding up the costs across each tier the customer reaches.

| Usage (Dimension 1) | Unit price  |
| ------------------- | ----------- |
| **0 – 500 GB**      | \$2.00 / GB |
| **501 – 2,000 GB**  | \$1.50 / GB |
| **2,001+ GB**       | \$1.00 / GB |

**Scenario:** 1,500 GB of Total Usage

| Tier range         | Usage in tier | Unit price  | Tier total  |
| ------------------ | ------------- | ----------- | ----------- |
| **0 – 500 GB**     | 500 GB        | \$2.00 / GB | \$1,000     |
| **501 – 2,000 GB** | 1,000 GB      | \$1.50 / GB | \$1,500     |
| **2,001+ GB**      | 0 GB          | \$1.00 / GB | \$0         |
| **Total Bill**     | **1,500 GB**  | —           | **\$2,500** |

***

## Get started: Configure your tiered product

*This tutorial walks you through building a global tiered template in your Product Library.*

1. **Navigate to the Library:** Go to **Contracts** > **Products**. This is your central hub for defining reusable pricing blueprints.
2. **Create a Standalone Product:** Click **+ CREATE NEW**and choose Standalone Product from the dropdown. The Create Standalone Product page will appear. Fill in the required details and click **Save & Proceed** at the bottom right.
3. **Open Price Details:** You will be redirected to the Price Details page. Click **+ Add Price** to configure pricing for the product.
4. **Select Tiered Pricing Model:** In the Pricing Model dropdown, select **Tiered Pricing**.
5. **Configure Tiers and Save:** Click **+ Add Tier** to create pricing brackets. Define the **from** and **to** ranges and enter the **unit price** for each tier. Continue adding tiers as needed. Once complete, click **Save**, then click **Done** on the Price Details page to finalize the setup.

***

## How-to: Add tiered product to a contract

### 1. Via Contracts

1. Open the target contract in **Contracts** > **Contracts**.
2. In the Summary tab, click **+ ADD PRODUCT V3**.
3. Search for and select your configured tiered product.
4. **Review Brackets:** Briefly confirm the price brackets match the customer's specific agreement.
5. Click **ADD PRODUCT**. You will be redirected to the Summary page. Click **Publish**.

### 2. Via Customer

1. Open the target customer in **Customers**.
2. Go to Contracts and click **+ CREATE CONTRACT**.
3. In the Summary tab, click **+ ADD PRODUCT V3**.
4. Search for and select your configured tiered product.
5. Click **ADD PRODUCT**. You will be redirected to the Summary page. Click **Publish**.

***

## Reference

### Technical specifications

<Table align={["left","left"]}>
  <thead>
    <tr>
      <th>
        Attribute
      </th>

      <th>
        Specification
      </th>
    </tr>
  </thead>

  <tbody>
    <tr>
      <td>
        **Dimensionality**
      </td>

      <td>
        **1-Dimensional (Univariate)**
      </td>
    </tr>

    <tr>
      <td>
        **Math formula**
      </td>

      <td>
        *P = (r₁ × q₁) + (r₂ × q₂) + ... + (rₙ × qₙ)* where:

        * *r* is the rate of the tier
        * *q* is the quantity consumed within that tier range
      </td>
    </tr>

    <tr>
      <td>
        **Logic type**
      </td>

      <td>
        **Graduated piecewise function**: The final price is the sum of costs across all applicable brackets.
      </td>
    </tr>

    <tr>
      <td>
        **Boundary behavior**
      </td>

      <td>
        **Lower-inclusive**: A value exactly at a threshold belongs to the tier starting at that value. Example: 500 GB is in Tier 1 (0–500), while 501 GB begins Tier 2 (501–2,000).
      </td>
    </tr>

    <tr>
      <td>
        **Calculation engine**
      </td>

      <td>
        **Bucket-based scaling**: The engine fills each tier "bucket" to capacity before moving the remainder of usage $x$ to the next tier.
      </td>
    </tr>

    <tr>
      <td>
        **Data object**
      </td>

      <td>
        `pricing_model_type: tiered_pricing`
      </td>
    </tr>
  </tbody>
</Table>

### Tiered vs. volume pricing

Both models use usage brackets, but they calculate costs differently:

| Aspect                 | Tiered (Graduated)                                   | Volume                                                  |
| ---------------------- | ---------------------------------------------------- | ------------------------------------------------------- |
| **Calculation method** | Each tier range billed at its respective rate        | All units billed at the single rate of the tier reached |
| **Formula**            | *P = (r₁ × q₁) + (r₂ × q₂) + ... + (rₙ × qₙ)*        | *P = rₙ × q*                                            |
| **Cost progression**   | Always increases with usage                          | Can decrease if discount overcomes volume increase      |
| **Use case**           | Reward incremental volume with progressive discounts | Apply bulk pricing to entire purchase                   |

**Example: 1,500 GB with same tier structure**

| Tier         | Rate      | Tiered calculation        | Volume calculation        |
| ------------ | --------- | ------------------------- | ------------------------- |
| 0–500 GB     | \$2.00/GB | 500 GB × $2.00 = $1,000   | —                         |
| 501–2,000 GB | \$1.50/GB | 1,000 GB × $1.50 = $1,500 | 1,500 GB × $1.50 = $2,250 |
| 2,001+ GB    | \$1.00/GB | 0 GB × $1.00 = $0         | —                         |
| **Total**    |           | **\$2,500**               | **\$2,250**               |

### Hierarchical relationship between entities

In Zenskar, the tiered pricing model is governed by a hierarchical relationship between entities:

* **Contract:** The legal agreement between you and your customer.
* **Phase:** A specific time-bound period (e.g., Q1, Implementation Phase) within that contract.
* **Product:** The actual service or software module being sold.
* **Pricing model:** The specific logic (tiered pricing) that defines how that product is billed.

```mermaid theme={null}
flowchart LR
    CONTRACT[Contract] ---|"has one or more"| PHASE[Phase]
    PHASE ---|"has one or more"| PRODUCT[Product]
    PRODUCT ---|"has exactly one active"| PRICINGMODEL[Pricing model]

style PRICINGMODEL fill:#90ee90
```

<br />