How to calculate with tier mode Graduated?

Introduction

This article explains how the Graduated tier mode applies progressive pricing for bulk purchases. Unlike other tier modes, Graduated pricing applies discounts only to items within each specific tier, creating a progressive pricing structure where different Quantity ranges are priced at different rates.

In this article:

• Understanding the Graduated tier mode
• Setting up Graduated pricing tiers
• How Graduated pricing is calculated

Understanding the Graduated tier mode

The Graduated tier mode is a pricing strategy that allows discounts for bulk purchases, but applies those discounts only to the added items in each tier. This means that as Customers purchase more units and move into higher tiers, only the units within each specific tier are priced at that tier's rate.

Key characteristics

• Sells each item at the Price of its corresponding tier row
• Discounts apply only to items within the next tier
• Previous tier pricing is maintained for units already purchased
• Creates a progressive pricing structure

Setting up Graduated pricing tiers

To configure Graduated pricing:

1. Navigate to the Price section in Product Management.
2. Set the Billing Period (for example, Monthly).
3. In the Formula section, select "Quantity Price Table."
4. Configure the Quantity Control (for example, "Cpu").
5. Set Tier Mode to "Graduated."
6. Define your pricing tiers in the table:

Tier 1: Creating a pricing plan for Quantities up to 5

• Min (inclusive): Set the starting Quantity (for example, 0)
• Max (inclusive): Set the ending Quantity (for example, 5)
• Cost Price: Enter the wholesale Price per unit (for example, 100)
• Suggested Retail Price: Enter the retail Price per unit (for example, 110)

Tier 2: Creating a pricing plan for Quantities from 6 to 10

• Min (inclusive): 6
• Max (inclusive): 10
• Cost Price: Enter the discounted wholesale Price (for example, 50)
• Suggested Retail Price: Enter the discounted retail Price (for example, 55)

7. To add additional tiers, select "Add new row" and configure the next tier.
8. Select "Preview" to switch to preview mode and validate your pricing.

Included Quantity: If you want to provide free units, set the first tier with 0 for both Cost Price and Suggested Retail Price. These units will be included at no charge.

How Graduated pricing is calculated

The Graduated tier mode calculates pricing progressively, applying each tier's rate only to the units within that tier:

Tier 1 example (Quantity = 6)

When a Customer selects 6 units:

• Units 1-5 are priced at Tier 1 rates (100 EUR Cost Price, 110 EUR Suggested Retail Price per unit)
• Unit 6 is priced at Tier 2 rates (50 EUR Cost Price, 55 EUR Suggested Retail Price per unit)

Calculation:

• Cost Price (Monthly): (5 × 100) + (1 × 50) = 550 EUR
• Suggested Retail Price (Monthly): (5 × 110) + (1 × 55) = 605 EUR
• Total (Monthly): 550 EUR Cost Price, 605 EUR Suggested Retail Price

Tier 2 example (Quantity = 10)

When a Customer selects 10 units:

• Units 1-5 are priced at Tier 1 rates (100 EUR Cost Price, 110 EUR Suggested Retail Price per unit)
• Units 6-10 are priced at Tier 2 rates (50 EUR Cost Price, 55 EUR Suggested Retail Price per unit)

Calculation:

• Cost Price (Monthly): (5 × 100) + (5 × 50) = 750 EUR
• Suggested Retail Price (Monthly): (5 × 110) + (5 × 55) = 825 EUR
• Total (Monthly): 750 EUR Cost Price, 825 EUR Suggested Retail Price

This progressive structure rewards Customers for larger purchases while maintaining profitability on all units sold. Each additional unit in a higher tier receives the discounted rate, but earlier units retain their original pricing.

Summary

The Graduated tier mode applies progressive pricing where discounts for bulk purchases apply only to items within each specific tier. Product Managers configure multiple pricing tiers with different Cost Price and Suggested Retail Price values for each Quantity range. When Customers select a Quantity, units are priced according to their corresponding tier—units in lower tiers maintain their original pricing while units in higher tiers receive discounted rates. This creates a fair pricing structure that rewards larger purchases without reducing revenue on previously purchased units. The Graduated tier mode is ideal for License-Based Subscriptions and other Offers where Vendors want to encourage volume growth while maintaining profitability across all Quantity levels.