FAQ: Do price increases affect customers with a discount-based private offer?

Q: I have a question about doing a price increase and how that affects customers with a discount (%) based private offer. If I have customers with say a 10% discount, and we increase the price, once that new price goes into effect, will the discount reflect the new price or the old price?

 

A: %-based discounts will happen on the new (updated) price once it is effective.

 

Follow-up Q: Consider a scenario where the updated price becomes effective in the middle of a customer's active SaaS subscription term that started prior to the price update? In other words, customer has an active 2-year SaaS subscription billed monthly. If price update is effective in month 7 of the subscription, will the customer see the % discount applied to the updated price beginning in month 7? 

 

To maintain price consistency, is the best practice to use absolute pricing instead of % discount? 

 

A: No, it will not apply in your scenario. Let me take an example to explain this:

• SaaS offer – 2 year billing term/monthly payment - $2400 public price
• ISV creates a private offer with 10% discount (effective price $2160) and customer purchases in May’24 with monthly payment option.

In this example, the 10% discount was applied at the time of purchase and the customer is locked for 2-year contract duration for payment of $90 per month. If ISV changes the public price to $3000 in June’24, the existing purchases are not impacted. At the end of the 2-year term if the contract renews again and 10% discount is still effective, then the new renewal price will be $3000*0.9 = $2700 for the next 2-year term.

 

Using %-based discount vs. absolute price is really an ISV choice. Absolute price is generally recommended when ISVs are trying to match an exact price in the contract. %-based discounts are generally used for consumption based products like VM PAYG or for SaaS products where ISVs have accurately listed/priced public SKUs and just wants to model negotiated deals as %-based discount on top of the public price.