Overview

Use tiered pricing when the price per unit changes based on quantity thresholds. Tiered pricing supports two calculation methods: volume pricing (single rate for all units) and graduated pricing (different rates for each tier portion).

Common use cases include:

• SaaS seat pricing with quantity discounts
• API calls with tiered consumption rates
• Bulk purchase discounts
• Utility billing (electricity, water, cloud storage)

Volume pricing

With volume pricing, a single per-unit price applies to all units based on the total quantity purchased. The more units a customer buys, the lower the price per unit can be.

How volume pricing works

• Define quantity tiers with per-unit prices
• Determine which tier the total quantity falls into
• Apply that tier’s price to all units

Example: SaaS seats

Product: Team Plan
Quantity tiers:
1–10 seats: $10/seat
11–50 seats: $9/seat
51+ seats: $8/seat
Customer purchases 12 seats
→ Falls into 11–50 tier
→ Price per seat = $9
→ Total = 12 × $9 = $108

Graduated pricing

With graduated pricing, each portion of a customer’s quantity is billed at a different rate based on the tier it falls into. This provides more granular pricing that rewards higher-volume usage.

How graduated pricing works

• Define quantity tiers with per-unit prices
• Each tier applies only to the portion of quantity within that tier
• Total charge = sum of charges for each tier portion

Example: API calls

Product: API Access
Quantity tiers:
1–1,000 calls: $0.01 per call
1,001–5,000 calls: $0.008 per call
5,001+ calls: $0.005 per call
Customer makes 3,000 calls:
- First 1,000 calls × $0.01 = $10
- Next 2,000 calls × $0.008 = $16
- Total = $26

Volume vs. graduated pricing

Volume pricing example

100 units with tiers: 1-50 @ $10, 51-100 @ $8
Volume: All 100 units @ $8 = $800

Graduated pricing example

100 units with tiers: 1-50 @ $10, 51-100 @ $8
Graduated:
- First 50 units @ $10 = $500
- Next 50 units @ $8 = $400
- Total = $900