How do duration discounts apply to usage bricks?

Last updated: September 14, 2026

Overview

Duration discounts ("discounts by month") are a great way to sweeten the front end of a deal, like 10% off the first 3 months of a 12-month contract.

A common question is whether that discount also reaches usage charges. The short answer: it applies to recurring charges, including pre-committed usage, but not to pay-as-you-go usage billed in arrears.

The rule

A duration discount is calculated against the order's recurring contract value and spread across the months it covers.

That means:

Brick type

Duration discount applies?

Plan and subscription bricks (seats, platform fees, etc.)

Yes

Pre-committed usage (a committed quantity billed each period)

Yes, on the committed amount

Overages beyond the pre-commitment

No

Pay-as-you-go usage (billed on actual consumption, in arrears)

No

One-time charges billed upfront

No

Pay-as-you-go usage isn't part of the contract value when the order is signed, because nobody knows yet how much the customer will use. It's calculated after the fact from actual consumption and added to the next invoice, so it isn't included in the duration discount math, regardless of which invoice the usage lands on or whether the usage happened during the discounted months.

Example of pay-as-you-go billing

A 12-month contract, billed monthly, with:

  • Brick A: $100/month subscription brick

  • Brick B: $1/unit pay-as-you-go usage, 100 units included per month

  • Discounts: 10% line item discount on Brick A, plus a 10% duration discount for the first 3 months

Brick A goes from $100 to $90 after the line item discount, then to $81/month for the first 3 months once the duration discount is applied. From month 4 onward it's $90/month.

Brick B is billed in arrears based on what the customer actually used. If they use 200 units in month 2, the 100 included units come off first and the remaining 100 units bill at the full $1 rate: $100, with no discount.

Invoice

Brick A

Brick B (PAYG usage from prior month)

Total

Month 1

$81

—

$81

Month 2

$81

$100

(200 units used: 100 included, 100 charged)

$181

Month 3

$81

$100

(200 units used again)

$181

Month 4

$90

(duration discount drops, line item discount persists)

$100

(200 units used again)

$190

If Brick B had instead been sold as a pre-commitment instead (say, 500 units/month at $1/unit), the $500 committed charge would be a recurring line item, and the duration discount would apply to it during the discounted months. Any usage above the 500 units would still bill at the undiscounted overage rate.

Want to discount pay-as-you-go usage after all?

Duration discounts won't get you there, but there are a couple of ways to build the same outcome into an order.

Option 1: Order phases

If multi-phase orders are enabled for your account, split the contract into two phases with the same plan and bricks:

  1. Phase 1 (the discounted period, e.g. 3 months): add a line item discount on the usage brick. Line item discounts apply to the brick's charges for that phase, including pay-as-you-go usage.

  2. Phase 2 (the remainder, e.g. 9 months): same plan and bricks, no discount on the usage brick.

Because discounts belong to the phase they're added to, the usage rate is reduced only while Phase 1 is active and returns to full price when Phase 2 begins. The customer signs once, and the order form shows both phases with their own totals.

Option 2: Ramping with a discount or rate override

Ramping also lets you change a usage brick's terms at a set date within a single phase. When you add a ramp to a usage brick, each ramping period can carry its own discount rate or its own overage (pay-as-you-go) rate:

  • Discount rate: set a discount (e.g. 10%) on the first ramping period and 0% on the next. Discounts on earlier ramp periods are temporary, and the last period's rate carries through the rest of the contract.

  • Rate override: alternatively, set a lower per-unit rate for the first ramping period and the standard rate for the next.

Ramping keeps everything in one phase and one billing cadence, so it's a good fit when nothing else about the deal changes at the boundary.

Option 3: Restructure as a pre-commitment

If the customer is willing to commit to a baseline amount of usage, selling the brick as a monthly pre-commitment makes that committed amount a recurring charge, which duration discounts do cover. This is often the cleanest option when the goal is a discount on the whole deal rather than on the per-unit rate.

Quick reference

  • Duration discounts reduce recurring charges (subscription bricks and pre-committed usage) for a set number of months.

  • Pay-as-you-go usage and overages always bill at full rate under a duration discount.

  • To discount pay-as-you-go usage for part of a term, use phases with a per-phase line item discount, or a ramping structure with a discount or rate override on the usage brick.

  • Duration discounts are one-time and don't carry into renewals. See Duration Discounts for the full formula and more examples.