Commitments

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Commitments enable service providers to retain customers for long periods (usually from one to several years). A typical commitment might offer that a customer “sign up for a two-year commitment and save $5 per month on Internet service.” Customers who take advantage of these discounts also receive special offers and the option to pause service, and thereby, the charges.

Commitments offer services with discounts for set periods of time. If customers cancel a commitment before a discount’s end date, they pay a penalty. When a discount ends, customers pay a full recurring fee to continue to use the services although they can cancel the services at any time without a penalty. Plus they can still benefit from special offers and even pause their services.

For example, the standard monthly price for Internet service is $20. If customers sign up for a 24-month commitment, they pay $15 monthly.

Internet package Standard price Price for 24-month commitment
Turbo 1 Gbps $20 $15 (with $5 discount)

To configure the Turbo 1 Gbps 24-month commitment, the administrator performs the following steps:

  • Creates a subscription with a $20 recurring fee, defines a minimum subscription period for 24 months, and selects the Sum of discounts applied option for the early cancellation penalty.
  • Creates a 1 GB Internet quota within a volume discount plan.
  • Creates an add-on product with Internet service and adds 1 GB of Internet quota.
  • Creates a commitment and sets the discount duration for 24 billing periods.
  • On the Recurring fees panel, the administrator selects the subscription and add-on product and specifies a discount of $5, which changes the total monthly fee to $15.

Now, the administrator can assign the Turbo 1 Gbps commitment to accounts.

Add recurring fee for commitment

After signing up for the commitment, customers pay recurring fees for using the service. When their billing period closes, PortaBilling calculates the charges for any commitments that were active during this period. Customers may have several active commitments at a time, for example, Internet and IPTV packages. When customers sign up or cancel the commitment in the middle of a billing period, they are charged a prorated fee by default.

When customers sign up for a commitment in the middle of a billing period, the discount covers the period from that day to midnight of the same day X billing periods later, where X is the number of discount billing periods. For example, let’s say John Doe has a monthly billing period and decides to sign up for an additional 24-month “Sport TV” commitment on November 20, 2020. The discount ends in 24 months from that day – at midnight of November 20, 2022.

Important conditions:

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  1. Commitments can only be assigned to accounts.
  2. The minimum subscription period must be set to calculate possible cancellation penalties.
  3. The early cancellation penalty for subscription must be the Sum of discounts applied type.
  4. Add-on products must be allowed with the main product.
  5. If the subscription discount rate is set for the customer, it overrides the commitment discounts for all accounts.
Benefits
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With the help of commitments, service providers:

  • Retain customers for long periods;
  • Increase revenue by using upselling.

Customers:

  • Receive discounts for extended periods;
  • Save money with the commitment pause option;
  • Can try new packages without paying extra.

Synchronize discount end dates for two commitments

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By default, the end date of a discount is defined by the number of billing periods set in the commitment. For example, for a commitment that includes 24 billing periods, the end date will arrive in 24 months. The administrator can change the default discount end date or synchronize it with one of the already assigned commitments.

When synchronizing discount end dates, a new commitment inherits the discount end date of the previous one. As a result, the discounts share an end date and expire at the same time.

Let’s say that John Doe has been using the Turbo 1 Gbps package for 3 months. The discount on his 24-month commitment ends in 21 months, on August 15, 2022. To receive more Internet traffic, John signs up for the Turbo 2 Gbps commitment. The administrator opens his account and assigns a new Turbo 2 Gbps commitment to it in addition to the Turbo 1 Gbps. To synchronize the discount end date with his Turbo 1 Gbps commitment, the administrator:

  • Opens the Discount end date tab.
  • Selects the Synchronize with the assigned commitment option.
  • Selects the Turbo 1 Gbps commitment from the list.

Now the discount end date for both commitments is August 15, 2022, so the discounts will end simultaneously, in 21 months.

Synchronize the discount end date

Penalty

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A penalty is determined by the sum of all the discounts provided to the customers since they signed up for the commitment. The administrator applies the penalty when they cancel their commitments before the discount end date.

Let’s say John Doe decides to cancel his two-year commitment after 20 months of usage. He calls the administrator and asks to cancel the Turbo 1 Gbps commitment on October 31. According to his package conditions, he received a $5 discount and, therefore, paid $15 per month. So then John’s penalty is $100, which is the sum of the discounts for his 20 months of service usage. On November 1st, John receives the invoice and sees the $115 total for October:

  • $100 is the sum of discounts for 20 months of service usage ($5 x 20 = $100);
  • $15 is the recurring fee.

NOTE: The periods during which the commitment is paused or the customer is suspended (due to non-payment) are excluded from the penalty calculation.

Configuring commitment termination penalties for a specific period
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The administrator can configure early commitment termination penalties for both recurring and one-time fees. This means that the early cancellation fee can be applied for an arbitrary period of time (e.g., just the last 3 months), not only for the whole period when the commitment was used. The administrator can also waive particular penalties for recurring and one-time fees charged as a part of a commitment.

The administrator can also choose whether to include specific early termination penalties carried over from the previous customer for a transferred commitment. This penalty is applied to the customer to which the commitment was transferred.

For example, John Doe signs up for a 24-month Drive TV service commitment at $15 per month on 02 December 2020. The monthly service fee for the Drive TV subscription without a long-term commitment is $20. Thus, John Doe enjoys a discount of $5 per month.

On the same day, he is charged $10 – 100% discount for the setup (a full one-time fee of $10 applies if the customer doesn’t sign up for a commitment) = $0. He is also charged $400-$399.99 = $0.01 for the TV-set. His first invoice comes up on 01 January 2021 and it is $14.51($15 monthly service fee prorated for 29 days of commitment = $14.50 + $0.01 discount charge for the TV set).

On May 02, John Doe decides to terminate the commitment and informs the customer service representative (CSR) about it.

The CSR informs John that an early termination penalty of $5 will be applied to each of the 6 months when John used the commitment services at the discount price, totaling $30. The CSR next informs John that he will also need to pay the remainder of the full price of the TV-set ($399.99) and cover the setup costs ($10). John Doe informs the CSR that he is ready to pay all the penalties next month, but if the recurring charge penalties for the discount monthly service are reduced to the last 3 months when he used the commitment (3 x $5 = $15), he is ready to pay for everything on the same day. To support the positive cash flow, the CSR agrees to waive the early termination fees for the first 3 months when John used the commitment.

To configure the commitment termination penalties, the administrator:

  • Opens John Doe’s Account > Finances > Commitments.
  • Selects the Drive TV commitment.
  • Opens the Termination tab and sets the commitment termination date. (Apply penalties toggle switch is active by default)

    Commitment termination tab

  • Proceeds to configure early termination penalties in the dialog windows called by clicking the Configure buttons.

    Configure penalties buttons

  • Configures Penalties based on recurring fees. In our example, the CRS only applies the early termination penalties for the last 3 months when John used the commitment – from March to May 2021.

    Setting time period for applying penalties

    Once configured, the penalties can be recalculated by clicking the Recalculate button. The sum total of the penalties will be updated, too.

    Recalculated penalties

  • Configures (decides to keep or waive) the Penalties based on one-time fees.

    Setting penalties based on one-time fees

As a result, John receives an invoice for $425.95 ($0.96 prorated service fee in May + $399.99 TV-set price + $10 TV set-up fee + $15 recurring charge penalties for the last 3 months of using the commitment). John’s commitment is terminated, so he can no longer use the service.

The administrator can waive the commitment penalties if the customer wants to close the existing commitment and immediately sign up for a new upgraded commitment. This can be done by clearing the corresponding check boxes.

If a commitment set for an early termination was previously transferred from a different customer, there will be two different toggle switches activated by default: Apply penalties and Include penalties from the previous account (calculated for the previous customer). The administrator can exclude the early termination penalties calculated for the previous customer by deactivating the corresponding toggle switch.

Choose whether to include penalties

This enhancement allows the administrator to configure the commitment transfer penalties by setting the exact time period for which to apply the penalties, add or remove certain penalties, and select to include the penalties for the time when the commitment was used by the previous customer.

One-time fee

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A one-time fee is a fixed amount of money that applies only once, when customers sign up for the commitment. The administrator can set a discount for the one-time fee. Let’s say that the standard price for a TV set is $400. Customers can buy it for just $0.01 with a $399.99 discount if they sign up for a two-year IPTV Maxi commitment. If the customers cancel their commitment before the discount end date, they pay the full price of the TV set as a penalty because the discount is also cancelled.

To configure the one-time fee, the administrator:

  • Creates an IPTV Maxi commitment.
  • Opens One-time fees panel and defines the description – TV set.
  • Specifies the full fee of $400 with a discount of $399.99, which changes the total one-time fee to $0.01.

Add one-time fee for commitment

So when John Doe signs up for the IPTV Maxi commitment, he pays only $0.01 for the TV set but if he cancels the commitment before the discount end date, the penalty is $399.99.

Sale discounts

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Service providers can grant additional discounts, called Sale discounts, to encourage hesitant customers to sign up for a long-term commitment. Sale discounts may cover multiple periods, each with a different discount level.

For example, Panda telecom offers the IPTV service at a standard price of $25 per month. If customers sign up for a 24-month commitment, they pay $20 monthly.

On November 20, Mary Smith contacts her service provider to sign up for the IPTV service. The sales manager offers Mary the Basic IPTV package for $25 per month without commitment and the Basic IPTV package for $20 per month, if she signs up for a 24-month commitment. Mary is not eager to pay even $20 monthly and decides to think it over. To encourage Mary to sign up for a Basic IPTV commitment right now, the sales manager offers the following discounts:

  • The first 3 months will have a $15 per month discount. The monthly rate is $5.
  • The next 6 months will have a discount of $8 per month. The monthly rate is $12.
  • Each following month will be $20 per month.

Mary agrees and signs up for the Basic IPTV commitment on November 20, 2020.

To define the sale discounts, the sales manager performs the following steps:

  • Opens the Mary Smith’s Account > Finances > Commitments.
  • Clicks Add and selects the Basic IPTV (24-month commitment) from the commitment list.

    Add commitment

  • Selects Sale discount tab.
  • Clicks Add