What does a ramp deal mean?

A ramp deal is a contract for a good or service lasting more than one year. The price, quantity, or discount rates change at regular times.

If you use Configure Price Quote (CPQ), a ramp deal is an agreement between a customer and a vendor to get better prices on future sales. The ramp deal lets the customer buy more over time or raise their subscription level to get savings or to keep up with the business’s growth. For the vendor, more extensive sales, more extended contracts, and steady cash flow are all good things.

This kind of deal that lasts for more than one year is also known as an incremental order commitment (IOC) in CPQ terms. Customers can set up an IOC in CPQ in several ways, such as by being a set amount every month or using a long-term contract that commits them to a certain amount of products or several user licenses over several years.

Similar words:

• Ramp-up agreement
• Incremental order commitment

How and Why SaaS Companies Use Ramp Deals

Ramp deals in software-as-a-service (SaaS) companies are based on the idea that the price of a contract should go up slowly over time. They give customers a reason to sign up for longer subscription terms and help businesses better match their costs with their income lines.

When sellers use ramp deals, they can change the size of their product or service based on the customer’s wants. As the customer’s business grows, more user rights or features can be added during the contract term. This helps keep customers coming back and brings in the most money.

Ramp deals suit buyers and sellers because they keep prices stable and predictable while letting both sides negotiate better rates and lower costs. With ramp deals, customers usually pay less per license because they offer volume discounts. On the other hand, vendors gain from steady sales and loyal customers.

Why ramp deals are good

Ramp deals help you keep more customers, make more money, keep fewer customers, and handle your cash flow better. Ramp payments can also help businesses guess how much money they will make in the future and prepare for possible changes in demand from current customers or growth in demand.

Costs that customers can plan for

With ramp deals, customers can budget their costs over time because they let them pay for a set amount of use over a year or more. This can make spending and planning for cash flow a lot easier. Customers may also get savings if they sign agreements for a more extended period.

Vendors Can Expect to Make Money

For sellers, ramp deals are a chance to make customers more loyal and make sure they always make money. Businesses can be sure that they will have steady income streams throughout the deal with their customers if they sign long-term contracts. This way, they don’t have to worry about changes in demand or price pressure from competitors. Furthermore, ramp deals can help keep customers by giving them better pricing choices tailored to their needs. Also, customers with ramp deals are less likely to switch providers because they’ve already signed a long-term contract.

Better planning and forecasting

Businesses can better predict their cash flows with the help of ramp deals, which give them more information about past cash flows. When businesses use standard fixed-rate subscriptions, they only have one piece of information, which makes it harder to make predictions. Businesses can set up different contract levels with different prices based on how much use customers expect by using ramp deals. By looking at the different tiers that customers choose, companies can correctly predict their cash flow and learn more about their customers’ habits and tastes.

Different kinds of ramp deals

With ramp deals, customers can slowly increase their payments over several years, which often have better terms and conditions than regular pay-as-you-go packages. Discounts or special offers, like free samples, lower prices, and other perks, are typical in ramp deals. Customer ramp deals come in several different types that SaaS companies can offer.

Sale prices

The most common type is a deal on the first level of the subscription ramp, which gets people to sign more extended contracts. This deal is often paired with a loyalty bonus that gives customers extra money for keeping and renewing their subscriptions.

For free

A freemium offer is another popular ramp deal. This deal lets users try out a limited product version for free before deciding to pay for full access. This lets people try out the product and see what it’s good for before paying for the whole site.

Different Prices

Different levels of pricing that give savings to customers who sign longer-term contracts are another type of ramp deal. This approach works well when a SaaS company has subscription plans that charge each user per month or year. When there are different price levels, customers can save money by signing more extended contracts and adding more users over time.

Business Agreement

The enterprise agreement is another type of ramp deal. This is when big businesses agree to use certain SaaS goods or services for a long time in exchange for lower prices. These deals usually come with extra benefits like faster customer service, more customization options, and early access to new product releases. Bigger businesses that need more complicated usage rules than what’s offered in standard subscription plans often use this kind of agreement.

Deals with Partners

Finally, as a way to get new customers, many SaaS companies have partner deals and programs where people can bring their friends. Users who bring in new customers and partners who bring in new business are rewarded this way.

Ramp deals can be complex.

There are a lot of problems that come with handling ramp deals. Ensuring the customer is happy with the whole deal is one of the hardest things to do. Customers are often given discounts or special deals when signing long-term contracts, but they might not keep them if the market changes or something else arises. The business could lose money if this isn’t handled correctly and in line with the contract terms.

Also, it can be hard to keep track of customer payments for these long-term contracts because delays or mistakes can often happen for several reasons, such as the customer having cash flow problems or the two parties not talking to each other enough. Companies that want to make the most money from ramp deals need to keep an eye on and deal with these problems.

Besides these problems, businesses have trouble making ramp deals and keeping track of them in their CPQ and billing systems.

How Hard Is It to Negotiate Ramp Deals?

It can be challenging for vendors to negotiate ramp deals because they have to think about many things, like the costs and benefits for each party and their contractual responsibilities, pricing structures, and service level agreements. Aside from how hard it is to negotiate ramp deals, there are also legal and financial issues. When companies sign such an agreement, they must be very clear about their agreement. This can be especially tricky with ramp deals, where a customer needs to change over time, and often, more than one party is involved.

It’s also hard to figure out how much risk each side should take and what rules should be included to avoid future disagreements or mistakes. For example, some ramp deals have clauses that spell out payment terms, service levels, support needs, and issues related to intellectual property rights. All of these things must be discussed before the deal is completed.

Taking care of intervals and periods

Businesses that offer multi-year ramp contracts may find it hard to keep track of ramp times and levels. The different steps of a ramp deal’s maturity are called ramp levels.

Usually, they have introductory offers, terms for early adopters, growth goals, and renewal limits. Customers must reach specific goals at each stage to get more discounts or other perks. As agreed upon, the time between each ramp level is called an interval. It could be weeks, months, or even years.

So, for a ramp deal to go well, you must know how to plan and handle these times accurately.

Taking care of ramp deals

Because deals that last more than one year are so complicated, vendors usually have special teams and tools to handle them.

Desk Deals

A deal desk’s job is to manage ramp deals, which helps companies ensure they give their customers the best deal. When a buyer and seller make a “ramp deal,” the buyer pays a fee upfront and then gradually increases the amount they pay and the level of service they get over time.

The deal desk needs to be careful with these ramp deals so everyone wins. Setting up ramp levels and figuring out how much each payment should be each time are all parts of this. The deal desk will also have to work with the buyers and sellers to ensure no problems or mistakes come up because of the deal.

Deal desks can use several tools to ensure ramp deals go smoothly. These include price protection clauses, which protect buyers from sudden price increases for goods or services during their payment period; escalator clauses, which let buyers set a price increase threshold at which point payments will go up accordingly; and discounts for paying early or on time.

A well-run deal desk should also have procedures in place in case of late payments or disagreements between buyers and sellers. This means they need to have backup plans ready in case something goes wrong. To stay ahead of industry trends, they should also keep an eye on any changes to regulations or the market that might affect how a ramp deal is handled or how it turns out.

Software for Ramp Deals

Sales operations teams need robust software to close deals and track them. These can be complete solutions or separate pieces of software that work together to handle different parts of these contracts.

CLM software, “contract lifecycle management,” has many tools and features that can help you handle multi-year ramp contracts. A CLM software platform or the contract management part of CPQ software, gives companies automated tools that make it easier to handle ramp deals. These tools include automated approvals, notifications, and redlining. It also works with billing software to set up payment plans that ensure invoices are correct and keep all deal records in one safe place.

CPQ: CPQ software is made to make it easier for businesses to handle ramp deals. CPQ software makes it easy for businesses to set up and quote their products quickly and easily set up and accept ramp deals.

To start the quoting process, you must choose the deal’s customer, product, renewal terms, and price guidelines. After that, the program lets sales reps set the rules for how much discount a customer gets at each price level. The system can also handle bundles and make its own price rules. Then, sales reps can quickly make quotes that include these savings, which speeds up the sales process.

What a buyer pays upfront, how many payments they make, how often they are due, and how much each payment is are all part of billing ramp deal structures. It can be hard to keep track of customers and properly bill them for this type of deal structure. Businesses can handle the billing and payment parts of these complicated deals with the help of billing software.

If you use the right subscription accounting software, it will be easy to keep track of the ramp levels for multi-year subscriptions and the prices that go with them. This way, you can ensure customers are billed correctly and on time. The program should also make it easy for businesses to change or cancel a customer’s payment plan if needed.

With a ramp-deal agreement, billing software can also control how many items a customer can buy or even how often they can buy things. This keeps companies from missing out on possible profits because of too many or too frequent deals that are too good to be true. Also, billing software can help reduce time-consuming administrative chores like figuring out discounts or processing payments for ramp deals by hand.