Get to Know Your Contractual Model

Learning Objectives

After completing this unit, you’ll be able to:

• Describe the AppExchange percentage of net revenue (PNR) and non-PNR monetization options.
• List contract considerations.

What awesome progress! Leung created her pricing strategy and planned her pricing tiers. But she’s not done yet: Revenue sharing benefits both partners and Salesforce. 

Keep reading to learn alongside Leung about her contractual options that maximize her app monetization, secure her relationship with Salesforce, and maximize the benefits to her customers.

What Are Your AppExchange Monetization Payment Options?

As you create your AppExchange listing and add your pricing details, your team works in parallel with Salesforce to finalize your contract. This is also called a Partner Application Distribution Agreement (PADA). 

When a partner like Cloudy Health signs a freemium app distribution agreement with Salesforce, they submit all of their orders through the Channel Order Application (COA). COA works with one monetization payment option: percentage of net revenue (PNR).

Remember PNR from when we discussed monthly and annual customer payment options? 

Most ISV partners have PNR contracts, meaning most charge their users a fixed amount on a recurring basis, and pay Salesforce a fixed percentage of their monthly revenue. However, there are some special cases where your app may not qualify for PNR.

If your app is a non-PNR app, you may still have a revenue-sharing obligation with Salesforce. To list your app on AppExchange, you sign a contract with Salesforce which will spell out your obligation.

There’s a lot to learn about contracts. And contracts are specific to your business and to your app. What you need to know is that everything is going to be just fine. After you have your app, business plan, pricing model, and pricing strategy, your team works with AppExchange representatives to understand the contract terms.

Leung wants to understand a bit more about monetization options, PNR and non-PNR, to ensure she’s made the right pricing decisions for her app.

PNR Contracts

Sure, PNR stands for percentage of net revenue. But what does that really mean? 

For Leung, that means Get Cloudy awards a percentage of their total revenue to Salesforce. They’re also responsible for submitting an order with Salesforce every time their Cloudy Health app is sold. 

Simply put, anytime you sell your app, you pay a royalty back to Salesforce. Typically, it’s 15% of your app’s revenue. 

What apps qualify for PNR? Paid Add-on Required, Freemium, and Paid apps qualify for PNR.

How does PNR work?

• PNR contracts use our COA to submit orders to the Salesforce Partner Operations team.
• Every time a customer purchases your app or makes a subscription payment, you submit an order to Salesforce. This keeps you up to date on your revenue-sharing agreement. We look at your COA orders, factor in the revenue share agreement you have with us, and generate your invoice.

Leung looks at Cloudy Health’s pricing tiers, and jots out the PNR payments:

If you want to collect payment via AppExchange Checkout, you’ll do a click-through agreement and be charged a standardized PNR of 15%.

Non-PNR Contracts

If your app doesn’t qualify for PNR, it’s still pretty simple. A non-PNR contract may be required. While you don’t pay PNR, you still pay a flat annual fee to Salesforce. The fee is determined by the number of orgs or users who use your app. An AppExchange representative will be able to help if your app doesn’t qualify for PNR. 

There are two types of non-PNR contracts.

Understand Your Revenue-Sharing Plan

Leung’s Cloudy Health app is freemium and uses functionality-based pricing. So the Cloudy Health app qualifies for PNR. Also, Leung and her team use the COA to manage their app’s sales and report to Salesforce. They use their own system for billing and payments. 

Wrap It Up

Fantastic! 

Leung has her AppExchange pricing strategy and detailed pricing plan. Her team is in touch with Salesforce and they’re finalizing the details.

Next, to create the best AppExchange listing, Leung heads over to ISVforce Guide: Publish Your Solution on AppExchange and learns about all of the options and details in the listing process. When she’s ready, she heads over to the AppExchange publishing tool to create her AppExchange listing. Just wait: it’s going to be awesome!

Resources

• ISVforce Guide: Publish Your Solution on AppExchange
• AppExchange: Publishing Tool (Sign-in required)