Delay Introductory Discounts

Subscription services, such as Scentbird, HelloFresh, and The New York Times, commonly offer a lower price for the first month or few months before bouncing the fee back up to what’s announced as the regular price. Researchers at Korea University note how prior studies support marketers using these introductory price breaks: The early gains provide the customer greater time-discounted value, exert stronger impulse-purchase appeal, and raise redemption certainty.
     The Korea University researchers then go on to identify circumstances in which a better tactic may be to charge the stated regular price at the start and then, after a few months, give a discount. Rather than charge $5 for the first month and then charge $10 for months 2 and 3, for example, charge $10 for the first two months and then $5 for month 3. The studies indicate this works well when long-term customer retention is more important than new customer acquisition.
     But how the delayed discount is worded makes a significant difference. If the month 3 discount is stated as “50% off” instead of the actual dollar amount, such as “$5” in my example, the effectiveness is weaker. The use of dollar amounts throughout the offer better leads the shopper to perceive a trajectory of improving prices which they’ll project into the future, adding attractiveness to the offer. Consumers are prone to sense trajectories.
     Another argument for delayed discounts is how it rewards loyalty. With a discount only at the start, a subscriber is tempted to stop giving you their business when the introductory offer expires so they can then take advantage of another provider’s introductory offer.
     If you do employ the initial-discount option in your marketing of a subscription service, findings from London Business School and Massachusetts Institute of Technology suggest a helpful tactic: Tell new customers the reason they’re getting a discount is to compensate for the hassle of changing habits and integrating the service or subscription into their lives.
     This justifies the new user discount in a way which makes experienced users not begrudge benefits given to succeeding generations of new users. It encourages new users to pay back the discount by working to integrate the subscription into their lives. The result is that these well-integrated new habits of using your services or subscription will persevere.
     Pointing out the barriers to change and then compensating the consumer for the hassle can be a winning combination.

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