Martin Lewis reveals the highly effective psychology behind month-long free trials – and he does not hope you neglect to cancel
Martin: “We humans don’t like loss – we think more of the loss than of the initial profit.”
On the show, Martin stated that companies naturally take the view that after a month or two some people will forget to cancel – but this is only a short-term increase in profits. He said, “We have obviously seen a huge surge in subscriptions from grocery boxes to dry cleaning and flowers to the obvious Netflix and Amazon Prime products and Disney +.
“A lot of people, I have to say, say they know they shouldn’t have them and they don’t see that much, but they don’t cancel.
“That’s exactly the case here. The obvious reason companies often run free trials or limited-cost trials to get people to sign up is because of the apathetic dividend. They hope they win when people forget to quit for a month or two. Of course, some people love it and think it’s worth it. But that adds to the bottom line in the short term. “
“It’s the same with gym memberships – people value the opportunity to leave even when they aren’t using it.”
Martin went on to explain that the most powerful psychology in the game is actually that people naturally tend not to lose something they already have. He said, “There is a more powerful psychology in the game and I call that the inertia dividend. That’s because we humans naturally tend not to lose anything we have.
“There are a lot of people who wouldn’t sign up for a movie service that they don’t really need if they had to pay for it, but they would do it for a free trial. They go in to cancel it when their trial ends, however by this point they are already used to it and getting rid of it means that it is a loss. And we as humans do not like loss. “
Martin added, “This is not inelastic. We think of losing a service rather than gaining it. If we use the parallel of a raise. When you receive a raise you enjoy the increase in disposable income at first, but once that normalizes and we are used to it you would feel that loss much more than if you took that increase away then you actually have the profit in the first place felt to get him.
“I mean [it’s the same with] the gym membership that people keep during normal times when they are not using it because they value the opportunity to hit the gym even when they don’t actually get to it.
“We have to recognize our emotional prejudices and cancel unused subscriptions.”
To counter this, Martin went on to explain that we need to recognize our emotional biases and cancel unused subscriptions. He said, “So we have to be clinical and recognize our own emotional biases.
“It’s important that you try to reset your mindset to when you first signed up for the product. When you know what you know by now, ask yourself if I didn’t, I would pay?” And if the answer to that is ‘no’ then be clinical and drop it. “
For more on Martin’s thoughts on this, check out his blog: The Real Reason Companies Offer a Monthly Free Trial.