These days a very common method to build a customer base for service industries, whether it’s Netflix, credit monitoring services or even Graze food boxes, is the ‘month’s free subscription’.
The obvious reason why companies do this is the apathy dividend – in other words, the hope that they’ll gain as people simply forget to cancel for a month or two. But this is a short-term contributor to profits as there’s actually a more powerful psychology at play here, which I suspect is a bigger win – let’s call it the ‘inertia dividend’.
We human beings are naturally pre-disposed to not liking to lose something that we have. Many people wouldn’t sign up for a movie service that they don’t really need if they had to pay for it, but would for a free month’s trial. They go in with a view to cancelling it when it ends, but at that point they become accustomed to it and now getting rid of it means a loss – and we don’t like loss.
The lust for such things doesn’t bounce back like elastic. We tend to feel the loss of a service far more potently than the joy at its gain in the first place.
An easy example is a salary rise (or cut in mortgage rate). At first you feel happy at the increased disposable income, yet soon that cash is normalised and we’re used to it. Take it away after we’ve adjusted to the new amount and the pain is high.
Just think of the number of people with gym memberships who don’t use them. The idea of losing the opportunity to go to the gym even though they rarely attend keeps them paying month after month.
This is a dangerous sub-philosophy when it comes to MoneySaving. We have to be clinical and recognise our own biases. It’s important to try and revert your mindset back to where you were when you got it. Ask yourself: "If I didn’t have it, would I pay for it?" If the answer is no then be clinical and ditch it.
After all, if you’re paying for it by the month and you can cancel if you don’t use it, stop using it and then you can choose to sign up again.
I’d love to hear your experiences as to whether you feel you’re tough enough and hard enough to avoid this temptation or whether you’ve been caught by firms’ ‘inertia dividend’ and how much it has cost you.