Deal or no deal? How discounts for unhappy subscribers can backfire on businesses
Subscription-based service providers including newspapers, cable and internet providers and utility companies often issue price-based incentives including discounts in response to complaints about service failures. It’s been shown to satisfy angry customers — at least momentarily. But new research from marketing professor Vamsi Kanuri demonstrates the tactic may not be successful in retaining customers in the long term.
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The study also offers ways to mitigate the negative effect of recovery discounts and can help any subscription-based service provider currently using discounts as a recovery tactic.
“After all, discounts may be necessary to alleviate customer dissatisfaction immediately after a service failure and firms may not have another option,” Kanuri said. “In such circumstances, we demonstrate that firms can alleviate the long-term negative consequences by lowering the renewal price at the end of the contract, increasing the time between recovery and contract renewal (offer additional service usage time) and using touchpoints with customers such as emails, bill reminders and follow-up phone calls to remind customers of the initial subscription price.”
Contact: Vamsi Kanuri, 574-631-2399,