.png)
Estd 4.22.2023
Based on the insights from our pricing strategy book, Price to Scale, the answer is twofold:
• Yes, offering a deep discount campaign to attract new customers can lead to higher churn rates later if those customers face a sudden price increase or feel the value no longer matches the price. In our book, we note that surprises at renewal—often referred to as a “nasty shock”—can trigger churn, especially for price-sensitive segments.
• To mitigate this, structure your deals deliberately:
Tailor the discount by requiring a longer contract commitment, which provides a built-in lock-in period. As discussed in our book (see the section on Personalized Pricing Reductions around page 287), linking discounts to contract extensions helps justify the price cuts and minimizes post-discount churn.
Clearly communicate the terms of the discount at the outset. Explain that the reduced price is a temporary gesture of appreciation, and ensure customers are aware of the upcoming adjustment. Improved communication strategies (as mentioned around page 245) can help manage expectations and maintain trust.
Consider segmenting your customer base to offer more personalized deals. Use metrics like churn propensity scores to determine which segments can best absorb a discount strategy and which might require more gradual price transitions or alternative value enhancements.
Instead of offering a mere discount, explore alternative structures such as bundling additional features or creating tiered packages. This can retain customer interest by stressing improved value over time instead of just lower pricing at entry.
In summary, while a big discount campaign can attract new customers, careful structuring — including contract commitments, clear communication, and customer segmentation — is essential to preventing a shock at renewal that might drive higher churn. This approach, as detailed in Price to Scale, ensures that your discount strategy supports long-term customer retention alongside immediate growth.