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Promotional offers are a great way for subscription businesses to attract new customers and give them a chance to sample products or services without requiring a major upfront investment. People who might otherwise be hesitant to sign up for these services can be enticed by free trials, discounts, and other promotions to subscribe.

Subscription companies can also use exclusive deals and offers to reward existing customers for continued business, further building brand loyalty and increasing the lifetime value of those subscribers.

For these reasons, promotional offers are a hallmark of subscription business models, and many brands use them to one degree or another. But are they getting the most value out of these strategies?

Subscription-based businesses should take every opportunity to optimize their promotional campaigns, offers, and strategies. Not only will they acquire more customers, but they will be able to keep those subscribers in the fold and generate more recurring revenue for the business.

Free or discounted: Which is better?

There are a lot of different ways to approach promotions for subscription services, but they often fall into one of two camps: free trials and discounted services. Both have their advantages and drawbacks, and deciding on the right method depends on the goals you’ve laid out for your promotional campaign.

Free trials: Low barrier to entry

The easiest way to convince prospective customers to sign up for your services is to offer them a free subscription. Giving away services for any amount of time can be a bitter pill to swallow for some subscription companies, but it may pay off in the long run.

Free trials typically only cover a few months of service, but those accounts still require extra time to start generating profit. A concern with free trials is that they don’t leave much time to build engagement with a new user and demonstrate the service's full value to the subscriber. What’s more, complexities can arise when transitioning a customer from a free trial to a paid service.

One other potential issue is that people who sign up for free trials may plan from the outset to cancel their subscriptions before their first payment is due. With that mindset, they may never really embrace the platform or feel that they need to get their money’s worth by exploring all of the different offerings available to them.

Discounted services: Greater opportunity to build engagement

Discounting the price of subscription services over an initial period – say, three to six months – can give subscription companies a little more time to make a good first impression and convince users to stick with their offerings. While customers are required to make a payment during this time, the reduced price may entice prospective users who are still on the fence.

During that initial subscription period with the discounted rate, brands have ample time to showcase their services, demonstrate their value, and become part of the customer’s daily routine. Because users have already committed some money to the subscription, they may be more inclined to use it regularly and realize everything it has to offer.

There are some disadvantages to this approach that need to be considered. It’s not as easy to entice new users with discounts when compared with free trials. Customers need to make an upfront investment to begin their subscription, and even if it’s at a reduced price, that could be enough to turn them away. With many subscription businesses taking advantage of free trial promotions, discounted services may have more difficulty making an impact on prospective customers.

Businesses should test out both approaches to determine if one produces notably better results than the other. In addition, subscription companies should run deep analysis on their promotional campaigns to figure out why one approach may resonate more with their target audience.

Find the perfect discount

Promotional offers are the most effective when customer savings and discounts are low enough to entice potential customers. At the same time, they can’t be so generous that it will take a long time to offset those initial losses and start making money off of the subscription.

Determining the best discount for your subscription business requires a great deal of analysis, research, and testing. Several factors can determine what the ideal price is for your subscription service. Ask yourself these questions to get an idea of what price point will strike the right balance for your customers and your business:

• How many additional customers will you need to acquire to offset discounted rates? How feasible is that goal?
• How do your discounted rates stack up against the competition? Are they enough to sway potential customers?
• How long will it take a new customer at a promotional rate to become profitable for your business? How many months do they need to stay enrolled once the promotional period ends before they start producing revenue for you?

Careful analysis of your pricing plans, customer preferences, market trends, and the competition’s pricing strategies will help you find the perfect discount rate.

Remove technological, institutional barriers

There are several different ways to manage promotional campaigns, but they all require a great deal of technological and institutional flexibility to launch on short notice. Rigid payment platforms may not allow for the level of customization subscription businesses need to craft the most effective sales promotions. Campaign stakeholders may also find it difficult – if not impossible – to make changes to promotional strategies on the fly, preventing businesses from fine-tuning their offers according to customer response.

Marketing stakeholders will, in all likelihood, require the assistance of the IT department to make any changes to promotional offers and implement them with their billing platform. That will only add extra lead time to any updates, making it difficult to dynamically shift a promotional strategy as user feedback rolls in. Organizations will also need to rely on close interdepartmental coordination to make those changes, which is far from guaranteed when dealing with marketing, sales, and IT teams.

More sophisticated subscription billing solutions have user-friendly interfaces, tools, and features that give business users the flexibility to refine promotional offers as needed. More successful campaigns mean more subscribers and more revenue.

Do your due diligence with promotional offers

Creating a promotional campaign strategy isn’t as easy as giving away promo codes or setting up free trials. Subscription businesses need to continually review promotional campaign performance and identify opportunities for improvement. Running a deep-level analysis on every facet of your promotional strategy and execution will help bring these insights to light. The more routine these review sessions are, the more up-to-date and effective your subscription promotions will be.

With so much hinging on discounts, free trials, and other promotional offers, subscription businesses should take every opportunity to continually improve their sales and marketing strategies. Working with an established and experienced subscription billing partner can help brands stay ahead of the competition and win over new customers.

As a leading member in the subscription business community, Vindicia’s expert consultation and guidance can help optimize promotional strategies according to different customer bases and demographics, encouraging more subscriptions and generating more ongoing revenue streams. Contact our team to find out more.