Early Bird Offer and Subscription: Is it a Good Idea?

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Summary

In a recurring business like subscription, Early Bird aren’t useful for acquisition. In retention, specific CLV conditions must be met to make them relevant.

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An Early Bird promotion offers a discount if a purchase occurs a long time before the scheduled date. Generally, the offer is limited in time and/or quantity.

In the context of a subscription business, with recurring payments, is an Early Bird offer relevant?

1. The use cases in a subscription context?

The Early Bird offer consists of encouraging the customer to complete a transaction before a scheduled date.

Applied to the subscription business, the use cases are as follows:

1. I want to acquire a new customer today rather than later.
2. An existing customer either benefits from a free or prepaid trial offer for a limited period or has canceled his subscription. However, he still benefits from the service for a certain period of time. I want to convert him into a paying subscriber before he reaches the end of the service.
   

2. The Early Bird offer in Acquisition

A discount is offered on the initial purchase and then the subscription will be renewed at the regular fee. This is no different from a classic promotional offer.

In the case of a subscription pre-sale, there will be no impact on the number of subscribers nor the revenue before the subscription actually starts.

In acquisition, the Early Bird offer is of no interest.

3. The Early Bird offer in Retention

Its purpose is to reactivate the subscription or start a new subscription before the end of the current service.

An Early Bird offer will allow me to:

• Justify the need to make a transaction today, with a sense of urgency, while the end of service isn’t soon
• Communicate once again with the customer using different language elements than those used during the renewal period

Let’s look at the impact on the 3 Macro KPIs of the subscription:

• The number of subscribers ➡️: this isn’t a new customer, the number of subscribers remains the same.
• The retention rate ➡️: we don’t lose the customer, so no churn. The retention rate doesn’t drop.
• The average revenue per user ⬇️: logically down as the customer pays less than the normal price.

In addition, we generate some booking in advance but without impact on revenue. The principle of revenue recognition means that booking will be recognized when the new subscription begins.

4. In conclusion: 👍 good or bad idea 👎?

In a subscription business, an Early Bird offer has no impact on the number of subscribers or on the revenue at the time the transaction takes place. The “early” aspect has no impact.

An Early Bird offer will only be relevant if it manages to retain a customer who would have been lost by following the usual process and communication. The necessary conditions will be:

• The churn probability at the end of service is very high,
• and the customer potentially has a high CLV. Meaning once acquired, he’s loyal and pays for expensive product.

For example, if the competition at the end of service is strong, it’s relevant to ensure to keep the customer as early as possible.

Key takeaways

1. In Acquisition, it’s just a way of presenting a promotional price.
2. In Retention, the Early Bird promo doesn’t impact the number of customers nor the revenue.
3. The Early Bird promotion is a good idea only if it is easier to keep the customer early than later.