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We place greater value in things when there are barriers placed around them

Paying to unlock benefits leads us to illusions of superiority, greater value analysis and a need to justify sunk costs by spending more once inside.

Ashley, Gillespie & Noble (2016). The effect of loyalty program fees on program perceptions and engagement. Journal of Business Research, 69(2), 964-973.

The study

Setup

310 US Amazon Prime customers were split into 2 groups, either on a free trial or on a paid membership. They were then queried about attitudes towards and value perceptions of Prime and its benefits.

Results

Those on the paid subscription reported greater loyalty, perceived value and exhibited a higher monthly spend than those who were on the free trial.

Study graph

Key Takeaways

This is driven by two core effects:

1) Sunk Cost Bias where we seek to justify past, non-recoverable costs (of membership access) with our current actions (more spending), even when it’s not in our best interests. 

2) A desire to remain consistent with our past commitments - “I’m a Prime customer now.” 

Takeaway image

Create a members club. Putting a price on entry heightens our analysis of the benefits of joining in a way that we wouldn’t if it were free. Limiting access to certain products or benefits can signal higher perceived quality (Zeithaml, 1998) and an increased willingness to buy.

Takeaway image

Amazon entice with convenience (‘free’ one-day shipping), priority (30-min Early Access Lightning Deals) and exclusive choice (a vast music, video and book library). What benefits would your own customers pay for? What feelings can gaining access promote?

Takeaway image
Takeaway image
Limited Access

Limited Access

We place greater value in things when there are barriers placed around them

Paying to unlock benefits leads us to illusions of superiority, greater value analysis and a need to justify sunk costs by spending more once inside.

The study

Setup

310 US Amazon Prime customers were split into 2 groups, either on a free trial or on a paid membership. They were then queried about attitudes towards and value perceptions of Prime and its benefits.

Results

Those on the paid subscription reported greater loyalty, perceived value and exhibited a higher monthly spend than those who were on the free trial.

study graph
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