MINNEAPOLIS (WCCO) — Consumers can’t seem to escape offers that give us a deal or pledge to save us money.
Many come through what are called subscriptions. It’s how companies turn us from a one-time customer into a loyal one.
But is that best for the consumer? A professor at the University of Minnesota’s Carlson School of Management gave us some food for thought.
When we commit to a service, we actually subscribe to it. And because of that, Professor George John says we adjust where we spend and shop.
“Generally speaking, companies benefit from it. People are far less price sensitive when they kind of make the decision once and then you use it or don’t use it,” John said.
He calls Costco, Sam’s Club and Amazon Prime good examples.
“What’s Amazon Prime trying to make you do? Come to us, check us out. You might even go somewhere else and check, but you’re going to come to me because you’ve got your two-day free shipping,” John said.
Memberships to gain access to lower cost or bulk groceries and goods have a similar goal.
“Why do they do that? It’s to commit you to wanting to go often enough to make it worthwhile to pay off that hundred bucks or whatever you did,” John said.
Newspapers and magazines are subscriptions generally offered for less than the cover price. Credit cards with an annual fee is also a subscription. Getting miles or points in exchange for the fee may make you use the card more and be a more loyal customer.
But John calls gym memberships the most egregious subscription. For most people, he says a pay-per-day plan would be most cost effective
“You feel like you’ve subscribed, you feel virtuous about trying to lose weight and, you know, it’s just hard to do it. So you wake up in the morning, ‘Oh, I’ll go tomorrow,’ and the gym club keeps your money,” John said.
He says consumers should go into subscriptions with their eyes open.
“It simplifies our lives but it doesn’t save us money. We often times think it saves us money, and if we’re really diligent, we could’ve saved money either way,” John said.