Presentations

Subscription Programs and Customer Behavior

Raghuram Iyengar, University of Pennsylvania

Subscription programs such as Amazon Prime and Sephora Flash give members access to a set of exclusive benefits for a fixed fee upfront. In this session, Raghu Iyengar will discuss the causal effect of customers’ adoption of a subscription program on their subsequent purchases. Analyzing a data set of a subscription program launched by a firm in the fast-moving consumer goods industry, he shows that subscription leads to a very large persistent increase in customer purchases, with significant variation across customers. Members are more engaged with the company as they purchase more frequently and a greater variety of products. Customers experience a sunk cost fallacy and switch their purchases away from competitors to the focal company in product categories with lower switching costs. Raghu will discuss the implications for subscription businesses and customer retention.

Related Conference

Marketing Science Accelerator

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