When we started offering discounts for special clients at the digital consultancy USEEDS° I founded in 2008, we used two discount alternatives. The first discount scheme seemed to be the industry standard. You define a discounted retainer with the client – a fixed minimum amount of days or EUROs they would have to order in the years to come. The alternative discount scheme was a discount percentage which increases, the more a client orders within a period of time – without any obligations to order anything. The first scheme was sometimes the basis for odd discussions with clients on how much they still need to order and what kind of additional forced projects we could come up with to reach the limit. The second scheme always produced positive surprise followed by discussions whether we should transfer the money back or use it for additional projects our clients always wanted to do but couldn’t finance – „hidden delight“.
Why don’t You get money back from Amazon, if you paid for 48 hours of access time, but only needed 3 hours to watch the film?
I know the question sounds absurd, but it helps to look at pricing mechanisms from a different perspective, the perspective of trust building.
The two most common ways to reduce pricing without loosing margin are limitations (less Gigabytes, limited time, reduced features etc. than the consumer might want in future) and bundles (more months, more of the same, more Gigabytes etc. than the consumer might want in future). Both are continuously mentioned as reasons to feel disappointed and tricked – reasons to lose trust. Why is that and how can the „hidden delight“ pattern change it?
With limitation and bundles, Marketers sell less than the consumer might want in future or more than the consumer might want in future. What they most often don’t sell is what the consumer actually might want in the future.
Limitation and bundles force customers to make a bet. And every time the bet turns out to be a bad bet, the customer will transfer the disappointment onto the relationship.
Have you ever signed a one year fitness centre membership (more than you might want in the future) and „saved“ months of fees? Have you ever learned later on, that you actually joined the fitness program only for some months but still the payments were due month per month? It occurs to me, that the fitness centre industry only exists, due to the one year (or sometimes even two year) contract model. They know that the usual member will become a „sleeping“ member within months. It allows to intensively overbook the fitness centre and sell not 12 months for the price of 10, but 3 months for the price of 10.
Members who notice that they where somehow tricked – at least not advised to their benefit by the fitness centre agent – will not prolong the membership (well they actually wanted to leave earlier anyway 😉 or come back later. They also will not recommend the fitness centre in the neighborhood and might try to trick back. The consequence of limitation or bundle pricings are often frustration and distrust. No one will thank you for a benefit signed years ago but many will complain about a loss once happening. So the initial advantage in selling becomes a nightmare for selling again.
My wife was an extreme Adobe enthusiast for the last 15 years. Back in the days we had long disputes on whether „Illustrator“ (her favorite drawing software from Adobe) or „Freehand“ (the competitor from Macromedia I preferred) was the better choice. She insisted on the Adobe software and partly this preference seemed to originate from her deep trust in Adobe. This trust was broken some months ago, when Adobe granted her a 3 month free try out for a pool of stock images. She accepted („well it’s for free let’s see maybe it’s useful“) but never actually used the service and didn’t know, that she needed to unsubscribe it weeks before the trial period ended to prevent it to become an expensive one year contract („Adobe wouldn’t do that to me“). From that moment on she was reminded monthly – when the next 50 € were booked out of her bank account for a service she never uses – that she can’t trust Adobe any longer. 15 years of buying Adobe software equals a 5 digit amount of sales volume. Seems that Adobe is not aware of the return on investment in trust.
ING the biggest Digital Bank in Germany chose a different route in their mortgage division. Additionally to an extremely competitive interest rate, they offer a further 0,1% reduction, if the customer opens a free of charge current account at ING and uses it as the main bank account. Let’s say the customer signs a mortgage of 250.000,- € for 10 years – that makes the 0,1% reduction worth more than 2.000,- € for using a for free current account. Bianca de Bruijn-van der Gaag, lead of the „home tribe“ and therefore responsible for mortgages at ING explains: „I know 0,1% is a lot. But the current account allows us to stay in a deep high frequent relationship with that customer for years. It gives us the opportunity to prove, that we are the right bank for further banking related business. It pays off in the long run“
We are used, that Telcos force us to sign a 24 months „membership“, gas and electricity providers have special offers with a min. of 12 months „membership“, car leasing contracts often can’t be cancelled within the first 36 months, if you want to pay back your mortgage earlier than planned, you have to pay an „early payback fee“ to the bank and once you buy the yearly public transport subscription (12 months for the price of 10) it will be extremely hard to cancel it, let’s say because you move to another city. Bundles ensure that customers are forced to stay longterm – well at least for those 12 or 24 or 36 months.
Companies which care about trustful longterm relationships act differently. „hidden delight“ is one of their secret weapons. Take Transport for London. When they introduced the oyster card in 2003, they offered the opposite of the examples above. With Oystercard you pay the regular price of a standard ticket per travel but if you use it to an extend, that a day pass or week pass would have made more sense, they retrospectively switch you to the special day or week rate offer. „Travel as much as you like in one day and we’ll cap your fare so you don’t pay more“. Transport for London sells what the consumer might want in the future. Transport for London solves the cognitive inconvenience to predict one’s travel behavior – an uncertain bet – and offers a „hidden delight“ model. At the end of the day (or week – depending on the card) Oystercard users get a refund, if a cheaper ticket would have made more sense. A frequent positive surprise.
Definition Trust pattern #003 Hidden delight
The „hidden delight“ pattern describes behaviours in a relationship, in which one party changes conditions like pricing or service intensity retrospectively to the benefit of the other party.
„Hidden delights“ allow the continuous communication of good news along the way. And they help to sell. The Oyster card „cap your Fare“ offer was initially installed to make the Oyster Card attractive to customers. Longterm attraction in contrast to potential longterm frustration of bundles and limitations.
Now apply the „hidden delight“ pattern on your business.
What would happen if a bank doesn’t offer a special trading offer for the first 6 months, but reduces the trading fees depending on the length and intensity of the customer relationship. Wouldn’t this create positive longterm bonding? Wouldn’t it foster a trustful relationship? (And yes, if you do the math banks would make a good margin). Or Vodafone? What would happen with your trust towards Vodafone, if you don’t have to decide between plans because you know you always retrospectively get the plan which best suits your consumption? would it make you relaxed about telco plans? Would it make you stay longer with Vodafone?
A friend of mine just recently experienced the Amazon example. She wanted to watch a film and bought a 48 hour rent at Amazon. Within the 48 hours she didn’t watch the whole film. So she would have needed to buy another 48h rent to watch the rest of the film. Does that feel fair? Well she contacted Amazon via chat and told her story. And „one minute later I could watch the rest of the film without double payment – it was a very positive surprise“. A customer care agent repaired the trust. The „hidden delight“ pattern creates trust systematically.
Trustpattern #001 „Put it on my tab“
Trustpattern #002 „adversely trigger“
Also published on Medium.