Tag Archives: Subscription

“Lay rationalsim” leads consumers to choose subscription services

Subscription-based model attracts attention. It helps firms to stabilize profits, obtain insights, and forecast sales, enabling them sustain.

However, marketers have to pay attention to consumer psychology when they develop a subscription service. That is, pain of payment is detached from joy of enjoyment. When consumers consider subscribing a service or not, they emphasize the realized pain of payment rather than their expected joy of enjoyment. In this case, they tend to rely on “lay rationalism” and base their decisions on reason than on feeelings (Hsee et al. 2014, pg. 134). In order to use reason to guide decisions, consumers may calculate the cost effectiveness of a service rigorously (e.g., how much I will enjoy later based on how much I pay now).

Since payment-enjoyment time gap leads consumers to rely on lay rationalism, they may like a subscription service that is is easy to calculate its cost effectiveness. Take an example of the following 2 TB Dropbox service. The cost effectiveness of the two billing cycle options are easy to calculate and easy to compare because their pay period is identical (month). I subscribed this Dropbox service because I found it easy to calculate cost effectiveness.

In contrast, when cost effectiveness is difficult to calculate, a subscription service may not be chosen. Take an example of the following 3 TB Dropbox space. In this case, the cost effectiveness of the two billing cycle options are difficult to calculate and difficult to compare because their pay periods differ (year vs. month). I assume many others hesitate to choose one of the two options.

Hsee, C. K., Yang, Y., Zheng, X., & Wang, H. (2014). Lay Rationalism: Individual Differences in Using Reason Versus Feelings to Guide Decisions. Journal of Marketing Research, 52(1), 134–146.

People have a lay notion of rationality—that is, the notion of using
reason rather than feelings to guide decisions. Yet people differ in the degree to which they actually base their decisions on reason versus feelings. This individual difference variable is potentially general and important but is largely overlooked. The present research (1) introduces the construct of lay rationalism to capture this individual difference variable and distinguishes it from other individual difference variables; (2) develops a short, easy-to-implement scale to measure lay rationalism and demonstrates the validity and reliability of the scale; and (3) shows that lay rationalism, as measured by the scale, can predict a variety of consumer-relevant behaviors, including product preferences, savings decisions, and donation behaviors.