Martin Lewis reveals the powerful psychology behind one-month free trials – and it's not hoping you'll forget to cancel

The clip above is taken from the Ask Martin Lewis Podcast on BBC Radio 5 Live, recorded on Wednesday 24 February.

Martin: 'We as humans don't like loss – we think of the loss more than of the initial gain in the first place'

Speaking on the show, Martin explained that there is of course a perception from companies that some people will forget to cancel after a month or two – but that this is only a short-term profit boost. He said: "We've obviously seen a huge growth in subscriptions from food boxes to dry-cleaning to flowers to the obvious Netflix and Amazon Primes out there and Disney+.

"A lot of people, I have to say, are saying they know they shouldn't have them and they don't watch that much but they don't cancel.

"That's exactly what's going on here. The obvious reason why companies often do free trials or limited-cost trials to get people to sign up is the apathy dividend; they hope they gain as people forget to cancel for a month or two. Of course, some people love it and think it's worthwhile. But that's a short-term contributor to profits."

'It's the same with gym memberships – people value the opportunity to go even if they don't use it' 

Martin went on to explain that the most powerful psychology at play is, in fact, that people are naturally predisposed to not losing something they already have. He said: "There's a more powerful psychology at play and I call that the 'inertia dividend'. That's because we human beings are naturally predisposed to not liking to lose something that we have.

"There are many people who wouldn't sign up to a movie service they don't really need if they had to pay for it but they would do it for a free trial. They go in with a view to cancelling it when their trial ends but at that point they've already become accustomed to it and getting rid of it means it's a loss. And we as human beings don't like loss."

Martin added: "This is not inelastic – we tend to think of the loss of a service much more than at its gain in the first place. If we use the parallel of a salary rise: if you get a salary rise, at first you feel happy at the increase in disposable income, but as soon as that's normalised and we're used to it, if they then take away that increase, you would feel that loss much more powerfully than you actually felt the gain in the first place for getting it.

"I mean [it's the same with] the gym membership, which in normal times people keep on when they don't use it because they value the opportunity of going to the gym even if they don't actually get to it.

'We need to recognise our emotional biases and cancel unused subscriptions'

To combat this, Martin went on to explain that we need to recognise our emotional biases and cancel unused subscriptions. He said: "So what we have to do is be clinical and recognise our own emotional biases.

"It's important to try and revert your mindset back to when you first signed up for the product. Knowing what you know now, ask yourself, 'If I didn't have this, would I pay for it?' And if the answer to that is 'no', then be clinical and ditch it."

You can read more on Martin's thoughts about this in his blog: The real reason why companies offer a month's free trial.