The 'loyalty tax' on subscriptions: why old customers pay more

Many subscription services employ a tactic where customers threatening to cancel immediately receive a significantly better offer. This "loyalty tax" phenomenon, where long-term customers might pay more than new ones, was highlighted in a viral Reddit discussion on the r/Frugal community.

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Usually, when a company pulls me in with lower prices exactly when I want to leave, I refuse on principle. But the incident made me wonder: how many other subscriptions could I get substantial discounts on just by faking the intention to cancel?

Users shared experiences of securing substantial discounts on internet, mobile phone, streaming, and even newspaper subscriptions simply by initiating the cancellation process. The consensus among participants was that this action triggers the "retention department," where companies keep their best deals to prevent customer loss.

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Companies, from mobile phone providers to other services, including online ones, know that attracting a new customer costs much more than keeping an existing one. That's why the retention budget is generous. Instead, the 'good' customer doesn't raise any alarms, so they will never offer them a better deal.

Economic analyst Adrian Negrescu explained that companies know acquiring a new customer is far more expensive than keeping an existing one, hence the generous retention budgets. "The 'good' customer doesn't raise any alarms, so they will never offer them a better deal," he told Adevărul.

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If you only ask questions about the bill, you won't get anything. Companies have strict procedures: retention offers are activated exclusively when the customer clearly states they want to cancel services.

To access these retention offers, simply inquiring about a bill is insufficient. According to a telecom employee, companies have strict procedures: retention deals are only activated when a customer explicitly states their intention to cancel. Experienced users suggest backing up this request with a competitor's offer, such as a concrete mention of a lower price found elsewhere, to effectively trigger the retention team and secure preferential pricing.

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The best time to negotiate is when you are outside the initial contract period or immediately after a price increase. You have the best chance of success if you can demonstrate an offer from a competitor.