Buy 1 Get 1 Free Or 1/2 Off – Which is better for SaaS Products??

I have been interested in Masterclass e-learning courses for few months, since they added celebrity chefs like Thomas Keller and Gordon Ramsay. The latest targeted ads by google made me aware of the “Buy 1 Gift 1” promotion they were running this week .

I thought $180 (annual all-inclusive pass, currently the only pricing tier available) was a little bit steep for my impulse buy, given the fact my past e-learning experiences weren’t great. The “Buy 1 Gift 1” had brought the price point below my impulse buy $100 threshold if I could split it with a fellow crusader. Unfortunately I did not find a buddy to split the class, so I reached out to Masterclass offering them an opportunity to sell the annual subscription at $90 similar to what I would get if I split it with a buddy.

The customer service was prompt and they politely declined my offer.

As I was thinking about which promotion would be better, I came up with conflicting ideas.

1.      Near Term Revenue- Given that the only pricing option is an annual subscription, it would be hard to argue the “1/2 off” promotion would be better, since we would need twice the number of customer to sign up. Although under $100 might be a good sweet spot for many consumers including the “Gift Giving” segment they are trying to attract.

2.      Devaluing the Product- Masterclass being in the premium e-learning segment, slashing the rate in half may not be the best move. However I would argue the “Great American Marketing Machine” has trained the consumer to expect hefty discounts during these “Black Friday- Christmas” cycles even for premium products from clothing to diamonds to cars.

3.      Customer Lifetime Value –

As my sales Yoda always says, “Selling more product to your existing customer is much easier than getting a new customer.”

I believe the “1/2 off” model would have better probability at customer retention, rather than “Buy 1 Gift 1” because the person being gifted my not be as keen on the service as the paying customer.     

I am pretty sure the smart Product/Marketing people at Masterclass analyzed the data to come to the conclusion but I am conflicted since I do not have the data.

All I know is Thomas Keller style “Pasta to die for” will have to wait till the next promotion.

Would love to hear your thoughts.

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