Discounts Don’t Devalue Your Brand (When Done Right)

Discounts have long been treated as a necessary evil in SaaS. Tolerated, but rarely celebrated.

But the data tells a different story.

At Churnkey, we’ve looked at over three million subscription cancellation sessions.

Offering a discount at the moment of cancellation extends customer lifetime value by more than five months.

What We Learned from 3 Million Cancellation Sessions

When customers initiate a cancellation, subscription companies typically present one or more offers, commonly known as a "cancellation flow." Here’s how each performs:

🟢 Discounts

• Customers who accept a discount stay 5.1 months longer on average
• 11% remain subscribers over a year later, even after the discount expires
• Best used as time-bound, targeted offers, not broad, public promotions

🔵 Pauses

• Accepted quickly (15 seconds faster than discounts, on average)
• Add 5.5 months of additional customer life
• Pauses appeal to users who are overwhelmed or budget-constrained and simply need a break.

🟣 Trial Extensions

• Highest acceptance rate at 20%
• Most customers decide within 25 seconds
• Trial extensions give customers more time to experience value, especially if they feel they haven’t fully explored the product.

🟡 Plan Changes

• The most durable retention lever
• Adds 7 to 8 months on average
• 30% of users who choose a plan change remain for 12+ months
• Plan changes help customers recalibrate their commitment when the existing tier feels mismatched.

Each one maps to a specific moment of friction and emotion in the customer journey.

“Clearly, in the short run, you have to offer a discount. And what I would be focused on is what I call discounting with dignity in a manner that doesn’t devalue your product in the long run.”
— Rafi Mohammed, Harvard pricing strategist

The Skepticism

Most SaaS leaders have good reasons to be wary of discounts.

Few finance teams track total discounts, let alone by customer segment or time period. Once you start giving them out, it’s hard to go back. And every percentage drop in price cuts deeper than you’d expect. A 1% dip in average selling price can slash operating profit by around 8%.

There’s also the signaling problem. A deep discount can suggest your product isn’t worth full price.

Vidhi Agrawal from Databricks put it simply:
“Substantial discounts often indicate the client may not value the product highly.”

The issue isn’t that discounts don’t work. It’s that most companies use them too early, too often, and without clear strategy.

Why Offer Discounts at Cancellation Instead

Discount offers work because they target people who already know your product.

You’re not fighting against competitors in a tab war. You’re trying to keep a relationship alive.

That moment is an opportunity.

That’s where contextual, one-time offers shine. They give customers a reason to pause and reconsider their decision.

When paired with options like pauses, plan changes, or trial extensions, discounts become just one part of a powerful retention toolkit.

As Rafi Mohammed at Harvard puts it,
"Clearly, in the short-run, you have to offer a discount. And what I would be focused on is what I call discounting with dignity in a manner that doesn’t devalue your product in the long run."

How to Use Discounts Without Killing Your Margins

The best SaaS teams don’t avoid discounts. They use them with precision. Here’s how discounts can be used when combined with a retention flow strategy:

1. Make discounts rare and invisible
   Keep them embedded within cancellation flows.
2. Segment your offers
   Don’t treat every user the same. Use plan tier, behavior, and usage to personalize. Test yourself or let Churnkey do it for you with Adaptive Offers.
3. Track long-term revenue lift
   The goal isn’t just stopping churn. It’s increasing total LTV. Use that as your north star.
4. Combine offers in a full cancellation flow
   Use discounts alongside pauses, plan changes, and trial extensions to give users flexible offers. Analyze feedback at scale and see the MRR impact to prioritize.

“The most effective companies build pricing power, not just pricing strategy.”
— Fraser Davidson, CEO, Cyclr

Retention Is a Strategy, Not a Tactic

A 5% monthly churn rate means that 46% of your customers leave each year. Monthly churn rates above 10% lead to annual churn rates over 70%, which would be catastrophic for most businesses.

Discounting is neither a cure-all nor a trap. It is a tool. Used well, it extends revenue and rebuilds relationships. Used poorly, it destroys value.

The key is placement and intent. Discounts at cancellation are not giveaways. They are an invitation to stay.

Why Churnkey Beats Everything Else

At Churnkey, we help subscription businesses use the cancellation moment wisely. With flows that are thoughtful, data-backed, and flexible, you give your customers a reason to stay.

With Churnkey, you can collect partial invoices, offer discounts via dunning emails, run adaptive offers intelligently without having to manually A/B test what resonates most, and so much more!

Building all of this in-house would take years, and it may not come with an ROI Guarantee like Churnkey does.

Sign up for Churnkey or book a demo to see how you can lower churn without reinventing the wheel.