Headspace Uses Gated Offers to Prevent Discount Abuse

Tony Coray September 10, 2018 · 6 min read

Successfully marketing your subscription business is no small feat. Competition is fierce, and customer acquisition costs (CAC) and churn are high. Companies are fighting back with steep initial discounts, but that strategy fails to engender true loyalty, as other trial offers entice customers to impulsively bounce to the next brand.

To address these challenges, subscription companies are increasingly turning to gated, exclusive offers to acquire — and keep – customers who are part of high-value target groups. Whether it’s a student discount that seeds the next generation of subscribers or a military promotion that helps a company stand out, gated offers work because they honor an individual’s unique status and provide the kind of ongoing value that attracts and retains customers.

While these kinds of promotions can help brands acquire long-term customers, discount abuse can wipe all of the gains away. The profit you can generate through steep initial discounts can be quickly eaten up by the losses you sustain when subscribers who should be paying full price aren’t. That’s a risk you can’t afford to take.

So what’s the best way to protect your margins and make sure ineligible buyers can’t redeem your offer? Make sure you’re using a digital verification platform to gate it.

Discount Fraud is Rampant

Let’s face it: people are going to cheat. One in three consumers say they’ve redeemed a gated offer they knew they didn’t qualify for. Of those, nearly half (49%) say they used a code or a link forwarded to them, and one in five (20%) report they claimed belonging to an organization that they don’t.

This dishonesty hurts your business’s bottom line. 47 million Americans say knowing a brand allowed customers to wrongfully use a gated offer would negatively impact how they interacted with the brand. And the damage can be severe. Eighty percent would lose trust in the brand, half would shop elsewhere, and a third would even recommend that friends and family shop elsewhere, too.

And no company is immune to discount fraud. Our customer audit revealed that discount abuse can be as high as 35% for some brands.

1 in 3 consumers redeemed a gated offer they new they didn't qualify for.

Protect Your Offer with Digital Verification

The antidote to discount fraud is digital verification. Subscription companies like Kettlebell Kitchen, and streaming services giants like Comcast and CBS All Access, use SheerID’s digital verification platform to create gated offers they know will be secure.

Here’s how it works:

Subscription companies offer gated discounts to high value segments, such as students, teachers, seniors, or members of the military.
As part of the checkout process, consumers provide a minimal amount of data (such as email address and date of birth) to determine eligibility.
SheerID’s Digital Verification Platform uses hundreds of authoritative sources to instantly verify the subscribers’ eligibility.
Document review backs up the digital verification process for even greater security, ensuring everyone who accesses the offer is eligible, and everyone who is truly eligible can access it.
Subscribers redeem their gated offer.

The result? Your margins are protected and your gated offer pays off.

Case in Point: Headspace

The popular subscription-based meditation app Headspace turned to gated offers to connect with their audience and stand out from the crowd. As part of their vision to “improve the health and happiness of the world,” they launched a gated offer for students – a deep discount of $9.99/year – to make it easier for college and university students to access Headspace.

“Having student specific pricing was one of the most requested points of feedback our customer experience team received over the years,” said Keya Patel, Headspace’s Growth Product Manager. “Now, students will have support from Headspace to tackle feeling stressed, anxious, burned out, or overwhelmed, while receiving more than 85% off our normal price.”

A student meditating by a Headspace subscription she purchased through a gated student offer.

Headspace was concerned their gated offer would go viral and that discount abuse would impact their margins, so they leveraged SheerID’s Digital Verification Platform to protect it. Keya had seen the platform help other subscription services successfully launch their gated offer programs, and she was confident it would provide the security Headspace needed.

“We were looking for a strong verification platform that allows us to seamlessly embed student verification into our existing checkout flows with technical support when we needed it,” she said. “SheerID gave us this and more.”

Digital Verification Made Headspace Fearless in Promoting the Offer

When companies know their offers are secure, they’re not afraid to “go big” – to offer deep discounts and promote them broadly, which contributes to even greater success.

Digital verification gave Headspace the confidence to promote their gated offer with an integrated campaign that is reaching students through multiple channels, including:

College/university digital and print newspapers.
College/university websites.
Physical ads on campus.
Athletic department partnerships.
Social media, including Facebook, Instagram and Google ads.
Emails (for those already registered as subscribers).
PR outreach.

A happy student who learned about Headspace's gated student offer through their integrated marketing campaign.

Headspace’s campaign is a great example of gated offer best practices, but some subscription-based companies go even further. T-Mobile, for example, promoted their gated offer to the military by running national TV ads, pledging to hire 10,000 veterans and military spouses, and investing more than half a billion dollars to expand coverage and infrastructure in communities around U.S. military bases in the next five years. This type of multi-faceted initiative deepens the ongoing value of a gated offer by creating even greater personal connection between subscribers and a brand.

Digital Verification Boosts Conversions by Addressing Privacy Concerns

Digital verification doesn’t only protect revenue – it safeguards people’s privacy, too. And that trust is critical for subscribers to commit. Eighty-three percent of shoppers have concerns with the types of data that would be collected when redeeming a gated offer.

It also matters who’s doing the verifying: 57% of shoppers say they’d rather be verified by an independent third-party than a brand’s customer service representative.

SheerID’s Digital Verification Platform addresses these concerns by providing third-party verification that requires only the information a majority of shoppers surveyed said they are comfortable providing. In addition to the name of the college or university they attend, students only have to give Headspace their:

Full name.
Email address.
Date of birth.

83% of shoppers are worried about the data collected when redeeming a gated offer.

The more comfortable subscribers are with the verification process, the more likely they are to sign up and remain a loyal customer. Digital verification provides the foundation of an offer’s integrity, protecting not only revenue and reputation, but also the relationship between the brand and consumer.

Gated Offers Deliver Unmistakable Value in the Subscription Economy

Gated offers are quickly becoming a go-to strategy for subscription companies to acquire and retain customers across a range of high-value segments. But they need to be protected with digital verification if you want to fully tap into the incredible returns that businesses have seen, including:

18:1 return on ad spend (ROAS).
3x conversion increase.
2x repeat purchase increase.

Gated offers bring loyal subscribers, and digital verification ensures you’ll reap the financial rewards for years to come.

Ready to acquire long-term customers while protecting your margins?

Follow the lead of Headspace and other well-known brands like Comcast, Spotify, and The New York Times that are using digital verification to win the subscriber game. Contact SheerID to learn more or get a demo.