Whether it’s cable TV, a gym membership, or computer software, many of us prepay for products and services. Prepayment is based on the dual logic that as consumers, we will have one less thing to worry about in our busy, chore-filled lives, and we will enjoy the product more if we have already paid for it in advance. And in some cases, our decision to prepay is based on the fact that the marketer has offered us a nice-sized discount in exchange for cash upfront .
Despite potential benefits, consumers should be cautious about prepaying for products. In an earlier blog post, I described the downsides of subscriptions. Even though consumers enjoy purchasing subscriptions, they often do more harm than good. Consumer researchers have found that paying in advance, too, can hurt consumers’ wallets and produce unintended negative consequences. These effects range from the consumer’s incorrect assessment of the product’s real value, to how much of the prepaid-for good or service they consume afterwards, and how much they enjoy the consumption.