How to leverage loss aversion to boost subscriber upgrades

Hop over to almost any SaaS homepage and you’ll likely see at least one AI buzzword…

AI-powered.

AI-enabled.

AI-driven.

(Is there an AI-buzzword/SaaS drinking game yet? If there isn’t, maybe there should be.)

The big problem with AI buzzwords?

All sizzle and no steak.

Sure, investors might want to see you’re incorporating AI. They’re investing in your future after all.

But your customer? They’re buying what you sell now. They won’t give a sh*t unless you tell ‘em what your AI can do for them.

Thankfully, this AI email marketing example (from Loom) seems to be an exception:

Loom actually explains what their AI feature does and how it benefits the user. And they’re doing so in a way that can help them increase average revenue per user (ARPU).

(For those thinking “ugh, ARPU—that’s for product marketers.” Sure. Lead acquisition is the thing that everyone wants to talk about. But increasing ARPU is crucial for sustainable growth in SaaS businesses. It’s a major lever that too many of us ignore.)

In this issue you'll see:

• How Loom leverages its AI trial to drive upgrades

• The psychology behind why temporary access to premium features can be irresistible

• The key email marketing strategy you can swipe to boost ARPU

Let's dig in.

THE BREAKDOWN

Loom’s AI upgrader email.

For your consideration, here’s Loom’s AI upgrader email:

Let’s start with the key area where the copy can be strengthened:

Replace Jargon & Buzzwords:

Yes, I know—this is supposed to be an example that counters the typical buzzwords and jargon. And it does (I promise!). Still, Loom fell victim to a few pesky buzzwords.

For example, some word choices—like "transform" and "better"—lack the specificity that makes the benefit feel, well… beneficial.

Similarly, “better” is subjective—tell us what you mean by better. Looking at the copy that follows, it seems like better probably means “easy to consume” or “actionable.” How do the folks who already upgraded describe what “better” means to them? Say that and you’ll make your message more meaningful.

Now, here’s what’s working:

1) Relevant Trigger-Message Pairing:

The email was triggered shortly after I took a specific action—recording a Loom. This trigger capitalizes on my recent engagement with the product, making the email timely and relevant. As a result, I actually wanted to open this email when I saw it in my inbox.

2) Trial Offer Specificity:

By mentioning "4 more videos left," Loom creates a sense of urgency and makes the offer feel more tangible. The email displays the countdown in several areas, so it’s unlikely a reader will miss that intel.

3) Clarity in AI Feature Explanation:

Loom provides specific details about how their AI works and how it benefits the user. (Yes, as previously mentioned, the benefits (bolded) are a wee bit buzzwordy. The specifics in the features help counteract this a bit IMO.)

As you can see, Loom's AI can do plenty of useful things for the user, like generate video summaries, create chapters, remove filler words and suggest video titles. By clearly saying what their AI does, Loom helps users understand how the feature helps them, which makes upgrading more appealing.

Which brings me to the bigger underlying persuasive technique at play…

THE PSYCHOLOGY

You win some… you (don’t really wanna) lose some.

Loss aversion is the psychological principle that suggests people feel the pain of losing something more than the pleasure of gaining something of equivalent value.

It's like feeling more upset about losing $100 than feeling happy about finding $100 on the street.

This concept was first introduced by Daniel Kahneman and Amos Tversky in their 1979 paper. (Fun fact: That paper is now one of the most cited works in economics and psychological science. Talk about standing the test of time.)

While some recent studies have questioned aspects of the original study, a comprehensive global study conducted in 2020 across 19 countries and 13 languages largely confirmed Kahneman and Tversky's findings.

So, yeah, loss aversion is still alive and well.

By temporarily unlocking premium features and then sending action-triggered emails, Loom is:

1. Explicitly highlighting what I currently have access to.

2. Emphasizing that I’ll lose these benefits soon if I don’t take action.

In doing so, Loom makes the reader acutely aware of what they stand to lose… and the simple action they can take to avoid that loss.

It’s worth noting that there’s likely a little of the endowment effect kicking in as well. The use-based trial does give a sense of temporary ownership. I’ve focused on loss aversion because the Loom email emphasizes what users will lose when the trial ends, rather than reinforcing a sense of ownership.

THE ACTIONABLE TIP

Unlock a premium feature. Upgrade with a strategic email.

Here's the key strategy you can swipe to boost your ARPU:

Temporarily unlock premium features AND pair that with email marketing to leverage loss aversion and drive upgrades.

Yes, the premium feature “unlock” is sometimes easier said than done. Depending on how your product is set up, you might need to unlock on a time basis vs. a per-use basis.

For example:

• You could unlock a high-value feature for 7 days, then send a series of 3 emails over the next week highlighting what the user will lose if they don't complete the upgrade.

• Not sure if this will work for your specific product? Start small by testing this strategy with a segment of your user base—maybe 10% of your base tier users. Monitor their engagement and upgrade rates compared to a control group. You can always scale up once you see results.

By implementing this strategy, you can increase your conversion rates. Boost your ARPU. Both of which help you grow your business more effectively.