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• This paper contributes to the understanding of the taste heterogeneity of travelers to pre-peak discount pricing strategy. • Naturalistic data from smart card data users in Beijing before and after a policy intervention is used in this regard. • Four groups of travelers with heterogeneous characteristics are classified by constructing a latent class model. • Different targeted policy recommendations for each group of travelers are proposed in order to improve the policy effect. Studies of travelers' response behavior to transportation demand management is receiving substantial attention among researchers and transport operators in recent years. While previous studies in this area have generally assumed that the sensitivity of travelers to different factors is homogeneous and relies on survey responses, which may be prone to self-reporting errors and/or subject to behavioral incongruence. Relying on naturalistic data, this paper aims to investigate the behavioral response to pre-peak discount pricing strategy in the context of the Beijing subway with a special focus on the heterogeneity among the travelers. Anonymous smart card data from 5946 travelers before and after the introduction of a peak avoidance policy in Beijing are used to construct a latent class choice model to capture the sensitivity to different factors and the associated taste heterogeneity of travelers. Given the passive nature of the data, the model can offer more realistic outputs. The results indicate that there is substantial heterogeneity in travelers' responses to the peak avoidance policy, and that they can be probabilistically allocated to four latent classes. For all classes of travelers, the decision to shift their departure to off-peak is affected by the monetary saving, the required change in departure time and the frequency of travel, but in different magnitudes. In particular, only two classes of travelers (who exhibit lower standard-deviation in pre-intervention departure time) show significant sensitivity to price changes indicating that the discount policies are more likely to be effective for these groups. The rest of travelers are largely price insensitive – warranting the need for non-monetary incentives as opposed to fare discounts. To the best of our knowledge, this study is the first to innovatively apply the LCC framework to analyze travelers' heterogeneous behavior using large-scale smart card data without socio-demographic information. The findings can provide guidance to the subway authority in devising differential peak avoidance policies targeted for different groups of users, which are likely to be more effective than the current 'one size fits all' approach. [ABSTRACT FROM AUTHOR]