The FTC recently announced plans to ramp up enforcement on companies that make canceling a subscription difficult. The policy states that it’s deceptive, abusive, and in some cases illegal to not provide an “easy and simple” cancellation process that includes an option that’s “at least as easy” as the one used to subscribe.
1. Given complaints about unauthorized charges & impossible-to-cancel billing, FTC has issued a policy statement making clear that firms that trick customers into signing up for subscriptions or trap them when they try to cancel are breaking the law. https://t.co/y0LkZWvVFY— Lina Khan (@linakhanFTC) October 29, 2021
2. To comply with the law, businesses must ensure sign-ups are clear, consensual, and easy to cancel. Specifically, businesses should provide cancellation mechanisms that are at least as easy to use as the method the customer used to buy the product or service in the first place.— Lina Khan (@linakhanFTC) October 29, 2021
What does this mean? In short, if a customer can sign-up for a subscription online, they must also be able to cancel it online. And while this may seem like a no-brainer to many; the reality is, there is still a belief among many subscription-based companies – particularly those in the news industry – that making a subscription hard to cancel is going to lead to an increase in customer retention.
Ultimately, this move by the FTC signifies the end of call-to-cancel policies, and we believe businesses and consumers alike should be glad to see it go.
The consumer benefits from the end of call-to-cancel are obvious. More transparent, user-friendly canceling policies make managing your subscriptions easier. However, we would argue, having a simple subscription cancellation process benefits the company, as well.
As we know, trust is one of the most important factors consumers consider when making purchasing decisions. According to the Edelman Trust Barometer, 81% of consumers say they need to be able to trust a company to be willing to buy from them. What’s more, this expectation of trust is the same across most market and demographic groups. Meaning it doesn’t matter who you sell to – they want to do business with companies they trust.
Trust is built from meeting buyer expectations and having honest, transparent customer communications. Making your customers jump through hoops to cancel their subscriptions erodes trust.
And when you think about it, cancellations are the last impression your customers have with your company. If it’s negative, not only are they unlikely to resubscribe in the future, but they are unlikely to recommend your business to their friends or family.
At the end of the day, you want customers who are subscribed because they find value in your product. Not because you’ve trapped them in some never-ending cancellation loop. Making cancellation difficult simply delays the inevitable and drags down your brand’s reputation in the process.
Of course, as a business, you don’t want to encourage customers to cancel. Keeping your churn rate low needs to be an essential part of your business strategy. What are effective ways to retain customers and keep them happy long-term? We’ve written about this topic extensively, and what we’ve found is that with a transparent approach that allows for two-way communication, you can turn your cancellation process into a retention engine.
Make your cancellation process quick and easy. Delight your customers by allowing them to update, change, or cancel their subscriptions easily. Subscribers who can easily cancel their subscription will be more likely to return in the future. It will also make them more likely to recommend your company to friends and family, even if they don’t continue to use it themselves.
Collect feedback at the time of cancellation. Understanding why your subscribers are canceling is crucial to understanding how you can improve retention across the board. Again, the goal is that your product or service provides so much value that customers can’t imagine not having it in their life. Use customer feedback to identify current strengths and weaknesses and develop strategies for improvements.
Offer an incentive to keep the customer from churning. One of the reasons companies like call-to-cancel is that they believe getting a customer on the phone gives them the opportunity to sweet talk the customer to stay. But the truth is, there are tools that offer this same idea in a less intrusive, digital format. Offering incentives at point-of-cancellation is incredibly effective. Using an easy-to-integrate tool to offer incentives to customers on the brink of churning can prevent up to 30% of cancellations.
We understand that it can be scary to change your cancellation processes to make it easier for a subscriber to cancel. The idea of losing more customers is a hard pill to swallow. After all, you’ve invested time and money in getting people signed up in the first place, and your business depends on retaining as many customers as possible.
However, with the right tools and strategy, you can make a cancellation process that is FTC compliant and provides your business a ton of insight and control over customer cancellation touchpoints. Leading to stronger, more trustworthy, and longer-lasting customer relationships.
Schedule a demo to learn how ProsperStack can automatically transform your online cancellation process, to help drive down your churn and retain customers.