Subscription commerce has become incredibly popular over the past few years, offering subscribers great value for a low monthly price. However, a sinister side of subscription commerce is starting to emerge.
Some companies are seeing huge profits from inattention, especially the big players. Automatic renewals and price increases often fly under the radar, leaving subscribers out of pocket without realising.
In this article, we will look at how this affects subscribers, how the big companies are responding to attempts to fix this flaw in the system, and what you can do to keep your subscribers happy.
Inattention is driving subscription profits
Subscription services can be a great value proposition. You get access to products and content for a fraction of the upfront cost. In times of economic struggle, a subscription service can be exactly what you need. Yet, subscriptions can be a double-edged sword. The great value quickly diminishes when subscribers forget to cancel once they’re done using the product.
A recent NBER paper by Liran Einav and Neale Mahoney of Stanford University, and Benjamin Klopack of Texas A&M has uncovered some interesting facts that link inattentiveness with big profits for subscription companies.
The paper confirms what many of us already suspected, subscription companies are relying on subscribers forgetting to cancel as a significant source of revenue. They estimate that “inattention increases firm revenues by between 14% and more than 200% depending on the service”.
Think about that for a second. A potential 200% increase in revenue is coming from subscribers who simply don’t know their money is being taken, or realise too late to cancel. Seems shady, right?
This isn’t the first study painting subscription commerce in a bad light. A 2022 study by the UK’s Citizens Advice called for a ban on subscription auto-renewals after finding that people in the UK wasted £300 million per year on unused subscriptions. They attribute this staggering figure to free trials, lack of renewal notifications, and complicated cancellation processes “trapping” subscribers into long-term subscriptions. Their study also found that 80% of those surveyed supported banning auto-renewals.
It’s clear that this consumer-friendly concept can easily become parasitic, slowly draining people’s bank accounts despite the current cost of living crisis. So, what are the big players in subscription commerce doing? Surely they’re working hard to make things right for their subscribers? Not quite.
High-profile cases like Disney’s pushback over new subscription legislation in the UK make it clear that the big names are fully aware of the financial benefit of inattention. Fighting against such a simple, subscriber-friendly piece of legislation shows that the biggest names in subscription commerce rely on dark patterns, inattention, and subscription traps.
With the insidious side of subscription commerce coming to light, many people feel rightfully wary when purchasing new subscription services. The question now is, what can subscription companies do to win back consumer trust?
How to ensure you're doing right by your subscription customers
At Limio, we’re right alongside consumers in standing against these practices. We’re a start-up based in London, so we understand that every penny in the bank really matters. That’s why our mission is to make subscription commerce work for businesses and subscribers and return this industry to the consumer-friendly, high-value market it should be.
From a brand reputation standpoint, it doesn’t make sense to rely on subscribers forgetting to cancel. Treating your subscribers well is the best way to build a brand. That means ensuring they continually find value in your subscriptions.
To avoid this kind of trend, subscription providers should:
Send subscription reminders
Regular subscription reminders help subscribers better manage their finances. It’s easy for customers to sign up for a free trial and forget to cancel, but an ongoing, unwanted subscription can mean a big hit to budgets. Sending subscribers an automated email reminding them of their active subscription allows people to assess if they still want and can afford the subscription.
Offer easy changes to subscriptions
If you have a multi-tiered subscription service, make it simple to change tiers at will. Subscribers may want to keep certain subscription benefits but can’t afford to pay for your top tier. Allowing them to easily switch tiers instead of cancelling and resubscribing will help increase retention rates, improve customer satisfaction, and help subscribers keep getting value from your offerings.
Work with subscription regulations rather than fighting them
While the big names are busy fighting consumer-friendly regulation of the subscription commerce market, smaller companies are focusing their efforts on compliance.
As we’re seeing in the UK, governments are setting their sights on subscription commerce. They’ve recognised that consumers need additional protection against subscription traps and dark patterns. While subscription giants like Disney and Netflix can afford fines for failure to comply, smaller businesses cannot afford to run afoul of regulations. So keep up-to-date with new regulation developments — which we follow closely on our blog — and work towards compliance.
Make it as easy to cancel as it is to sign up
Within the EU, The Digital Services Act already requires subscription platforms to offer a cancellation process that’s as simple as signing up. This includes clear signposting to the cancellation section of their website and minimal roadblocks designed to deter subscribers from cancelling. We expect to see more governments adopt these types of cancellation regulations, so it’s better to get ahead of the curve.
Do subscription commerce the right way, with Limio
Letting inattentive customers fuel your revenue may be tempting, but treating them well will help you build a more stable and reputable brand that subscribers will appreciate.
Partnering with Limio makes it simple to build customer-friendly subscription businesses. We’ll help you create custom cancellation flows, auto-renewal reminders, and anything else you need to make life easy for subscribers — all while keeping you ahead of legislation changes.
Get in touch with us today to get started on your journey to better subscription commerce.