Episode 21 - New Cancellation Laws for Subscription Brands

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📰 Top Story: New Subscription Cancellation Laws: what you need to know and how you can still make customers ponder the decision

In episode 9 of this newsletter, I looked at how to optimise subscription cancellation journeys to reduce churn without harming future re-subscriptions, referrals, or your reputation.

To do this, brands must highlight the value lost, offer alternative options, and find the balance between prompting reconsideration without being obstructive. 

This is important because a win-back is far less effective than a save during a cancellation flow.

This is for two reasons (1) customers have left and, therefore, their decision is more fixed on staying off the brand than coming back and (2) marketing consent, meaning you may not be able to reach all lost customers via low-cost channels like email, resulting in additional media spend.  

For today's case study brand - Minnesota Star & Tribune, saving a customer has a 28% higher conversion rate than win-back.

This episode aims to give you the low down on everything you need to know about the US click-to-cancel regulation and the UK’s Digital Markets, Competition and Consumers Act, while supporting you with building cancellation journeys that optimise retention outcomes and deliver improved CX.

The US Click to Cancel Regulation  

The US FTC (Federal Trade Commission) will fully adopt the click-to-cancel rule in March 2025. Key elements of the law are: 

1. Sign-ups and cancellations should be equally straightforward.

2. Identifying how to cancel must be easy for customers.

3. You must get consent before renewing subscriptions or converting free trials to paid memberships. 

4. Brands must separate consent to subscription from any other part of the transaction via a consent check box. This consent should make clear (a) that the customer will be charged unless they take action to cancel, (b) the amount that will be billed and the frequency of recurring charges, (c) the date by which they must cancel to avoid being billed and (d) all information necessary to locate the cancellation mechanism.  

5. Customers who sign up via the web or an app must be able to cancel via those channels. Pushing customers to a chatbot or to call a call centre will no longer be permitted if the customer is not required to contact a chatbot or call centre agent when signing up. 

6. If customers sign up in person, they must be permitted to cancel online or via a call centre. 

In the UK, the Digital Markets, Competition and Consumers Act 2024 forces brands to 

1. Inform customers that a free trial or low-cost trial is coming to an end.  

2. Requires companies to ensure that customers can easily end a contract. 

3. Just before a contract is formed, businesses must present consumers with a list of "key pre-contract information." This must include the length of the contract, any minimum period before the customer can cancel the contract, the subscription fee, and the steps required to cancel the contract. 

4. Provide simple and accessible cancellation processes, free from unnecessary complications, delays or barriers. 

5. For subscription contracts entered online, an online cancellation process must be made available, and the processes must also be prominently displayed. Consumers may also use other methods like email or post to end their subscription contracts.

6. Once a consumer submits a cancellation request, it must be acknowledged with an "end of contract notice." This notice should confirm the cancellation date, and brands must refund any overpayments. 

7. The cooling-off period extends beyond the initial 14 days to renewal periods, including the end of a free or discounted trial or an existing contract.  

All this ends hidden cancellation processes, complicated processes and forcing digital signups to cancel via telephone.

This is good news for customers and brands (see episode 2 of this newsletter for more on why customer love is good for brands).

However, these new laws shouldn’t stop brands from encouraging customers to ponder the cancellation decision. 

This week, I posted my views on LinkedIn about how Netflix is losing millions of dollars due to its sub-optimal cancellation process.

In the UK, Netflix has a 4-step signup process: 

1. Enter your email address

2. Create a password

3. Select your plan 

4. Add billing details 

The cancellation process is two steps. From manage membership, customers go to

1. Cancel Membership

2. Cancel or change membership 

This is compliant because the number of steps is less than sign-up. 

However, Netflix is losing millions of dollars by not encouraging customers to ponder the cancellation decision. 

• The cancel button on the last page is at the top; you are gone with one click.  

• The information architecture is a mess; alternative options are below the cancel button; this is a lost opportunity.

• Covers of content and titles tell me little about what I will miss; they lack emotion or personalisation and do not create loss aversion. 

There are three things Netflix need to do which will generate millions of dollars, improve the customer experience and remain compliant with the law: 

1. Add a page that shares relevant, personalised content customers will lose access to by cancelling.

2. Enhance the visibility of alternative pricing options, including the with-ads payment option, and add the ability to pause.  

3. Place the cancel button below alternative options.  

In today's case study, we explore how a 157-year-old Newspaper publisher optimised its cancel flow by making customers ponder the decision.

“We don’t have another year to gamble on untested retention strategies.”

If you struggle to improve retention with test and learn, don’t - use proven systems instead.

I have spent 25 years in customer retention, consulted with 30+ brands and generated $200m of incremental ARR for brands in the last decade.

Reach out to discuss consulting, my fast-track retention accelerator, courses, and training.

💼 CASE STUDY: Minnesota Star Tribune

_{Together with ProsperStack}

Optimising Cancel Flows to Make Customers Ponder the Decision

The Star Tribune was founded in 1867 in Minneapolis. Today, it is Minnesota's top source of local news and the fifth-largest Sunday paper in the country.  

Before introducing an online cancellation mechanism, all cancellations were made at the call centre. One of the most surprising outcomes for the team is that one year after implementing their online cancellation journeys, they improved their save rate from 8.5% in the call centre to 18.5% online. 

Key to this success was encouraging customers to ponder the cancellation decision.

They did this with five key activities:  

1. Smart cancellation flows - don't fear adding a little friction (compliantly). If you use a stop-and-save flow (like Netflix), you leave money on the table. 

2. Surveys - surveys help improve the product and power personalised offers. 

3. Smart offers - based on tenure, cancel reason and customer profile.

4. Personalisation to the customer’s names, profiles and interests.

5. Always on experimentation. In their first year, they ran 15 A/B testing sequences on their flow to find the optimal business and customer outcomes. Check out episode 19 of this newsletter to learn how to fast-track experimentation. 

_{Find out how ProsperStack can optimise your cancel flow by visiting ProsperStack.com. Quote Retention Coach for a 10% discount.}

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