17 Protect Your Members from Subscription Fatigue
Have you ever felt unwelcome surprise at an annual fee appearing on your credit card, or dismay at the growing list of monthly subscription charges on your statements? If you have, you’re not alone. Thirty-six percent of US and UK subscribers find subscriptions frustrating because “it’s getting to be expensive to pay for multiple services” according to research by Global Web Index Report.1 TechCrunch reports that 53 percent of Chinese consumers expect to be using more subscription services in two years.2 And according to a July 2018 report from West Monroe Partners, 84 percent of Americans completely underestimate how much they spend on subscriptions every month.3 No wonder people around the world are starting to gripe about subscriptions!
Many subscribers complain that they’ve heard too many pitches to subscribe to the next new thing, when they’re not even sure what the value is. They’re thinking, “I don’t want to subscribe to the software—it’s cheaper to just own it outright and I don’t need the new features” or “I can’t read the issues as fast as they arrive. They’re piling up and making me feel guilty.” Or even “How many ties-of-the-month does one dad need?” Subscription fatigue is a growing affliction, caused in part by too many choices, confusing pricing, and even manipulative subscription businesses.
How does an organization manage the volume and cadence of its offering in such a way that it’s valuable but not overwhelming? You want your members to make your subscription a habit that they won’t reconsider, and to trust you enough to stay with you for a long time. Let’s look at the various factors contributing to subscription fatigue (and pushback), and how you can avoid contributing to the problem.
Too Many Subscriptions!
Any organization could theoretically become a subscription organization. That’s what we’ve been discussing in this book. You just take a step back and think about the forever goal that drives your members’ purchases. Then, brainstorm ongoing benefits you could add and burdens you could remove, repacking the benefits in a way that better creates a forever transaction. So, many organizations have transformed from ownership models to access models and from transactional to relational models. Millennials own less than their parents, subscribing to everything from transportation to entertainment to professional equipment and even food. Consumers and businesses alike love the freedom, flexibility, and security of these relationships. But the number of them is getting out of hand. People struggle to keep track of all the subscriptions.
Deloitte’s 13th Digital Media Survey reports that the average streaming video subscriber has three video subscriptions.4 “With more than 300 over the top video options in the U.S., coupled with multiple subscriptions and payments to track and justify, consumers may be entering a time of ‘subscription fatigue,’” said Kevin Westcott, vice chairman, principal, US Telecom, Media & Entertainment lead, Deloitte LLP. Tracking and managing subscriptions may start feeling like a full-time job, instead of an easy way to solve a problem forever.
In October 2018, banking behemoth Wells Fargo launched Control Tower, enabling customers to cancel subscriptions directly through the bank, without necessarily bothering to cancel with the organizations.5 Newcomers such as Truebill and Trim are also developing applications to protect consumers against too many subscriptions.
Thomas Smyth, founder and CEO of Trim, compares the relationship between the subscriber and subscription organization as a David and Goliath situation: “As a consumer, you have this whole capitalist society that is constantly getting better at pushing your buttons to get more money out of your pockets. It’s a losing battle.”6
He created Trim, an app that identifies where consumers might be spending too much, and then negotiates on their behalf. Says Smyth, “People say look, it’s gotten past the point where I can do this myself. I need a third party, an optimization machine, another business with a corresponding level of sophistication to look at my situation, see where I’m being taken advantage of, and make the problem go away.”
Consumers flock to these services to protect themselves from companies who grow their businesses via consumer inertia. Not surprisingly, consumers’ trust in, and commitment to, these companies declines. This lack of a trusted relationship is very bad for the world of subscriptions. According to Robert Skrob, author of Retention Point, subscriptions are the first thing to go in an economic downturn or a financial setback.7 As a result of the 2008 financial crisis, more than 40 percent of the subscription businesses Skrob tracked in 2007 were gone by 2009.
To sidestep subscription fatigue, consider bundling multiple benefits under a single subscription. Cable companies have long done this and continue to, even in the “cut-the-cord” era. Apple’s new subscription music offering has been bundled with Verizon.8 This could be good both for Verizon, which gains an additional revenue share and another point of connection with customers, and for Apple, which drives behavior change to their app for music, while expanding its footprint to help it compete with industry-leader Spotify (which has its own bundle deal with video-streaming service Hulu).
Too Many Options and Hard-to-Understand Pricing
Subscription billing is complex. Companies need to bill on a regular schedule, managing automatic payments and the issues that arise when a credit card or bank account no longer works. Price changes can be difficult for an organization to manage, and having multiple tiers of pricing can make things really messy. In December 2019, IDC released an assessment of 13 subscription management platforms, each of which provides myriad ways to bundle and price a subscription’s features and benefits. It’s possible to create virtually limitless pricing options. You can have multiple tiers, as well as micro-transactions and fixed price options, and different rates by size or industry.
Some software-as-a-service (SaaS) companies literally have a different pricing structure for every client. Why? Because the client asked, and the billing system allows it. It can feel good to give the client exactly what she asks for, even if it creates unnecessary complexity for the SaaS organization or ultimately doesn’t give clients what they really need.
Letting your customers dictate the specific features and structures they want is a little like patients self-diagnosing and determining their own prescription. Diagnosis and prescription are your job. The customers are the experts on their pain points, but not necessarily in how to solve their problems. Part of the value you provide is in packaging and combining benefits.
Companies with too many features and incomprehensible billing algorithms can overwhelm subscribers. It’s tempting to offer a low introductory price that is eventually raised, but anytime pricing changes, it gives customers a reason to move from membership back to a consumer mindset and to reconsider the initial purchase. To avoid exhausting your subscribers with options, keep your pricing as simple as you can. You can still test pricing plans and terms. It’s also perfectly fine, even powerful, to reward your best customers for their loyalty with better pricing or benefits. This approach is the opposite of what most organizations do with low introductory pricing but aligns well with a membership mindset. Experimentation and different options can work, as long as you are transparent with customers. Remember, pricing needs to be simple for the customer to understand—refer to Chapter 12, “Create and Fine-Tune Your Pricing Strategy,” for that discussion. The more you tinker with and adjust your pricing on the fly, the less customers will trust you.
Comedian Ryan Hamilton has a whole sketch about how hard it is to cancel a gym membership.9 Hamilton jokes that the only thing you should need to do to cancel is to say “I want to cancel,” but in fact, you often have to cancel in person, or on a particular date, or with a formal letter. These are all tactics to postpone canceling or dissuade it entirely. What irks him is that it can be painfully obvious the customer is not getting the value he’s paid for—but it’s still hard to get out of the subscription. “As you can see, I’ve spent $2,600 for four workouts. Now, from where I’m standing, the grounds for cancelation are pretty solid.”
At a 2018 gathering of CEOs using subscription pricing, one proudly explained to me how he’d extended the average revenue per user (ARPU) at his company by an average of two billing payments by requiring subscribers to cancel via phone only and during normal business hours. Needless to say, I was not impressed. Imagine how his customer must feel, having to schedule time to cancel unneeded, unwanted subscriptions! Retaining customers by “hiding the cancel button” is not new. There’s a whole world of longtime subscription businesses, known in the trade as “continuity businesses,” that bill consumers at the start of each month in exchange for automated product shipments. Think “Book of the Month Club” and those old record clubs that used to give you 12 CDs (or audiocassettes) for one penny if you sign up. They were (in)famous for obstructing cancellation.
Historically, the cable companies have been among the worst offenders. It’s notoriously difficult to cancel a cable subscription, and the bills are tough to read and understand. Pricing might start at 60 percent or more off the regular rate, then skyrocket over time. Additionally, because many markets have limited options for consumers, they feel forced to accept whatever they have to pay. With the rise of new streaming content options, consumers now have more choices.
This is why so many apps and financial institutions are providing consumers with ways to fight back. Trim’s Smyth explains, “People don’t want to cancel, so Trim gathers consumer purchasing power and insights to help it negotiate on the subscriber’s behalf. ‘I’m negotiating on Robbie’s behalf and the right price is . . .’ can be highly effective, while saving the consumer time and aggravation.”10
Investors are starting to understand that increased customer lifetime value doesn’t offset the backlash from making it difficult to cancel. Nikhil Basu Trivedi, a managing director at Shasta Ventures, actually sees an upside to easy cancellation policies.11 “Having a clear cancellation button can lead to a potential save mechanism—you can say ‘are you sure?’ and offer other choices to the customer (like a different cadence—every other month, or quarterly—or a lower priced plan)—and you can also learn from why a customer is thinking about canceling.”
Netflix has always been a leader in giving subscribers freedom to leave. In 2019 when it raised subscription rates, it included the link to cancel in the email announcing the price increase. That’s transparency. Don’t hide the cancel button. My experience working with a broad range of companies using subscription pricings has given me confidence that subscribers will often come back if the value is there.
Don’t succumb to the temptation to extend a subscription by a month or two, or add features your customers don’t need while charging fees you hope they don’t notice. These tactics can mean the difference between hitting and missing your quarterly expectations. But any company with a business model predicated on its customers’ stupidity or laziness is bound to fail in the long run.
And who wants to work at a business like that? If you aim to build forever transactions, based on relationships where customers trust your advice and remain for the long term, don’t give them reasons to cancel.
What to Do Next
• Have you optimized your offering with triggers (features that drive sign-up) as well as hooks (features that may be discovered post-transaction that drive loyalty and engagement)?
• Make sure that your service is a “must have” with benefits that become weekly or daily habits. If you have good market share, consider bundling other subscriptions into your offer to deepen the ties.
• Continue to add new features and functionality, ideally without changing your pricing.
• If you were a customer trying to cancel right now, could you find the cancel button? Don’t hide it.