Optimize Your Subscription Model for Greater E-commerce Success
The Federal Trade Commission (FTC) has proposed a new rule that could make canceling subscriptions easier for consumers.
Under the "click to cancel" rule, companies must provide a "clear and conspicuous" way for consumers to cancel their subscriptions or membership.
This could include a button or link that says "cancel subscription" or "end membership" prominently displayed on the company's website or mobile app.
The FTC's proposed rule is designed to address the issue of "negative option billing," where consumers are automatically charged for a subscription or membership unless they take action to cancel it.
According to a report by the Better Business Bureau, complaints about negative option billing have increased in recent years.
In 2019, the BBB received over 6,000 complaints related to negative option billing, up from just over 2,000 complaints in 2015.
In a statement, the Consumer Federation of America (CFA) said, "The proposed rule will help to ensure that consumers are not trapped in unwanted subscriptions and that they have control over their own financial lives."
If the rule is approved, it could significantly impact the subscription and membership-based business model.
What can you do?
In the world of e-commerce, subscription-based models have become increasingly popular.
Nonetheless, retaining customers and preventing them from canceling their subscriptions can take time and effort.
In this Substack, I'll share some tips to prevent e-commerce subscription cancellations and provide relevant statistics to support these tips.
Augment customer retention for subscription-based e-commerce models
Offer a free trial period
A free trial period can allow customers to try out your product or service before committing to a subscription.
Recurly has found that companies that offer a free trial period have a 15% higher retention rate than those that don't.
Follow these tips for offering a free trial:
Determine the length of the free trial: The free trial period should be long enough for customers to experience your product or service fully but not so long that it becomes costly or ineffective. Based on a survey by Recurly, the most common free trial period for subscription-based businesses is 14 days.
Communicate the terms and conditions: It's essential to clearly communicate the terms and conditions of the free trial period to customers. This includes the length of the trial, what is included in the trial, and when the trial will end. Providing this information upfront can help prevent confusion and frustration in the future.
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