ON CUSTOMER RETENTION || How poor execution of a subscription model could lead to losing customers
Cash flow is critical to the survival of a business, which is why I’ve often touted the pros of subscription models.
This model works well in most cases to help provide stable and predictable income for a business. So how could it backfire on you when it sounds so simple to implement? Well, when you place your clients on an auto-renew subscription without telling your customers up front, you can imagine how clients wouldn’t like a surprise recurring charge on their credit card.
Websites usually announce such payment terms and conditions on their websites, clearly outlining service packages and incentives for subscribing for a longer term, and commonly offer annual and monthly payment plans. There would also be a legible clause on the purchase confirmation page that states plans are auto-renewed until cancelled.
I have an issue when a vendor auto-subscribes clients to an auto-renew plan without notifying them of such an auto-renewal plan. I’m sure other customers would have an issue with such business practices as well. This isn’t like an email newsletter where you can add emails to a Mailchimp list and check a box to confirm that you know this person and they have given you permission to add them to the list. Want to know how we almost didn’t catch this mystery recurring payment on our credit card? Read on.
Story time.
Today I’m going to share a situation that happened at my marketing agency. Our media planners emailed one of our media vendors to request a booking for ad placement. The ad rep told us that there is a 3-month minimum booking. This is fine, and we confirmed via email that we have the approval from the client to proceed with a 3-month booking.
Throughout the booking process, the rep did not mention an auto-renew clause, or that it would apply to our situation, where we explicitly stated our request for a 3-month booking in black and white; those with a basic command of the English language would know this meant three months with no extension.
Surprise, surprise.
We got a charge on the company credit card for month four last week. We first checked through our records to confirm that we had requested a 3-month booking, and confirmed there weren’t any direct changes between the client and the media vendor.
I figured it would be better to follow up with a call to chat with the rep, in case there had been a mistake with their accounting department. We’re Canadian, so we’re used to being nice and giving others the benefit of the doubt. Now, this phone call was the highlight of my day, because the rep began to read off the auto-renew clause. They also reminded me that if I were to cancel the subscription, I would need to give them a 30-day notice—a subscription that we did not agree to. I was then told that they would look into the situation, and there were no guarantees that they would be able to refund the charge for their mistake.
Locking customers into a contract they didn’t sign up for isn’t going to encourage long term loyalty. In fact, it spurs clients to leave at the first sign of a viable alternative or substitute.
This scenario reminded me of a popular term—gaslighting—but used in a business context where suddenly I felt like I was in the wrong for not reading terms and conditions when in truth, we had indicated the duration of the contract in the initial booking.
It might be worth mentioning that I’m not alone in similar scenarios with this company, as other agencies have also fallen prey to this unannounced auto-renew clause. While the subscription model is often used to encourage repeat business and secure a stable revenue stream for businesses, the media vendor’s handling and execution of this auto-renew measure has left a sour taste in the mouths of long-time customers. We have dealt with this media vendor for years without issue, but needless to say, this case has prompted us to look for alternatives or even build one of our own solutions.
In today’s economy, where advertising revenue is harder to come by, we understand the need to secure more revenue streams. Still, how this sales situation was handled was undoubtedly detrimental to the brand. Perhaps the vendor considers themselves irreplaceable, but as with all business cycles, companies come and go, and substitutes can pop up when they least expect it.
If you run any business, ensuring a smooth and frictionless customer journey is critical. The key to repeat business isn’t to trap your customers into a contract; it’s to offer them value and service that makes them want to deal with you again and again. The best restaurants in the world don’t need to lock clients into dining once a month with them; great food, ambiance, and service bring customers back. Think of your favourite vacation spot, for example, like Japan, where I wouldn't need to be prompted twice to hop on a plane to experience the country’s spectacular cuisine and hospitality.
You have to work to provide a consistent and satisfactory customer experience to earn and keep repeat business. Wouldn’t you agree?
