Regulatory pressure on subscription cancellation and how media subscription businesses can prepare

A key component to any subscription business strategy is to prevent cancellation and improve retention. In the Reuters Institute Journalism, Media, and Technology Trends Predictions Report (2023), Nic Newman predicted that news/publishing leaders will concentrate more on retaining existing subscribers rather than attracting new ones over the next year. Read our take on retention, here.

Combating churn is often a simpler and more cost effective way of maintaining a healthy subscription business. However, in the pursuit of lowering cancellations, many companies deliberately make it difficult for customers to end their subscription. This includes the popular “call-to-cancel” technique and similar “subscription traps”. These practices often require customers to go through a long tedious process before they can cancel their subscription – often being asked to first call a customer representative, wait and listen to the sales pitch before confirming that they want to cancel.

In a survey conducted by the American Press Institute (2021), only 41% out of 526 news organisations across the United States make it convenient for customers to cancel their subscriptions online.

Due to growing concern around consumer rights, governments around the world are releasing proposals for new regulations that could address these “dark patterns”. The Digital Markets, Competition and Consumers Bill in the UK reforms consumer protection laws by further protecting consumers from trade practices including “subscription traps”. The bill requires subscription businesses to allow consumers to end their subscription contract in a “single communication” (e.g. restricting subscription providers from requiring customers to phone a call centre or fill in a long form to cancel the subscription).

The Federal Trade Commission (FTC), has proposed a similar provision called the “Click to Cancel” rule. The provision mandates businesses to make a straightforward process for subscription cancellation process, as easy as it was to sign up.

If enacted, the proposed legislation will penalise those continuing to use dark patterns and impact the revenue of those who comply.

In the UK market, according to the government impact assessment released in April, it is estimated that the reformation will result in a one-off cost of £315mn for businesses and £1.2bn in lost revenues, as well as the loss of an additional £1.7bn for reminding clients and providing alternative cancellation methods. Meanwhile, the FTC estimates that 109,000 organisations will face a total annual cost of over $5.7mn, but according to Venable LLP (2023), these figures might underestimate the compliance burdens with businesses likely to face far higher total costs as a result of this rule.

There are several ways media subscription businesses can prepare for these changes to regulation. At FT Strategies, we often emphasis the following tactics to our clients:

Focus on engagement

Engagement has a strong correlation with retention. Building consumer engagement is critical during the early stage of the customer journey. According to the Piano Benchmarking at INMA, on average, 34% of churn occurs within the first 90 days of subscribing. New customers churn because they often struggle to understand the product or might not get the level of value they anticipated. Unfortunately, it is difficult to win back these users because they did not develop a relationship with the publication. The best possible way to address these regulatory challenges is to be proactive in ensuring that customers' engagement is high during their early life by having a solid onboarding strategy. This strategy should be centred on helping customers make the most of the product and building foundational habits that will help them engage for the long term.

At the FT, the priority of our onboarding strategy centres on driving usage and encouraging habits that will lead to the long term engagement of customers:

• Signing up to the app
• Receiving push notifications
• Following topics on MyFT
• Signing up for newsletters
• Engaging with comments
• Reading the FT across multiple devices
• Reading the FT on Weekends (Saturday or Sunday)
• Visual journalism

Completing the actions above tend to boost engagement and reduce the likelihood of churn.

Embed retention tactics at every stage of the customer lifecycle

In addition to keeping subscribers engaged, businesses should also find other creative ways to improve retention. This is particularly critical during the trigger moments in the subscriber lifecycle (e.g. end of trial, renewal).

The initial step is to determine the drivers of churn (i.e. price sensitivity, lack of engagement). Effectively understanding churn drivers and when they typically occur in the lifecycle can help preventative strategies. Proactive retention strategies include:

• Sending personalised emails and offering tailored discounts during critical moments. At the FT, we segment readers based on their propensity to renew. We then adapt our approach depending on propensity levels - for example, we typically offer a price freeze or lower priced product for audience segments that are less engaged with our content.
• Encourage long term subscriptions. Customers subscribing to annual plans have higher retention rates and in turn higher lifetime value. In Piano Benchmarking at INMA, it was found that 70% of subscribers with annual subscriptions remain after 1 year, while only 33% of monthly subscribers remain after their first year. We have found similar results with the 500+ publishers that we have now worked with - annual subscriptions can have 3 - 7x higher lifetime values because of the reduction in churn rate.

Create an effective but easy cancellation process

It is inevitable that some customers will decide to cancel their subscriptions, for a variety of reasons. However, using subscription traps to retain them is not the long term solution. As the practice of the tedious cancellation process becomes unacceptable in the eyes of both the customers and legislators, it is important to come up with an effective but less difficult cancellation journey.

Many companies fear that making the cancellation process easy would increase voluntary churn. Previously, the FT only allowed subscribers to cancel through a “call-to-cancel” option. However, we found that this approach was the highest source of negative experience for our subscribers. Motivated by strengthening our customer experience and retention management, FT decided to remove the friction for customers cancelling their subscriptions by allowing customers to cancel online. In 2020, all digital subscribers could cancel online, but the developed ‘save me’ journey makes the process easier and at the same time aims to keep the subscriber. This new journey yielded a more positive save rate of 6% (doubled compared with the previous 3% save rate). The steps on our cancellation journey include a “fear of missing out” message (e.g. reiterating the value of the brand and perks of subscription) and price freezes (e.g. changed subscription fee for the next renewal and recommended discounted package).

The seamless online cancellation journey of FT resulted in the following:

• No negative impact on the overall cancellation performance.
• Effective “save me” journey doubles the trial save rate.
• Decrease in the negative feedback from subscribers.

With the increasing intervention of the government on media subscription businesses, organisations need to be proactive in ensuring that they can maintain a healthy business and most importantly retain customers.

If you want to find out more, please do not hesitate to reach out to us.