Monday, March 27, 2023

The FTC's Proposed “Click to Cancel” Could Help or Hurt Your Brand. Which Will It Be?

Photo by Markus Winkler on Unsplash
My peer, Ben Bloom, raised a provocative question: Will the proposed Federal Trade Commission “click to cancel” rule help or hurt brands? Like virtually everything in business, I believe the answer depends on a brand's customer-centric culture, the customer understanding it has or collects, and its commitment to #CustomerExperience. It's clear how this proposal could hurt some brands, but smart brands can beat (and should already be beating) the FTC to the punch with a winning #CX.

If you're not familiar with the proposed “click to cancel” rule, it is a simple idea that all of us will applaud as consumers: It would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if you can sign up online, you must be able to cancel on the same website in the same number of steps.

The fact “click to cancel” must be forced upon companies is a sign of how difficult it is to achieve customer-centric decisions in a company, particularly at the moment of customer abandonment. For a new or loyal customers, the advantages of experiences that encourage satisfaction and loyalty are evident, but what's the value of making it easy for customers to depart? The business benefit of keeping customers is immediately evident (revenue!) while the dangers of poor CX at the moment of churn are less so (damaged reputation and a reduced chance to recapture the customer). You can almost hear brand leaders thinking, “Well, if cancelers are pissed off to begin with, then what's the danger of more frustration?”

But, let's face it--this should already be a no-brainer for brands. You and I both know this policy is a painfully obvious idea in the customer side of our brain, yet business leaders will likely fight this proposal rule tooth and nail. Any resources and effort your organization may be inclined to dedicate to lobbying against the rule really ought to go into making the rule superfluous for your brand. Brands can win with a thoughtful, customer-centric approach.

Today, it's too easy to tell customers they have to call your company to cancel, placing the retention burden on call center employees. That not only frustrates people and risks brand damage, it is also a terrible, frustrating employee experience as well. But if customers must be able to cancel as easily as they purchased or subscribed, smart brands will: 
  • Listen more and resolve drivers of dissatisfaction and churn. If some brands face an impending cancelation Armageddon, the first and most obvious course should be to minimize and eliminate the reasons customers want to leave. Many companies do a lousy job of listening to customer feedback and investing to resolve causes of customer friction. Often, this is because the economic value of doing so isn't evident, but this new FTC policy tips the cost/benefit equation and makes the financial benefits more evident.
  • Identify and react to customer warning signals. The prior suggestion was about understanding and fixing the top aggregate reasons for churn; this idea is more about identifying and proactively reacting to customers most at risk of churning. Some customers will abandon brands unexpectedly, but for most, there will be signals: Reduced usage or frequency, declining engagement, more customer care interactions, and dissatisfied survey responses. Brands should be monitoring and proactively responding to these abandonment signals rather than waiting for the cancelation request. An offer of a free month to someone threatening to end a subscription can seem a desperate, too-little-too-late brand ploy, while a surprise offer of a free month to an existing (albeit declining) customer can be a loyalty-building delight.
  • Consider customer personas to improve the overall experience and offer the most powerful retention offers. Brands tend to rely on the negotiating skills of employees to prevent abandonment, turning each instance into a one-on-one negotiation. “Click to cancel” will force brands to automate this process, which means they need to understand each customers' persona. A budget-minded customer struggling to make ends meet will be responsive to an offer of reduced subscription fees, while a more value-oriented customer may be encouraged to stay by adding services that would otherwise require additional payments. Or, think of Netflix: Knowing which fan is into scifi versus romantic comedies can help the brand promote the most desirable upcoming content to try to keep customers.
  • Implement a constant test-and-learn approach to finding the best retention offers. The solution isn't to find the one-and-only best offer; instead, constantly test what effectively retains customers. This should be a ceaseless process because today's answers may not be the same as next year's, depending on changes in the economy, competitive landscape, and your brand's offerings.
  • Finally, earn the right to keep in touch. If the customer is committed to abandoning, then do what you can to improve your future ability to recapture the lost customer. Don't assume you can continue to spam lost customers; instead, ask for permission to keep people on your email list and offer options. For example, a lost customer probably won't want your daily marketing message but might be interested in a once-a-month update on improvements you've made to your product or service.
“Click to cancel” could help or hurt a brand. Do the right things to prevent churn, earn loyalty, respond to cancelation requests, and ease the path to continued engagement and recapture, and your brand can snatch victory from the jaws of defeat and minimize abandonment.

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