Companies Giving Consumers an Exit From Subscription Fees

Summary

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WSJ Your Money Briefing

Episode Summary:

Title: Companies Giving Consumers an Exit From Subscription Fees
Date: February 26, 2020
Host: J.R. Whalen
Guest: Matthew Castle (Wall Street Journal Contributor)

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Episode Overview

This episode delves into a growing trend among subscription-based businesses: making it easier for consumers to cancel their subscriptions. While subscriptions are a lucrative revenue source, companies are loosening traditionally restrictive cancellation policies. The goal? To foster customer trust, create a more favorable brand image, and encourage long-term loyalty by making consumers feel less “locked in.” The episode examines brands like ClassPass, Netflix, and Harry’s, discussing the shift and its implications for both customer relationships and regulatory pressures.

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Key Discussion Points & Insights

1. The Shift Toward Easier Cancellations

• Consumer Frustration: Increasing customer complaints about complex “unsubscribe” procedures have prompted companies to reconsider their policies.
  • Example: In 2016, The Honest Company faced backlash for requiring phone calls to cancel ([01:42]).
• “Self-preservation tactic”: Companies loosen rules to maintain a positive reputation and attract more sign-ups with the promise of easy exits.
  • Quote:

    “It’s more of a self preservation tactic and a marketing strategy that allows companies to give customers the impression that they are being treated fairly.”
    — Matthew Castle [00:55, repeated at 01:42]

2. Policy Transparency and User Experience

• ClassPass Case Study:
  • Initial live chat cancellation designed to “save” subscriptions by offering alternatives if price was the problem.
  • Ultimately switched to an automated cancellation process for easier, clearer user experiences ([02:27]).
  • Focus: Respecting customer wishes, making cancellation “frictionless,” and investing in a better experience.
  • Quote:

    “They just were better off getting rid of it entirely… now rolling out an automated cancellation process that… allow[s] customers to more easily click the cancel button.”
    — Matthew Castle [02:27]

3. Lifetime Customer Value and Trust

• Long-term Strategy: Companies equate easy cancellation with higher “lifetime customer value” — building relationships for retention and possible returns after cancellation ([03:53]).
  • The easier it is to cancel, the more comfortable people are to subscribe and (potentially) re-subscribe.
  • Quote:

    “Not only does it make customers feel more comfortable subscribing because they feel that they won’t be locked in… it also encourages customers to feel as if they can come back easily.”
    — Matthew Castle [03:53]

4. Netflix as Industry Leader

• Transparent Cancellation:
  • Netflix is highlighted as a “standard bearer,” featuring a visible cancel button, especially during price increases ([04:43]).
  • Emphasizes openness to put customers at ease — a model for others.
  • Quote:

    “They put, you know, like a button there and say, you can cancel if you want.”
    — Matthew Castle [04:43]

5. Evolving Subscription Perks

• Harry’s Razor Example:
  • Expanded offerings: A core membership program ($15/year) with discounts and unique perks to increase feelings of club inclusion ([05:12]).
  • Broader movement: Looser policies and enhanced perks aim to create a two-way relationship rather than a restrictive one.

6. Regulatory & Social Pressures

• Legal Requirements:
  • States like California now mandate that online subscriptions offer equally easy online opt-outs ([06:12]).
  • Increased scrutiny from the Better Business Bureau and social media shaming drive companies to adjust.
  • Anticipation of broader regulation.
  • Quote:

    “California began requiring that companies that let consumers subscribe online also let them opt out online. And this could be the beginning of a broader trend…”
    — Matthew Castle [06:12]

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Notable Quotes & Memorable Moments

• “It’s more of a self preservation tactic and a marketing strategy that allows companies to give customers the impression that they are being treated fairly.”
  — Matthew Castle [00:55, 01:42]

• “They just were better off getting rid of it entirely… now rolling out an automated cancellation process…”
  — Matthew Castle [02:27]

• “Not only does it make customers feel more comfortable subscribing because they feel that they won’t be locked in… it also encourages customers to feel as if they can come back easily.”
  — Matthew Castle [03:53]

• “They put, you know, like a button there and say, you can cancel if you want.”
  — Matthew Castle [04:43]

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Important Timestamps

• 00:36: Host introduces the episode’s topic: simplifying subscription cancellations
• 01:42: Matthew Castle explains why companies are adopting looser policies
• 02:27 – 03:18: ClassPass case study on refining its cancellation process
• 03:53: Shift toward “lifetime customer value” and its strategic rationale
• 04:43: Netflix as an example of transparency and ease in cancellation
• 05:12: Harry’s membership plan; subscription model evolution
• 06:12: Growing regulatory attention and legal shifts (e.g., California law)

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Conclusion

This episode unpacks the reasons and the ripple effects of subscription companies simplifying their cancellation processes. What initially appears counterintuitive—making it easier to lose customers—ultimately builds trust, boosts customer lifetime value, and puts companies ahead of regulatory and reputational risks. As the trend gains momentum and legal scrutiny grows, expect more subscription businesses to prioritize seamless exits as much as enticing entries.

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Transcript

[Small Business Owner]

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Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Advocate for Durbin Marshall Bill]

they need while increasing megastore profits. They deserve it, don't they?

[Political Advertiser/Announcer]

Tell Congress stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[J.R. Whalen]

Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. Subscription business models can be a cash cow for companies, but too often it can be a time consuming process for consumers who want to cancel a subscription. Well, now many companies are making it easier for customers to lose those monthly subscription fees.

[Matthew Castle]

It's more of a self preservation tactic and a marketing strategy that allows companies to give customers the impression that they are being treated fairly.

[J.R. Whalen]

That's Wall Street Journal contributor Matthew Castle. Coming up, he'll tell us why companies like Netflix are giving customers an escape hatch from subscription rules. From clothing to meal kits, a subscription business can be a lucrative revenue stream for companies. But for loosening the rules that keep customers around can actually pay off in the end. Wall Street Journal contributor Matthew Castle is with us to discuss. So Matthew, it seems financially counterintuitive to give customers the option to stop paying monthly subscription fees?

[Matthew Castle]

Yeah, it would seem that way. But in recent years, a bunch of companies have been adopting looser cancellation policies in an effort to lure in more subscribers. And the reason is because also in recent years, customers have been complaining a bit about onerous cancellation policies. In 2016, for instance, the Honest company was criticized for requiring that customers call on the phone, which caused some delays and cancellation. So it's more of a self preservation tactic and a marketing strategy that allows companies to give customers the impression that they are being treated fairly.

[J.R. Whalen]

Are the companies very upfront about these looser rules?

[Matthew Castle]

Yeah, some are. ClassPass, for example, is currently rolling out a new cancellation policy after it found that customers wanted a more kind of like frictionless cancellation process. So they at first they had a live chat feature. And the reason that they had that, according to a person at the company I spoke with, was they wanted to find out that customers weren't canceling because they found, for example, that their subscription was too expensive. So they wanted to potentially offer another plan that could be a little more affordable, but they found that they just were better off getting rid of it entirely. And then they're now rolling out an automated cancellation process that they believe will be more transparent and allow customers to more easily click the cancel button.

[J.R. Whalen]

ClassPass gives users access to exercise classes at area gyms and studios. Do companies like ClassPass, do they see this as an investment?

[Matthew Castle]

Yeah, I think they do. Lauren Cower Hill, the director of customer experience at ClassPass, told me that they want to sort of respect what their members want, and they've found that their members value a kind of frictionless cancellation flow. So they've been trying to deliver that to their customers.

[J.R. Whalen]

But the importance here to the companies is a long term better relationship with the customers.

[Matthew Castle]

Yes, that's part of a broader strategy that's been gaining traction among subscription companies. It's better known as lifetime customer value. And it's part of an effort on subscription companies to retain customers over a long period of time and build a relationship with them. And a kind of interesting aspect of this new trend among subscription companies making it easier to cancel is that not only does it make customers feel more comfortable subscribing because they feel that they won't be locked in and can cancel at any time. It also encourages customers to feel as if they can come back easily because if they cancel and it was, you know, an easy process, then they won't be concerned if they come back, if they need the service again.

[J.R. Whalen]

So it kind of puts the customer at ease. They can come and go as they please.

[Matthew Castle]

Yeah. And the standard bearer, according to one expert I spoke to in this regard, is really Netflix, which is very transparent with their cancellation policy. Whenever they do a price increase, they allow the customer to cancel. They put a. They put, you know, like a button there and say, you can cancel if you want.

[J.R. Whalen]

Now, the Harry's Razor company advertises widely their subscription model for shaving supplies, but they also changed their subscription policy. How did they change it?

[Matthew Castle]

They have a subscription service, and they also sell in brick and mortar stores, and they have a core shaving plan. But they found that customers wanted a kind of more personalized service. So they launched what is called a core membership program that costs $15 a year, that gives customers discounts and stuff like free engravings, limited edition. So it's part of an effort among subscription companies to kind of make customers feel as if they're part of a club or members in a club. And that fits more broadly into the looser cancellation policies that are being put into effect now that allow customers to feel a little more at ease when they sign up and feel as if they're taking part in a kind of two way process.

[J.R. Whalen]

Now, changing these subscription rules can help companies develop better relations with their customers. But but subscription businesses and the rules, they've also gotten the attention of lawmakers

[Matthew Castle]

right in recent years. And one of the reasons that some companies are switching up more recently is the Better Business Bureau and other regulatory organizations are sort of cracking down. And some companies have been shamed on social media. In 2008, California began requiring that companies that let consumers subscribe online also let them opt out online. And this could be the beginning of a broader trend in which companies are more legally required to make quitting simple, I guess.

[J.R. Whalen]

All right, that's Wall Street Journal contributor Matthew Castle with us. Matthew, thanks for coming on the show.

[Matthew Castle]

Thank you for having me.

[J.R. Whalen]

And that's your money briefing. I'm JR Whalen in New York for the Wall Street Journal.

[Political Advertiser/Announcer]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] WashingtonWise.