Are You Prepared to Retain Revenue and Avoid Fines From The ‘Click-To-Cancel’ Rule?

The Federal Trade Commission (FTC) has spoken: Cancelling a subscription needs to be as simple as signing up for one. Consumers must be able to end enrollment with a single click, without ever stopping to entertain the business’s next-best offer.

While the “Click-to-Cancel” rule aims to protect subscribers, it might feel like a massive impediment for subscription-based businesses. Release that breath you’re holding: it doesn’t have to be.

The fact of the matter is that retention should never come down to dragging back a dissatisfied customer on their way out the door. The real work of holding onto subscribers happens long before that. Businesses build loyalty by considering the customer experience (CX) at every stage of the journey—particularly after sign-up. The FTC’s move is a gift horse that presents an opportunity for businesses that have leaned on last-minute retention offers to strengthen CX, grow customer lifetime value and ultimately increase retention rates before customers ever come close to clicking the cancellation button.

Learn how to safeguard revenue and prepare for the FTC’s “Click-to-Cancel” rule before it goes into effect, without breaking the bank. Here’s what you need to know:

What Is the ‘Click-to-Cancel’ Rule Changing?

The rule will make it simpler for consumers to manage their subscriptions without hassle. It’s a big win for CX as it promotes transparency, ease of use and trust. The rule’s requirements, most of which will go into effect in about six months, mandate that businesses provide a cancellation method that’s as simple as the method used to sign up for the service. This means if a subscriber signed up online, they should be able to end recurring billing online, too, without facing unnecessary hurdles or being bombarded with retention offers.

While this is the heart of the rule, there are several other key additions:

Clear disclosures

Material terms: Businesses must clearly disclose all material terms of the subscription before obtaining billing information. This includes the cost, frequency of charges and how to cancel the subscription.

Promotional offers: Any promotional offers, such as free trials, must be clearly explained, including what happens at the end of the promotional period and any charges that will apply.

Informed consent

Explicit consent: Businesses must obtain explicit consent from consumers before charging them, even after a free trial. This means consumers must actively agree to the terms and conditions, rather than being automatically enrolled when they take no action.

Opt-in mechanisms: The rule requires the use of opt-in mechanisms for subscriptions, ensuring that consumers are fully aware of what they are agreeing to.

Prohibition of misleading practices

No misrepresentation: The rule prohibits businesses from misrepresenting any material facts about the subscription service. This includes misleading claims about the benefits, costs or terms of the service.

Transparency in marketing: Marketing materials must be transparent and not omit critical information that could mislead consumers.

Reminders for continuous services

Ongoing subscriptions: Businesses must remind consumers about ongoing subscriptions that lack a regular, tangible presence. This could include services like internet or phone subscriptions where the service is continuous but not always visible.

Reminder notices: The rule may require businesses to send reminder notices to consumers about upcoming renewals or changes in terms, ensuring they are aware of their ongoing commitments.

Bundled offers and upselling

Clear presentation: When offering bundled services, businesses must clearly present all components of the bundle, including pricing and terms for each service.

Consent for bundles: Consumers must provide explicit consent for each component of a bundled offer, ensuring they understand what they are subscribing to.

Saves during cancellation

Non-obstructive saves: While businesses can offer discounts or alternative packages during the cancellation process, these “saves” must not obstruct or complicate the cancellation process. Consumers should be able to cancel easily without undue pressure.

What’s the ‘Click-to-Cancel’ Rule’s Potential Impact on Businesses?

Businesses are anticipating hikes in operational expenses and potential revenue losses that may strain financial resources, especially if they’re smaller companies. While these changes will hit sales and retention strategies the hardest, business teams like marketing, operations, and especially IT and digital might all require adjustments to comply with the new rule.

Adapting to these regulations requires strategic planning and investment, which can be burdensome but necessary to avoid legal repercussions and maintain customer trust. Several processes will need to be reimagined, including:

• Sales flow redesigns: Rearranging flows to provide disclosures of all material terms—and breaking out individual prices—before even taking a customer’s information
• Cancellation processes: Redesigning straightforward and intuitive cancellation user flows to ensure easy and accessible options for customers to cancel their services
• Save process updates: Providing save offers at the appropriate moments and in ways that don’t obstruct customers during the cancel process
• Informed consent for automatic renewal and opt-in updates: Designing both communications and digital flows to allow straightforward and accessible opt-out processes
• Reminders for continuous services: Implementing systems to send timely reminders about continuous services
• Clear disclosures: Updating all marketing materials, communication channels and knowledge management systems to ensure consistency and clarity across all customer touchpoints

These are simply a few of the digital considerations for businesses impacted by the “Click-to-Cancel” rule. Then there’s the human component: training. Relearning compliant practices during customer interactions calls for employees to shift age-old habits. Training will be an essential aspect of adhering to the spirit of the law.

Why Prepare Now? The Cost of Doing Nothing

Businesses may understandably resist a new way of thinking, even in light of the FTC’s final rule. It’s a risk: Pivoting in the wrong direction can be costly. But a failure to act is certain to be.

Companies that neglect to prepare for the “Click-to-Cancel” rule now will contend with these challenges later:

Operating expenses

• Website and app redesign costs: Redesigning websites and apps to include cancellation options, enhance transparency on bundles and integrate save processes.
• Backend system development: Updating billing system display and functions, product catalogs, CRM and other driving systems.
• Training costs: Training customer-facing staff to comply with new processes, which may counter long-standing habits.
• Support needs: Simplified cancellation processes may dramatically reduce the need for retention agent headcount, yet following new systems will come with bugs in the process that may temporarily increase contact rate.

Lost revenue

• Increased customer churn: Easier cancellation processes can lead to a spike in cancellations, directly impacting revenue streams. The inability to use retention tactics (like offering discounts during cancellation) can raise churn rates, but transparent practices will likely promote long-term customer loyalty and repeat business.
• Higher marketing and promotional costs: To compensate for the ease of cancellation, companies may need to invest more in attractive promotions and marketing efforts to acquire customers and expand those relationships.
• Competitive disadvantage: Smaller companies might find it more challenging to bear the financial burden of implementing these changes, including staffing and technical upgrades. This could give larger companies with more resources a competitive edge, potentially squeezing smaller players out of the market.
• Reduced upsell and cross-sell effectiveness: Transparent marketing and clear disclosures might reduce the effectiveness of upselling and cross-selling strategies. This potentially lowers average revenue per user (ARPU) and prompts the need for better value propositions and product or service experience.
• Regulatory fines and legal costs: Non-compliance with regulatory requirements like the “Click-to-Cancel” rule can result in significant fines (up to $51,744 per violation). These fines, along with potential legal costs, can damage a company’s financial health, as well as brand trust.

Brand equity

• PR nightmares: Companies that run afoul of the rule can face not only the regulatory enforcement but also the public attention that comes with it. That damages the brand in a highly competitive market. Once trust is broken, it can be difficult to regain; customers may switch to competitors, and employees may lose morale.

There’s no way around it: This FTC rule is going to be a major adjustment. But it also presents businesses an opportunity to implement better strategies for customer retention.

How to Prepare for the FTC’s ‘Click-to-Cancel’ Rule

The FTC ruling isn’t intended to make life harder for businesses—it’s meant to make it easier for consumers. Attempting to circumvent “Click-to-Cancel” with shortcuts or gimmicks isn’t the way to navigate the change successfully. Instead, lean into the rule’s purpose: Improve the customer experience.

It won’t happen overnight. But by preparing the right way, right now, businesses can emerge with stronger brand loyalty and better retention rates. So, how can you set yourself up for CX success?

For years, customers have turned to CSG’s award-winning solutions to solve these CX problems.

Through better communications, brand messaging and offers, your business can put a renewed emphasis on the customer experience and reap rewards without sacrificing revenue. CSG makes it easier to comply with regulations like the “Click-to-Cancel” rule by providing cross-channel visibility and governance through customer journey orchestration. Respond to the FTC’s final ruling with greater speed and agility by leveraging the following features:

• • Strategic messaging: Guide customers through actions with contextual messages. At the right moments, you can send notifications for customers to receive informed consent and reminders for continuous services.

• • Churn mitigation: Guide your customers through the disconnect flow (without disrupting them) by giving them the choice to see targeted offers tailored to their needs with clear disclosures.

• • Bill explanation: Increase transparency and preempt questions by walking customers through new or unusual charges. With our solution, you provide AI-powered explanations tailored to your customer and their bill.

• • Contextual upsell: Use intelligence to transparently target bundled offers to the customers that are their best match to grow loyalty and revenue. Understand where customers are in their journey and their contextual needs, then provide personalized recommendations so that you can upsell or cross-sell before they ever want to cancel.

• • Abandoned interest completion: Help customers complete their purchase quickly by removing friction that may lead them to abandon the purchase.

• • Account activation: Guide customers and provide timely information to deliver a smooth onboarding experience, speeding up time to revenue.

There are many ways to respond to regulatory changes—some reinforce customer trust, and others erode it. Using the new rule as an opportunity to assess and improve CX can make your transition successful and your business stronger.