The Downside of Auto-Renewals (and how they masquerade your churn)
There’s a special shampoo my daughter loves. She used it consistently. The website where my wife orders it from offers a subscription. You can specify how often you want it, sign up, and get a healthy discount for doing so.
Good idea! They pay you in the form of a discount in exchange for a predictable commitment.
Well…it was a good idea until my daughter was no longer using it. Not making the conscious connection between her no longer using it and the subscription, another bottle of shampoo and conditioner arrived, and our credit card was charged.
Finding the Minecraft Ender Dragon apparently is a difficult task…like many subscription cancellations.
I get it. It was our obligation to cancel. We didn’t. So, I went to the website to do so. Since it had been probably a year since we signed up, we had no idea what the password was. Once logged in, finding the place to cancel was, as my son commented, “like finding the Ender-dragon in Minecraft”. (aka, not easy)
Yesterday, three months later, another bottle of shampoo and conditioner arrived, and our credit card was charged again.
Totally aggravated, I immediately went to the website. The subscription is still active! Apparently, my cancellation didn’t take.
I searched for a phone number – none to be found, but there was an email form. I wrote one, explaining the issue.
They replied within an hour with the equivalent of “too bad. So sad.”
Not just a B2C thing…
In the subscription economy of B2B, we’re (a) enforcing auto-renews, some with price increases, where the original buyer doesn’t remember or is no longer even there, and (b) making cancellation a massive project for our customer. I’m seeing it all the time. When I teach negotiation and the CFO sits in, I find myself arguing about this with them. [I need to be more careful – they’re the one paying for me to even be there!}
You’re rewarding a client for the commitment – that’s what subscriptions are designed to do. You are paying for predictability.
When a client has an auto-renew, are you reminding them of it with plenty of time for them to do something about it? You should.
When a client wants to cancel (within their rights/renewal time), are you making it easy?
And, once they do renew, are you putting them on the witness stand? Are you laying on thick why they’re making a mistake? Or, are you seeking to learn, and wishing them the best?
When you hoodwink a customer into a begrudged renewal:
- You’re getting that revenue. Bravo!
- Your churn numbers look better. Bravo!
But, just know it’s probably costing you at least a few deals you didn’t even know existed; future potential customers not reaching out to you or considering you because…
…the blowhorn by which that one hoodwinked customer can share their experience has never been louder or more accessible.
Did I make sure I had in writing that we are canceled going forward? Absolutely.
Are we leaving a review? Sure are!
Will we ever recommend them to anyone else? Not a chance.
Earn your renewals. Earn your upsells. Earn your case studies. Earn your referrals. Playing the long game helps you win the short game, too.
My Policy on Auto-Renewals – For Those Who Are Curious
Here was my policy…take it for what it’s worth.
In my last role, my CFO wanted an auto-renewal policy in every contract. As you can sense from above, I hated that idea. So, here was my stance.
- No – or…
- If we’re going to have auto-renewal language, we should have a clause that says it’s only valid if we remind the then current contact of this clause at least 90 days in advance of said renewal.
Remember, nobody remembers the clauses in your contract. And, even worse, the odds that the person who signed the contract is still in charge of the renewal is slim, too! Own it. If the truth won’t sell it, don’t sell it!
I speak and teach revenue organizations on how to leverage transparency and decision science to maximize their revenue capacity. It’s what I do…teach sellers, their leaders, and really entire revenue organizations the how we as human beings make decisions, then how to use that knowledge for good (not evil) in their messaging (informal and formal), negotiations and revenue leadership. I wrote a 3x award-winning book (𝘛𝘩𝘦 𝘛𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘤𝘺 𝘚𝘢𝘭𝘦), and have a newish book out (𝘛𝘩𝘦 𝘛𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘵 𝘚𝘢𝘭𝘦𝘴 𝘓𝘦𝘢𝘥𝘦𝘳) now that just won its first award!
Reach out if you want to discuss The Transparency Sale sales methodology, or really…anything else (sales kickoffs, workshops, keynotes, the economy, history, etc.)! Email info@toddcaponi.com or call 847-999-0420.
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