vindicia lp

Subscription businesses should reduce friction even when it comes to cancelling

Everyone has their own horror story about dealing with cable television, and it seems these complaints will never go away. Consider what happened when one major company failed to completely cancel  service for a man in San Diego. According to the local NBC affiliate, Sandy Golden, daughter of an 87-year-old San Diego resident, noticed Time Warner Cable had charged her father for television despite the fact that he'd canceled his subscription a year prior. The pair might not have even noticed the discrepancy had it not been for the fact that Golden's father wanted to move his TV. When Golden called Time Warner, a representative said her father's house didn't have that particular service.

Ultimately, Golden had to call the company 25 times. Through the process, she learned her father had canceled Time Warner's TV service but continued to use the company for phone and internet. However, he was still being charged for television. Despite Time Warner staff admitting to the mistake, the company didn't refund the payments it received right away. It was only after Golden contacted NBC 7 that the company attempted to right its wrongs by offering a $1,200 refund. 

It took Golden multiple phone calls to determine her father had been overcharged for a year of service.It took Golden multiple phone calls to determine her father had been overcharged for a year of service.

Friction and cancelations
It shouldn't take a news agency to convince a cable company to provide good customer service. What Time Warner should have done was ensure Golden's father's billing information was completely erased from its databases and his name taken off the company's list of customers to bill. 

From poor customer service to skyrocketing prices, it's no wonder many people are cancelling their cable subscriptions. As the LA Times reported, estimates from research firm SNL Kagan found cable TV lost 812,000 subscribers during the second quarter of 2016. A drop in subscriptions isn't unusual during this time, as students generally cancel cable services at the end of the school year. However, the total number of cancelations has steadily increased over time.

"It is a bit of an acceleration and the biggest quarterly loss that we've seen," Ian Olgeirson, an analyst with the firm, told the publication. "We are seeing a gradual increase in the decline rate."

"Cancelation are a natural part of any company that operates on a subscription management business model."

While much has been said about the increasing number of people who are cutting the pay TV cord, cancelations are a natural part of any company that operates on a subscription business model. Businesses can and should take measures to keep their churn rate as low as possible, but they must also accept that there will always be a portion of customers who want to leave. It's important that these companies treat customers respectfully and honor their wishes by making the process swift and easy.

One goal of subscriptions is to reduce friction for the customer. It's easy to see this concept from the payments side. Customers provide their card or bank information, and a recurring management service charges them automatically. But when it comes to cancelations, it's easy to make the process complicated. Some businesses require multiple steps while others have a grace period between the time a customer cancels and when the request is finalized.

By introducing friction into the cancelation process, businesses create unsatisfied customers. These individuals are more likely to make negative comments which can impact a company's public standing. In addition, charging customers after they cancel, even accidentally, increases the risk of chargebacks. Customers will see the charges on their billing statements and call their bank to dispute them.

In addition, charging customers after they cancel can interfere with reporting and decision-making processes. Businesses will factor in these incorrect charges and overestimate metrics like profit forecasts and average revenue per user. 

No business wants to see its customers leave, but allowing them to do so easily is far better than forcing them to stay. 

About Author

Vindicia and Amdocs: Powering the Digital Economy Together

Previous blog

Designing IoT products for success

Next blog