The complicated process of unsubscribing from recurring subscriptions and memberships— whether for a media streaming service, software subscription, e-commerce, or educational platform—may soon be a thing of the past. The Federal Trade Commission’s (FTC) Click to Cancel rule mandates that businesses with subscription business models should provide simple cancellation mechanisms similar to the sign-up process.
The rule aims to reduce consumer frustrations with cancellations and to combat unfair practices related to subscriptions and other recurring-payment programs.1 The Click to Cancel rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule,2 which states that:
- Important information has to be accurate and easily accessible
- Consumers need to know all the details of the agreement before signing up
- Sellers must prove that consumers understood all details when they agreed to the subscription
- The cancel process should be as easy as the sign up
- Non-compliance will result in penalties for violators
While the FTC’s Click to Cancel rule is good news for consumers, as cancelling a subscription will become significantly easier, it poses challenges for businesses. Companies will need to redesign their processes, operations, and technology stacks to comply with the new requirements.
Some industries will be impacted more than others. In the media and communications sector, transforming friction-filled journeys into engaging experiences is crucial, potentially through bundled offerings and personalized content. Similarly, SaaS companies face pressure to enhance user onboarding and retention strategies to enrich the overall customer experience.
Regardless of the industry, companies will need to prioritize loyalty strategies to reduce churn and build long-lasting connections with their customers.
As such, two questions arise:
- How can businesses encourage customers to stay—focusing on positive retention strategies rather than complex cancellation barriers?
- How can businesses remove friction for those who do want to cancel, ensuring a smooth, customer-friendly experience?
We believe that the most successful brands build enduring loyalty by understanding and nurturing the key drivers of both rational and emotional connections with their subscribers. Driving rational loyalty subscriptions hinges on tangible benefits like value or time saved, whereas cultivating emotional loyalty involves intentionally creating profound connections that inspire trust, attachment, and belonging.
How Businesses Can Encourage Customers to Stay after the Click to Cancel Rule
The selection of the optimal retention strategies depends on various factors such as the industry in which a business operates and the type of subscription, whether service-based or product-based, leading to diverse approaches that brands must consider. But here are a few tangible ways through which most brands can improve retention:
- Reaffirm the value proposition—a staggering 85.7% of consumers in the US have a subscription going unused each month.3 This often occurs because subscribers forget about their access or are unaware of the end-to-end value the service offers. Brands must not wait for subscribers to recognize the lack of reciprocal value; instead, they should proactively highlight and communicate the benefits included in their subscription
- Cross-sell features/services with connected value
- Identify and address problematic points of friction in the customer lifecycle, including onboarding, product education, and bad customer service
- Continuously optimize and enhance products and services based on customer insights
- Reinforce value of product features and enhancements (e.g. product nudges)
- Extend value proposition via partnerships
Although beneficial for the brand, the above retention strategies are not a one-time effort. Brands must treat their subscription model as an evolving product and activate an engagement flywheel—both digitally and offline—to sustain their customer base. This flywheel fosters an environment where customers not only appreciate the service provided but also form a deeper love for the brand through the connections and experiences it adds to their lives.
How Businesses Can Remove Friction, Ensuring a Smooth and Customer-Friendly Experience
Brands should implement several strategies to facilitate a smoother cancellation process, transforming potential dissatisfaction into an opportunity for valuable feedback and future re-engagement.
These include, but are not limited to:
- Streamline the cancellation process: Clearly visible cancellation button and minimal clicks
- Provide flexibility and options: If a more suitable plan exists that better meets their needs, such as a basic plan that allows customers to retain certain benefits without a full financial commitment, they should be made aware of it
- Provide clear information, reinforcement of subscription value, transparency, FAQs, and guides
- Gather customer insights to drive retention and optimize cancellation process through a brief exit survey
- Always leverage empathetic messaging throughout the cancellation process, thanking subscribers for their previous patronage and expressing regret at their departure
- Provide a “save offer”—a compelling offer designed to retain customers and encourage them to renew their subscription. (Note, any “save offer” should provide at least as much value as the brand is providing through the new customer acquisition offer)
What’s Next
Planning for the impact of the Click to Cancel rule is essential to ensure business growth without disruptions. We recommend developing a set of process simplifications in several key areas:
- Long-term retention: Delivering value to subscribers through relevant content, engagement strategies and strong customer relationship management to keep them loyal
- Technology integration: Helping to implement user-friendly digital platforms that facilitate easy cancellations
- Process optimization: Analyzing and redesigning cancellation workflows / customer journeys to ensure compliance and a positive customer experience
Interested in building brand loyalty to avoid the pitfalls of shifting regulations? Learn more about our unique approach to customer retention.
1 “Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships,” Federal Trade Commission, October 16, 2024.
2 “The FTC’s ‘Click to Cancel’ Rule,” Federal Trade Commission.
3 “The Cost of Unused Subscriptions 2024,” Self.inc.
