Goodbye to bad revenues, thanks to the FTC’s click-to-cancel rule

Lots of things are easy to sign up for. Lots of things are also not so easy to quit. With the new “click-to-cancel” rule implemented by the US Federal Trade Commission, that’s about to change.

The U.S. Federal Trade Commission gets about 70 complaints a day about charges for subscriptions that are hard to cancel, or cases where people did not realize they had signed up for to start with. (And consider how many people with similar problems never realized they could complain or think it’s not worth the effort.)

You may be opposed to “red tape” regulations, but I think this is a pretty good one. Anyone else who’s been tricked into a subscription and couldn’t get out — which is just about everyone who’s ever done anything online — probably would agree.

What are bad revenues?

Fred Reichheld’s groundbreaking book The Ultimate Question describes two kinds of growth: good growth and bad growth. Good growth is based on customer satisfaction and delight, the kind that generates word of mouth. Bad growth is based on saturation marketing and deception.

Let’s go further. What is good revenue? It comes from:

• Products and services that solve a customer’s real problems.
• Better products and services.
• Cheaper products and services.
• Excellent customer service.
• Transparency in product features and costs, including subscription costs.

What is bad revenue? It comes from:

• Deceptive marketing processes.
• Failing to deliver what is promised in marketing descriptions.
• “Dark patterns” in web sites that sign people up for things they didn’t intend to get (like a recurring monthly political contribution when you only meant to give one contribution).
• “Roach motel” subscriptions, where it’s easy to get in and hard to get out. For example, subscriptions that you can click or tap to get into, but require a phone call and waiting on hold to cancel.

Any sort of friction designed to make it hard for people to quit is generating bad revenue. Why bad? Because you now have customers who are paying for something they don’t want. That generates poor word-of-mouth and makes it even harder to sign new people up. You’ve basically got zombie revenues, and that’s not a sustainable way to run a company.

What happens now?

A whole lot of deceptive companies that survive on mostly bad revenue are about to go out of business. Because the moment that it becomes easy to cancel, people will hear about it, and they’ll cancel in droves.

Demand for customer experience experts will go up, because companies will no longer be able to count on friction to retain dissatisfied customers.

There will be plenty of finger-pointing in cases where there is a supply or marketing chain leading to sign-ups. If Amazon makes it easy to buy a bad product and hard to get your money back, who’s on the hook: Amazon or the product supplier? If a middleman sells you a subscription, must the middleman make it easy to cancel — and if so, how will that middleman handle their business relationship with the actual supplier?

What happens with subscriptions that are hard to get back into, like health insurance? Should it be easy to cancel your health insurance with one click?

What happens if the supplier is overseas, out of reach of FTC enforcement?

It’s likely that Kamala Harris, if elected, would continue the policies of Joe Biden’s FTC and its commissioner, Lina Kahn. But Donald Trump, if he wins, would put his own FTC head in place. Would that person retain this policy? There will certainly be corporate pressure to can it, under the classification of “reducing regulations.”

This may increase costs of some products and services. Because if companies can’t count on revenues generated by fooling people and making it hard for them to leave, they’ll have to get revenue from actual customers who want the product — and there may be fewer of those.

I’d like to believe this will usher in a new era of better products and services. Maybe. I’ve just seen so many hopeful developments like this that didn’t pay off (are you still getting spam phone calls?). What do you think? Will this improve the world of online commerce?