What are “Subscription Traps”? How to spot them?

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Summary

Subscriptions often get a bad reputation because some merchants use them to trap customers and take as much money as possible. Unfortunately, the bad practices of some discredit the model. 👎

Customers can spot “Subscription Traps” by looking for certain clues. 🔎

And merchants should follow good practices.😇

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Ever felt trapped by a subscription? You’re not alone. Some merchants use subscriptions to trap customers and take as much money as possible. But don’t worry, there are ways to spot them.

Regulations (EU regulations/directives, or Consumer Acts in the US) and regulators (e.g. CMA in the UK – Competition and Markets Authority) aim to end the bad practices of “Subscription Traps”.

Here are the five pillars on which “Subscription Traps” thrive.

Prices: not explicit or more expensive than displayed

Subscription prices may seem unclear due to many displayed elements.

In general, there are several prices associated with a subscription:

• The price of the future renewal which is often a crossed out price
• The price of the initial purchase often discounted compared to the renewal price
• The discount, in value or in percentage
• The price per month: it is either the amount of the monthly subscription, or the equivalent per month for an annual subscription

To see clearly, it is necessary to consider that

• The real price of the subscription is the one that will be paid several times. It is this renewal price that is strike through
• The more the initial price is discounted, the more the price difference will be felt at the time of renewal. This will be the “sticker shock” 😱
• Paying monthly generally costs 20% more than annually💰

⚠️The Terms & Conditions do not include an “entry fee” 🎟️, which is not explicitly displayed but added to the first payment.

Regulators require that all prices be displayed grouped with the same font size.

Monthly or yearly commitment 📆

Regulations and regulators allow an initial commitment but require no commitment at renewals.

In general, the initial commitment is one year, even if the payment is made monthly. You have to look in the Terms & Conditions to see what the commitment period is.

A sentence like “no annual commitment” does not mean “without commitment”. It just means that the commitment is not annual but over several months 😮

Difficulty to unsubscribe

Regulations and regulators give instructions that unsubscribing must be as easy as subscribing.

We identify “Subscription Traps” by their unsubscribe process. For example, they require calling a phone number, sending a letter or are only accessible at certain times.

Such a procedure is very well illustrated in the series Friends when Chandler tries to leave the gym. 🏋️

It is unfortunately very difficult to know before subscribing if the unsubscribe process is easy or not. It’s a good sign when you can easily find the documented procedure on the merchant’s Support site. 👀

Loyalty is not rewarded

A common idea on the customer side is that rewarding loyalty must result in a lower selling price for older customers. However, this business model is not interesting for the merchant in the long term as explained in the article “Do You Have Good Acquisition & Retention Price Strategy?”. The customer should instead expect additional services or benefits for the same price rather than a discounted renewal price.

Regulators are more interested in merchants who would be tempted to maximize their revenue by selling more expensively to loyal and inattentive customers than to customers showing a desire to leave.

As it is not easy to guess what the long-term pricing policy is before subscribing. It is always necessary, at the time of renewal, to check that the renewal price matches to the current reference price (the crossed-out price) for an equivalent offer.

Flying below the radar

It’s much more likely to encounter a “subscription trap” with a small company than with a very large corporation. Indeed, the larger the companies selling subscriptions (software, mobile, internet, streaming, etc.), the more they are scrutinized by regulators and consumer associations.

Key takeaways

1. Not all subscriptions are “Subscription Traps”. Subscription is a stable business model for companies that need regular revenue to maintain and develop a permanent service.
2. The communication elements that allow you to detect “Subscription Traps” are also the elements that need to be taken care of to be irreproachable.
3. You cannot base a long-term business on questionable practices; the older and bigger the companies are, the less they gain from not respecting the rules.