The pros and cons of automatic renewals

Recently a colleague of mine recommended a grammar-checking product that she said she liked better than Grammarly. She said this product was more expensive to purchase, but the price includes lifetime access, unlike Grammarly, which charges an annual subscription.

I’ve been using Grammarly for years. I like it and recommend it. Even so, I decided to check out this new product. My first step was to see when my Grammarly subscription expires to determine when I had to make my decision.

Wouldn’t you know it? My non-refundable Grammarly subscription had automatically renewed the day before.

It made me remember an article I wrote years ago about negative option marketing. I thought the information was worth sharing again; below is an updated version.

In a traditional sales transaction, the seller makes his presentation and the prospective customer says either yes or no, and that’s pretty much the end of it. But negative option marketing turns things around.

Early book and record clubs were the pioneers of negative option marketing. Customers “joined” the clubs and received books or records either free or at a heavily discounted price as a new member bonus, then agreed to purchase a certain number of products at the regular price over a specified period of time. Customers who failed to decline the book or record of the month received it automatically.

Negative option marketing (also called advance consent marketing) has become more prevalent and is being used in a variety of industries. The central characteristic of a negative option offer is that the seller interprets the consumer’s silence or failure to take an affirmative action to reject goods or services, or to cancel the sales agreement, as acceptance of the offer. The offer is often presented as a “free trial” and charges will begin after a specified time if the customer fails to cancel.

Proponents say that continuous service and automatic renewals benefit consumers, but the potential for abuse is significant. The Federal Trade Commission logs hundreds of thousands of complaints on this issue every year. Some states are implementing legislation restricting—and in some cases, banning—the use of negative option marketing.

Businesses that choose to use negative option marketing should be sure:

  • That the offer meets all applicable regulations,
  • That salespeople are trained to provide complete details,
  • That websites offer clear and complete information,
  • That methods for canceling are clear, understandable, and easy to access, and
  • That complaints are dealt with promptly and fairly.

Some online marketers use the negative option technique to build email lists. The marketer sends an email stating its intention to send future messages and if the recipient doesn’t reply, permission is assumed, and a list is quickly built. The marketer then begins sending emails to that list and renting or selling the list to others.

Studies show that opt-in email lists have a better response than those built through negative option tactics. If you’re renting a list (and the pros and cons of that are a different discussion), find out how it was created and avoid those produced through a negative option opt-out campaign.

Successful marketing depends on trust, not tricks.

Since I wrote that article, the number of online subscription services has skyrocketed. Software we used to purchase and then periodically upgrade for a fee is now available only through monthly or annual subscriptions. Entertainment and news subscriptions abound. And for the most part, having these choices and options is good.

But as a consumer, watch for those automatic renewals. They can be expensive.

As a seller, consider notifying your customers before their subscription renews to give them a chance to cancel. Yes, you might lose some customers, but the ones you keep will be happier and less likely to complain.

I have a reminder on my calendar to check out the new grammar-checking product and decide about making a change before my Grammarly subscription renews again. I’ll let you know.

Jacquelyn Lynn
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