Mastering Revenue Retention: Legal Insights on Subscription Cancellations
The legal nature of your subscription cancellations is important to know to ensure you maximize your revenue from the customers you have already invested in so that you can maintain competitive advantage. In this blog post installment of our series on the Cancel Subscription Process, we are going to discuss this importance, including a few unique aspects of the legal nature of the cancel subscription process.
The Importance of Understanding the Legal Nature of the Cancel Subscription Process
When you invest in marketing automation that manages the cancel subscription process to improve customer retention you increase your potential for revenue. But, there are numerous legal angles to the cancel subscription process that your marketing automation must respect in order to both ensure your potential for revenue is actually realized as well as your company’s continued compliance with consumer protection laws.
The Legal Nature of the Cancel Subscription Process
The cancel subscription process depends on the nature of the consent to be billed and terms of the cancellation process being disclosed to the consumer. As discussed in the article, “Navigating the Legalities of Subscription Cancellations”, to gain legally enforceable consent to be billed, there are specific disclosure requirements at the CCPA, COPPA, and for any ecommerce sites persisting cookies, as well as general consent issues. Requirements for the disclosure depend on the type of subscription, such as if the subscription is tied to a free offer, or if renewal is bundled with a sale.
The CCPA disclosure requirements include:
In addition to the CCPA, if your subscriptions are tied to a sale under a free offer (which the Federal Trade Commission has specifically cautioned against) you need to comply with the Federal Trade Commission’s Telemarking Sales Rule, which requires the disclosure at the initiation of all transactions, including cancellations. Note that there are other technical requirements for the cancellation demonstration / disclosure.
Legal compliance can be difficult since there are so many nuances for when, where, how, what to disclose and demonstrate cancellation. The legal requirements for what your cancel subscription process must look like are substantially beyond this blog post.
Legal Compliance by Marketing Automation
Marketing automation can help your company to be compliant with the disclosure/reporting requirements and improve retention rates to increase revenue, as well as increasing regulatory compliance to avoid penalties. Newer marketing automation tools can ensure legal compliance while still optimizing for revenue (ROI).
For example, you can collect the required agreement to be billed for future amounts while still doing cart abandonment follow up a few weeks after some customers do not checkout the first time, and the marketing automation will catalog the results of the subscription process.
Combining Marketing Automation and Legal Knowledge
With all of this legal knowledge, we make the point that marketing automation can substantially help you comply with CCPA, COPPA, Telemarking Sales Rule, and other requirements, thereby avoiding the $7,500 per violation which can rack up to thousands of dollars per day. However, as a reminder, none of this is legal advice, and this is the type of thing that requires a full analysis from legal counsel.
Unfortunately, that makes this difficult for the small business that has introduced a subscription model for new revenue particularly in this economy.
A common complaint when I am conducting digital forensics web compliance, privacy compliance, or consumer protection litigation for clients I am currently serving as plaintiff’s counsel, or in the collection or settlement negotiations, is to see a website where a business accidentally did something wrong, and this “small business mistake” resulted in thousands of dollars due to a regulation that will not go away.
Preparation and Knowledge Gets You Ahead of Your Competition
It is critical to get ahead of the curve with the cancel subscription process and legal compliance as the regulatory environment is becoming increasingly stringent and fines and penalties continue to increase for legal violations.
