- A new study found forgotten subscriptions can raise sellers’ revenue by over 200% in some cases.
- When customers are reminded, they cancel more often than they otherwise would.
- Rising costs of subscription services mean inattentive consumers could lose a lot of money.
In the age of auto-pay and subscriptions, it’s easier than ever to access goods and services from around the world — and easier than ever to forget exactly which services you’re continually paying for.
After economist Neale Mahoney realized he forgot to cancel his Peacock subscription and paid for several months longer than he intended, he got curious about how many people were having the same problem.
Mahoney told NPR that he and another colleague from Stanford University joined forces with an economist at Texas A&M University to comb through millions of credit card records in a natural experiment — an observational study on when people canceled their subscriptions.
“We realized that when your credit card expires or you lose your credit card and get a new one in the mail, you’re going to get an email from all the companies where you have a subscription that says, ‘Can you log in again and update your payment information?'” Mahoney said to NPR.
When that happened, according to their resulting paper, and consumers had to re-subscribe with a different card, there was a sharp drop in subscription renewal.
Roughly 8% of customers canceled at that point of payment replacement, compared to the roughly 2% of customers that cancel subscriptions in a “regular” month, the researchers found.
The “inattentive” customers that the study tracked allowed “sellers” to raise their revenue by between 14% to over 200% in some cases, they wrote.
The costs could add up even more as services rise in price. For example — the cost of streaming services is rising. It rose 24% over the past year, and the price hiking probably isn’t done yet, according to a recent analysis from Mark Schilsky, a sales specialist at Bernstein Research.
A 2022 study found that 74% of its participants struggled to remember all their recurring subscription charges, and 72% said they used auto-pay on recurring subscriptions — making it easier for them not to realize how much they were spending.
“There are some people who tend to be more financially organized and they may set reminders,” Mahoney said to NPR. “And there are some people who are busy and have other things going on in their life and they’re more prone to making mistakes.”
Have a news tip? Contact this reporter at scahill@insider.com.
Related Post
- A new study found forgotten subscriptions can raise sellers’ revenue by over 200% in some cases.
- When customers are reminded, they cancel more often than they otherwise would.
- Rising costs of subscription services mean inattentive consumers could lose a lot of money.
In the age of auto-pay and subscriptions, it’s easier than ever to access goods and services from around the world — and easier than ever to forget exactly which services you’re continually paying for.
After economist Neale Mahoney realized he forgot to cancel his Peacock subscription and paid for several months longer than he intended, he got curious about how many people were having the same problem.
Mahoney told NPR that he and another colleague from Stanford University joined forces with an economist at Texas A&M University to comb through millions of credit card records in a natural experiment — an observational study on when people canceled their subscriptions.
“We realized that when your credit card expires or you lose your credit card and get a new one in the mail, you’re going to get an email from all the companies where you have a subscription that says, ‘Can you log in again and update your payment information?'” Mahoney said to NPR.
When that happened, according to their resulting paper, and consumers had to re-subscribe with a different card, there was a sharp drop in subscription renewal.
Roughly 8% of customers canceled at that point of payment replacement, compared to the roughly 2% of customers that cancel subscriptions in a “regular” month, the researchers found.
The “inattentive” customers that the study tracked allowed “sellers” to raise their revenue by between 14% to over 200% in some cases, they wrote.
The costs could add up even more as services rise in price. For example — the cost of streaming services is rising. It rose 24% over the past year, and the price hiking probably isn’t done yet, according to a recent analysis from Mark Schilsky, a sales specialist at Bernstein Research.
A 2022 study found that 74% of its participants struggled to remember all their recurring subscription charges, and 72% said they used auto-pay on recurring subscriptions — making it easier for them not to realize how much they were spending.
“There are some people who tend to be more financially organized and they may set reminders,” Mahoney said to NPR. “And there are some people who are busy and have other things going on in their life and they’re more prone to making mistakes.”
Have a news tip? Contact this reporter at scahill@insider.com.
