This Wall Street Journal piece about wasteful spending on subscriptions made me think of a neologism Regan Arntz-Gray and I are hoping catches on: 'fraudulent in spirit'.
Good one . Very relevant debate in these times . Companies often reduce subscription costs substantially after a customer cancels his/her subscription. The ethics behind this practice is debatable though companies may justify it under the guise of business strategies like customer retention etc.
Interesting. Never seen someone try to quantify the negative surpluses and assumptions that come with manipulative business models, but this was very enlightening.
It always irritates the shit out of me when a company is anything other than graceful with things like cancellations and refunds. If your customer is not happy to pay you, you're bad at business. Just grow up and admit it.
A lot of this comes down to that: there are costs to a company's being bad at business - and there are legal ways to transfer those costs to the customer. It's almost like how most financial innovation is literally just a process of stripping the risk out of a product and selling the risk to someone else.
I enjoyed the article, but I'm very skeptical that it might be bad for Planet Fitness to know the average attendance of their members and plan their spaces around that.
I imagine that Netflix probably doesn't have the infrastructure to handle all of their subscribers playing content simultaneously and it would be inefficient to expect them to.
Would you apply the same standard to city budgets? They set tax rates and department budgets based on knowledge of driving rates. Is that misleading? I think it's reasonable to assume they couldn't handle it if everyone drove 3x as much and wore out the roads faster. Despite this risk, I own my home so I'm really locked into my city tax subscription.
No, I appreciate the comment. Honestly it’s a fair critique and I wouldn’t really go after planet fitness if I was a regulator in this space since it’s much more of a grey area. It’s true that virtually every gym , cheap or expensive, has to make assumptions about attendance rates. With planet fitness, the assumption they make is a lot lower and rightly so. It’s also not clear that the consumption surplus is negative for most planet fitness members especially given the option value. They’re also making gyms accessible to people who wouldn’t otherwise be able to afford it. Yea, it comes at the expense of lazy people and I feel generally fine with it haha. I feel much more strongly about subscription services that are deliberately deceptive or make it hard to cancel.
With the glorification of subscription models and their benefits (recurring revenue, predictable cash flow), I wonder if it's worth exploring what are the characteristics of a market/company that's most likely to engage in these kinds of fraudulent practices. Perhaps this would help direct the focus of consumer protection agencies? I'd argue it's cases where 1) subscription cost is low enough to not alarm/warrant greater scrutiny 2) switching costs are low 3) customer demand is erratic
"The unsubscribe button is in the metaphorical asshole of the website, almost impossible to find without furiously clicking deep and thorough." Beautiful.
Neat , agree with dimensions 1 and 3. Do you mean "high switching costs" - eg. making it. harder to cancel.
One meta level solution is to mandate that consumers be allowed to choose how often/when they want to review this purchase decision; at which point you get an automated email reminder. For businesses that manage a mailing list (which they all do), this is trivially cheap and easy to implement. You can still keep the default as "continue", so long as the option to cancel is not more than two clicks to completion.
Low switching cost - meaning that consumers typically wouldn't need to spend significant time and effort finding a replacement or incur high cancellation fees. I'd argue that the competitive nature of any such market provides limited customer lock-in, and so these companies introduce fraudulent methods of retention.
Haha, only an EU ruling is likely to result in a mandate to reminder customers "Hey you're not using our service, do you wanna stop contributing to our shareholder value?" Agree that it would be nice to have though!
These kind of shenanigans are so prevalent - banks, cable companies, credit cards, and everything else. It is basically the result of shareholder capitalism -- this kind of tactics clearly improve shareholder returns and once you prioritize that and hire a bunch of MBAs, this is the natural result.
Obama created the Consumer Financial Protection Bureau (CFPB) in 2010 which tries to hold companies to account. The Republicans have been trying to de-fund and kneecap that agency ever since, with varying degrees of success. (The Republican Senate refused to approve anybody to head that agency for years, and then argued that without a head, any of its ruling are invalid. The right wing courts have been open to such kind of arguments as well).
Something to keep in mind, when you vote next time!
I don't know - you're right about this ofc but i can also think of regulators who are net negative. Prima facie, i'd guess the impact of the FTC under Lina Khan has been net negative. I'd probably say that generally about anti trust regulations (in most industries). Perhaps about the FDA too. Consumer protection - probably the opposite. In most cases, abolishing the agency would probably be a mistake but downsizing doesn't seem like a crazy idea.
Good one . Very relevant debate in these times . Companies often reduce subscription costs substantially after a customer cancels his/her subscription. The ethics behind this practice is debatable though companies may justify it under the guise of business strategies like customer retention etc.
Interesting. Never seen someone try to quantify the negative surpluses and assumptions that come with manipulative business models, but this was very enlightening.
It always irritates the shit out of me when a company is anything other than graceful with things like cancellations and refunds. If your customer is not happy to pay you, you're bad at business. Just grow up and admit it.
A lot of this comes down to that: there are costs to a company's being bad at business - and there are legal ways to transfer those costs to the customer. It's almost like how most financial innovation is literally just a process of stripping the risk out of a product and selling the risk to someone else.
I enjoyed the article, but I'm very skeptical that it might be bad for Planet Fitness to know the average attendance of their members and plan their spaces around that.
I imagine that Netflix probably doesn't have the infrastructure to handle all of their subscribers playing content simultaneously and it would be inefficient to expect them to.
Would you apply the same standard to city budgets? They set tax rates and department budgets based on knowledge of driving rates. Is that misleading? I think it's reasonable to assume they couldn't handle it if everyone drove 3x as much and wore out the roads faster. Despite this risk, I own my home so I'm really locked into my city tax subscription.
And, yes, I just read this article now and didn't realize it was old. Apologies if you've written more on the topic since then.
No, I appreciate the comment. Honestly it’s a fair critique and I wouldn’t really go after planet fitness if I was a regulator in this space since it’s much more of a grey area. It’s true that virtually every gym , cheap or expensive, has to make assumptions about attendance rates. With planet fitness, the assumption they make is a lot lower and rightly so. It’s also not clear that the consumption surplus is negative for most planet fitness members especially given the option value. They’re also making gyms accessible to people who wouldn’t otherwise be able to afford it. Yea, it comes at the expense of lazy people and I feel generally fine with it haha. I feel much more strongly about subscription services that are deliberately deceptive or make it hard to cancel.
With the glorification of subscription models and their benefits (recurring revenue, predictable cash flow), I wonder if it's worth exploring what are the characteristics of a market/company that's most likely to engage in these kinds of fraudulent practices. Perhaps this would help direct the focus of consumer protection agencies? I'd argue it's cases where 1) subscription cost is low enough to not alarm/warrant greater scrutiny 2) switching costs are low 3) customer demand is erratic
"The unsubscribe button is in the metaphorical asshole of the website, almost impossible to find without furiously clicking deep and thorough." Beautiful.
Neat , agree with dimensions 1 and 3. Do you mean "high switching costs" - eg. making it. harder to cancel.
One meta level solution is to mandate that consumers be allowed to choose how often/when they want to review this purchase decision; at which point you get an automated email reminder. For businesses that manage a mailing list (which they all do), this is trivially cheap and easy to implement. You can still keep the default as "continue", so long as the option to cancel is not more than two clicks to completion.
Low switching cost - meaning that consumers typically wouldn't need to spend significant time and effort finding a replacement or incur high cancellation fees. I'd argue that the competitive nature of any such market provides limited customer lock-in, and so these companies introduce fraudulent methods of retention.
Haha, only an EU ruling is likely to result in a mandate to reminder customers "Hey you're not using our service, do you wanna stop contributing to our shareholder value?" Agree that it would be nice to have though!
These kind of shenanigans are so prevalent - banks, cable companies, credit cards, and everything else. It is basically the result of shareholder capitalism -- this kind of tactics clearly improve shareholder returns and once you prioritize that and hire a bunch of MBAs, this is the natural result.
Obama created the Consumer Financial Protection Bureau (CFPB) in 2010 which tries to hold companies to account. The Republicans have been trying to de-fund and kneecap that agency ever since, with varying degrees of success. (The Republican Senate refused to approve anybody to head that agency for years, and then argued that without a head, any of its ruling are invalid. The right wing courts have been open to such kind of arguments as well).
Something to keep in mind, when you vote next time!
I don't know - you're right about this ofc but i can also think of regulators who are net negative. Prima facie, i'd guess the impact of the FTC under Lina Khan has been net negative. I'd probably say that generally about anti trust regulations (in most industries). Perhaps about the FDA too. Consumer protection - probably the opposite. In most cases, abolishing the agency would probably be a mistake but downsizing doesn't seem like a crazy idea.