Back in 1968, a law was passed that allows for consumers to fight against credit card billing errors. The law is called the “Truth in Lending Act” and has been both helpful for consumers and retailers on many levels.
While the act was highly beneficial and a safeguard for consumers, it also created a massive challenge for businesses of all shapes and sizes — so much so that it costs brands billions of dollars every year.
This is especially true for subscription-based services that come in the form of companies like Netflix, Honest Beauty, Spotify, The Dollar Shave Club, Fabletics, and more.
While these subscription-based companies often reap massive rewards, they have also learned the hard way that transaction reversals can lead to massive amounts of lost revenue.
As you work to build better and stronger business practices for your brand, it’s important that you do everything you can to avoid transaction reversals.
Before we dive into how you can avoid them, let’s take a look at the benefits surrounding subscription-based services:
If you’re considering developing a subscription-based product offering or service, you should definitely study up on ways to avoid recurring billing chargebacks.
#1 – Be Extremely Clear About Your Subscription-Based Business
Unfortunately, many brands make the mistake of being tricky about their subscription-based businesses. Sometimes they use the old bait and switch method to get customers to sign up and receive their products, or they insert terms and conditions stating the offering is a monthly subscription in the fine print and they go unnoticed.
The more clear and transparent you are about what your customers are getting, the better in the long run.
#2 – Offer Tiered Pricing and Flexibility
Try to inspire your customers to choose a subscription model that best fits their budget, rather than providing an expensive one-size-fits-all solution. You can accomplish this by offering tiered pricing. The secret to your success is making sure the consumer is getting exactly what they expect and can afford. Otherwise, you’ll set yourself up for more cancellations and chargebacks than you can imagine.
#3 – Have an Extremely Clear Returns & Exchanges Policy
The easier you can make it, the more faith your customers will have in your offerings. We can’t express enough how important transparency is, especially as customer reviews have become such an important tool. The last thing you need is several reviews mentioning that your subscription model is deceptive and/or a frustrating experience for consumers.
#4 – Make It Easy for Customers to Cancel or Unsubscribe
One of the biggest complaints from consumers surrounding subscription-based products and services is having a hard time cancelling or unsubscribing. Some brands don’t allow for their customers to cancel via the web, which can be extremely frustrating. Instead, brands require customers to call in or write extensive emails to end their subscriptions. While this can leads to less subscriptions lost in the short-term, it has been proven to be a strategy that often backfires in the long-run.
#5 – Utilize the Right Chargeback Solution
Because subscription-based products and services often lead to chargebacks, it’s important you know how to best deal with them when they arise. You may want to consider working with us at ChargeBack360, as we can help streamline the way you respond to and deal with chargebacks of all shapes and sizes.
If for any reason you’re questioning as to whether or not you should be transparent about your subscription model, we highly recommend that you dare to be as clear and straightforward as possible.
We’ve seen first-hand that when a brand keeps its customers’ best interests at heart, it goes a long way! Not only does it protect you against horrible reviews, it generally leads to far less chargebacks.
And of course, the more transparent you are, the more proof you can offer when you are faced with a chargeback you know isn’t justified.
The truth can set you free!
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