We’ve all been there, especially with an expensive antivirus subscription, but what does it mean for a company if you forget to cancel your subscription?
Economics professors from Stanford and Texas A&M reveal in a new study that people’s forgetfulness when it comes to subscriptions can pad companies’ coffers by up to 200%.
“I knew that people forgot to cancel. The magnitude, the pervasiveness of this issue was surprising,” said coauthor Neale Mahoney, an economics professor at Stanford, and I think we can all agree.
The study was made on 10 common subscription services and the findings clear: people mostly cancel subscriptions when the card they have on file expires, essentially reminding them they’re paying for a service they don’t use.
From a Fortune.com report:
“Mahoney, along with fellow Stanford economics professor Liran Einav and Benjamin Klopack, an assistant professor of economics at Texas A&M, calculated the cost (or — to companies — benefit) of inattention by zeroing in on a specific moment in purchasers’ lives: replacing a credit card.
Using a large dataset from an undisclosed payment system provider, the researchers first identified 10 common subscription services, and then looked at how frequently they were renewed during normal times and when the subscriber replaced a card, forcing them to update their payment information with each service.
Renewals sharply dropped off after these card replacements, even as other shopping behavior, such as buying groceries and gas, continued normally, leading them to a conclusion: When people had to actively decide to resubscribe to a service and enter new payment information, many opted out.”
What was your most expensive subscription or trial you forgot to cancel? Yours truly is ashamed to admit how much money I lost with various photo editing apps, not to mention streaming services I never use.