Repeat customers spend 67% more than new customers. In growing a business, an effective strategy for driving sustainable growth is through subscription models. It reduces friction in the buying experience by offering your product or service every month, without extra fees or complications. The rise in subscription-based selling has been meteoric, with Americans spending $924 per year on subscriptions.
As subscription businesses grow, so has scrutiny of practices relating to opting in and out of subscriptions. Regulators, including the FTC, have issued specific guidance that regulates the subscription economy. This type of regulation was recently tested in a case that the Attorney General of Pennsylvania brought against a coin manufacturer and distributor, American Mint. Were they looking to cash in on subscription business models at the expense of consumers?
Negative Option Marketing: A Poor Choice for Coin Collection
The Pennsylvania Attorney General’s Office received over 200 complaints regarding negative option marketing practices from American Mint, a collectibles company near Harrisburg, PA. An investigation revealed that American Mint used deceptive subscription practices, enrolling customers into recurring “negative option” plans without explicit consent. Under a “negative option” plan, a customer’s silence or failure to act is seen as agreement to make future purchases.
The Attorney General’s office alleged that American Mint violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law by signing customers up for subscriptions to coins without giving them a way to opt out of the subscription. It eventually reached an outcome that included a $750,000 damages payment, and required American Mint to discharge all consumer debts and make considerable changes to the company’s policies.
Consumer Surveys in Legal and Regulatory Disputes
When litigators or regulators need to demonstrate the presence or extent of misleading information in an ad, they can turn to consumer surveys. Consumer perception surveys may evaluate how consumers interpret marketing claims, promotional offers, or online interfaces; whether they understand terms like “free,” “trial,” or “limited offer”; whether their understanding impacted their purchasing decisions; or other consumer perceptions. These measures can be used in regulatory inquiries and also help companies develop compliant, transparent, and consumer-friendly marketing practices.
Well-designed surveys provide evidence about consumer understanding, perception, and behavior, and may be central to disputes involving advertising, labeling, and subscription models. Consumer surveys can help regulators demonstrate that a company’s communications were deceptive, even if those communications included disclosures or fine print.
MMR Strategy Group, an IMS Legal Strategies Company, is trusted by regulators to design and conduct consumer survey research that support both private sector and public enforcement.
This post was written with 100% public information.