Cancel anytime: a powerful tool to accelerate sales during COVID-19

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I received an email from Alaska airline back in March. The email talked about the launch of their Peace of Mind policy during COVID-19: any ticket purchased between 2/27 and 4/30 can be changed or canceled without a fee. Along with that they highlighted a big fare sale. I found the airline’s combo offer attractive: they invited me with favorable prices, and more importantly, relieved me from the fear of commitment in this uncertain time.

No-commitment is an effective tool to accelerate purchase decisions and boost sales. It assures customers that even if they make a wrong decision or encounter changes, they’ll still be able to adjust quickly. This tool has been used to address customer concerns on making “high risk” purchases: online outfit merchants such as Zappos and Reebok offer friction-less return/refund to reduce risks of wrong sizes or styles, and consumer subscriptions like Netflix and Amazon Prime offer cancel anytime to mitigate risk of being trapped by a pledge. According to a consumer survey on online shopping, if a retailer offers good return experience, 96% customers would shop again, but if a retailer charges restocking or return shipping fees, 69%+ customers would refrain from buying.

In normal times, no-commitment is one of the many instruments to encourage purchases. During this unprecedented pandemic, it becomes more powerful, enough to crack open frozen demand. Before COVID-19, most individuals and organizations have stable expectations about the future and high confidence in many plans, be it work, study or travel. Feeling in control, people hesitated little to make purchases that fulfill their needs. However, shocked by COVID-19, many are holding off purchases, in fear of further exposure to the uncertainties. Yet, these people and organizations still need and can afford the products and services. Their demands can be defrosted, as long as providers address the fear. In this volatile time, no-commitment places more control in customers’ hands, allowing them to adjust as things change. It shows empathy, generosity and care. Hence it may not only activate sales, but also win a customer’s heart.

Granted, no-commitment can be a headache to providers. It may lead to unpredictable revenue, swollen cost due to customer churn and prone to poaching. All these concerns are palpable. However, contractual commitment has its flaws too. It may slow down or even change purchase decisions, due to customer’s mental burden. it may also bear risks of reputation damage, by holding an unhappy customer hostage.

Even without commitment on paper, a customer may still stick around organically. Let’s look at consumer subscriptions as a proxy, for most of them are cancel anytime. According to a survey in 2016 of 500 shoppers in the U.S., the average subscription length is 125 days or roughly 4 months. If you are a B2B company, your average customer life-cycle will likely be longer. Four months may not sound enough, but we can do something to extend that.

There are many ways to incent customers to stay with us even without a contract, such as:

• Rewarding usage and loyalty. Airline frequent flyer and credit card reward programs are both in this category.
• Forming unique customer habits around product. For example, a health app reminds user to record their weight every morning.
• Guiding customers to discover on-going product value. For example, an on-demand workout platform proactively sends out welcome and check-in emails to help craft user’s fitness journey and guides them to find exercises tailored to their stage and preferences.
• Increasing product value dimensions. For example, Amazon Prime bundles free shipping, video and music streaming services, access to its e-books and more, making the subscription attractive on multiple fronts.
• Creating a network effect. Network effect is a phenomenon whereby the value of a product or service improves as more people use it. Telephone is a classic example, and social networks like Facebook, WhatsApp and LinkedIn are more well-known in this day and age. Many other products and services can be optimized with network effect. For example, online stores incent customers to leave product reviews to show social proof and build credibility; cloud storage solutions such as Box and Google Drive facilitate easy sharing and collaboration to extend product value way beyond storage.

Compared to contractual commitment, the approaches above may seem more subtle, but are equally, if not more effective in reducing churn and shielding providers from competition. The key is to guide customers to form a long-term relationship with one’s products and services, in every interaction. Intentionally or not, many businesses already baked one of more of these aspects into their products and business models. If your portfolio already has one or more of these qualities, implementing no-commitment will probably yield a good ROI for the risk taken.

If you are still concerned about customer retention, bear in mind that what really matters is the reasons behind a customer’s decision to leave/cancel. According to another survey in 2017 of 5,000 consumers in the U.S., “dissatisfaction with product experience” and “not getting value for the money” are the top two reasons of cancellation. These two combined accounts for more than 50% of all responses. The bottom line: good customer experience is the reason to stay.

Alaska is not the only airline that rolled out peace-of-mind policies during the coronavirus outbreak, most major U.S. airlines, including Delta, American, Southwest and more, all have significantly relaxed their flight change and cancellation policies.

Relieving customers from contractual commitment can be a powerful instrument to accelerate purchase decisions, for it gives buyers a peace of mind in this volatile time. While each provider needs to do detailed analysis to make a call on no commitment, I believe that every business should find ways to entice customers to stay, without locking them in.