The good news is that Netflix just announced a fix. The even better news is that no matter what kind of business you run, the Netflix decision offers an intriguing example that might well pay off for you, too.
First, the Netflix announcement.
I'll bet you've endured the annoying problem we're talking about, and to be clear it's by no means unique to Netflix. It's that sinking feeling you get when you realize you're automatically paying every month for something you subscribed to long ago but never really use.
In a recent post on the Netflix company blog, Eddy Wu, director of product innovation, revealed Netflix won't let that happen to subscribers anymore -- at least after a point.
"At Netflix, the last thing we want is people paying for something they're not using," Wu wrote, so Netflix has started sending notifications to customers if they go without watching anything on Netflix for more than a year. "If they don't confirm that they want to keep subscribing, we'll automatically cancel their subscription."
Automatic cancellation is an intriguing and counterintuitive move. The entire business model of many subscription-based companies is to get users to sign up once, enter a credit card--and provide a nearly perpetual annuity, no matter what.
People hate this. In the words of Tien Tzuo, whose Subscribed Weekly newsletter brought the Netflix announcement to my attention: "Zombie subscription models suck."
A search on Google for "won't let me cancel subscription" yields 1.5 million results.
And if you have a long memory, you might recall how Vincent Ferrari became internet famous some time ago, when he recorded what was required to cancel an account with AOL.
Now, when we dive in deeply to the Netflix announcement, there are three important points to consider.
The first is that Netflix says paid accounts that have remained dormant for a year account for less than a half percent of the Netflix user base: "only a few hundred thousand."
The second is that a full year without activity is a very long time.
One would have to imagine it includes some Netflix accounts for which the owner has died or otherwise is no longer physically able to watch. So while I don't mean to diminish the importance, it seems to me Netflix is setting the bar fairly conservatively here.
But the third point is likely the most important. It's that customers are used to companies trying to squeeze extra dollars out of them. So Netflix might well have bought long-term goodwill that is ultimately worth much more than it could possibly lose from the unused accounts.
(Netflix also says it previously factored the losses into the financial guidance it offers investors.)
When you step back, this decision strikes me as the calculated point where careful financial planning meets brilliant marketing. That's the big takeaway for almost anyone running any kind of business.
You might not have a subscription model like Netflix. But there are profitable inefficiencies in almost every industry.
Maybe it's about an especially large margin on a good or service that reflects customers' lack of understanding about what it costs to produce.
Maybe it's some type of extra fee that's become standard, but you suspect that if customers really scoured their bills and did the math, they might object.
To be clear, I'm not suggesting giving up profitable lines for the sheer niceness of it, especially if other companies use them too. That would be unilateral disarmament, and it might well put you at a competitive disadvantage.
But if you can find a way to chop off the most dramatic instances--the extremes that might make you blush figuratively if anyone ever brought them up, and that might not actually offer all that much upside anyway--you might buy goodwill worth more than what you give up by eliminating them.
In other words: Give up a tactical benefit, gain a strategic advantage, and delight your customers in the process.