Direct Response

It’s challenging enough to come up with an effective marketing campaign. It’s even more challenging when you want to ensure that this marketing campaign complies with FTC rules and regulations. You don’t want to mess with the Federal Trade Commission and other similar governing bodies.

As such, it is of paramount importance that you pay attention to the guidelines outlined in this article if you are the least bit interested in continuity billing and negative option marketing. Being able to provide some positive value to your customers probably doesn’t hurt either.

What Is Continuity Billing?

Continuity billing or the continuity sales model is a version of negative option marketing wherein a customer agrees to receive additional products or service on a subscription basis until they choose to cancel. This is typically without any sort of advance notice.

One example would be a customer who signs up for a free one-month subscription to the local newspaper. If this customer does not phone in to cancel this subscription before the free period ends, he or she will continue to receive the newspaper at the regular subscription price.

From a marketing perspective, this is a great way to get your foot in the door. However, many marketers have taken advantage of this business model, possibly using deceptive tactics to get those initial sign-ups. As such, the FTC has stepped in with several rules and standards to protect the consumer against these kinds of practices.

You Need an Affirmative Consent

With the FTC regulations surrounding continuity programs, there are two very big guidelines that you should keep in mind.

1. The forced continuity cannot be in authorized in the fine print.

In the past, marketers used extra large print to showcase the free trial or remarkably low price for an introductory item. They would then put the conditions related to the automatic billing that would follow (continuity program) into the fine print. Few customers read the fine print, so many people signed up with no real knowledge of the obligation they just agreed to.

So, the FTC stepped in to say that this authorization needs to be more clearly visible to the consumer on the sign-up page, whether it is a physical form, an online form, or over the telephone.

2. Marketers need to obtain affirmative consent from consumers for the subscription billing.

Again, marketers in the past could have attained implied consent through the fine print or as part of a larger form. On the web, this could have been achieved through a “pre-checked” checkbox in an online registration form. This is no longer compliant with FTC regulations.

The “affirmative consent” must be attained through a positive action on the part of the customer. For instance, that “pre-checked” checkbox must not be “checked” by default. The customer must then actively check the box next to the clause saying that he or she agrees to paying the regular subscription fee as part of the continuity program after the free trial or initial offer.

FTC’s Five Principles

As part of its efforts to reign in the confusion surrounding continuity programs, the FTC developed five key principles that are consistent with existing standards by the governing body. These target online marketers, but they also apply to offline marketing tactics as well.

1. “Marketers should disclose the material terms of the offer in an understandable manner. The negative option guidelines suggest that to comply with Section 5 of the FTC Act, marketers of negative option plans should disclose, at a minimum: the existence of the negative option offer; the offer’s total cost; the fact that a consumer’s billing information will be transferred to a third party (if applicable); and how to cancel the offer.”

Being as up front as possible with your potential customers is the best way to comply with FTC regulations, but this can go against some more traditional tactics in marketing. So, be creative but make sure you are in compliance.

2. “Marketers should make the appearance of disclosures clear and conspicuous. Disclosures should be placed on a Web page in a size, color and location where consumers are likely to see them.”

This is related to the notion above that consent to the subscription not be in the fine print. When it comes to the web, you should make sure that the disclosure text is just as large as the rest of the form.

3. “Marketers should disclose the offer’s material terms before consumers incur a financial obligation. Placement above any button a consumer would click to submit an order is suggested.”

It is quite common to see a “submit” button on a website before the full terms and conditions. You can’t really do this with negative option marketing. To help keep your page at a more reasonable length, the full terms and conditions can be in a scrollable text box.

4. “Marketers should obtain consumers’ affirmative consent to the offer. Marketers should not rely on pre-checked boxes as evidence of consent.”

This echoes the regulation described earlier in this article.

5. “Marketers should not impede the effective operation of promised cancellation procedures. Marketers should not hang up on consumers who call to cancel, place them on hold for an unreasonably long time or misrepresent the reasons for delays in processing cancellation requests.”

This doesn’t have so much to do with the sign-up process as it does with the cancellation process. It’s not illegal to have a “retentions” process to try to convince these customers to stick around, but you can’t use the unsavory methods (and ones like them) described by the fifth principle.

Marketing and Free Trial Offers

What else do you need to keep in mind when using continuity marketing programs? First, the trial offers need to be extended for a minimum of ten days and this period cannot begin until the product is shipped (or the service is rendered) to the consumer.

Second, it is important to outline the exact terms of the continuity model to the customer before he or she signs up. This could include information about minimum purchase obligations, for instance, as well as the frequency (and amount) for the subscription-based billings.

Offering a free trial is perfectly legal. Just make sure that the free trial really is free with zero obligation on the part of the consumer.

More Suggested Reading

Some people felt that the crackdown by the FTC would effectively kill the continuity billing framework. That’s far from true. It does change the game, though, so you need to make sure that you play by the rules.

For more information, be sure to check out these important documents on the FTC website:

- Prenotification Negative Option Plans – Facts for Consumers
- Negative Options (PDF)

P.S.  If you want to learn how to follow guidlelines and CRUSH IT at the same time reach out to us and we’ll show you. – Rich Gorman