Cancelling SaaS Subscriptions: The Good, the Bad, and the Ugly

7 min read Indus Khaitan

Introduction

Cancelling a subscription to a single SaaS product can be straightforward or complicated, depending on how the company has its user cancellation flow set up. But even simple cancellations become a problem for larger organizations with dozens (or even hundreds) of SaaS subscriptions. There is simply no way to track and manage those products manually across all departments. So renewal dates come and go, fees accumulate, and many licenses go underused or unused.

Then again, this is not entirely the organization’s fault. SaaS companies don’t always make it easy to cancel a subscription. There is an entire sub-industry built around the idea that SaaS companies can artificially decrease their “churn”—that is, the rate at which customers cancel a service, compared to the rate of accumulating new customers. A big part of the strategy for reducing churn is devising barriers to cancellation so that users either give up or lose track of their subscriptions—an emerging “dark pattern” blot in the SaaS product design.

These days, SaaS licenses are a big part of an organization’s tech budget, and so efficiencies at managing them will almost inevitably lead to cost savings. This includes timely cancellation of software that is not being used to its best capacity…and avoiding some of these dark pattern tricks that SaaS companies sometimes use to keep users paying.

The Bad: Why is Cancelling SaaS Subscriptions So Difficult?

Sometimes, difficult cancellations are not anything nefarious. A large software company might simply have a disconnect between sales and customer support, for example. Or there might be some legitimate questions about how to handle user data during and after the cancellation.

That said, there are also some shadier tactics that companies use. We are calling these out because we believe that the industry can do better. We also want the consumers of SaaS software to be aware of them because these are precisely the kinds of complications that appear when optimizing and managing SaaS spend.

Auto-renewal without sending a receipt

Some companies will charge their monthly fee quietly without even alerting the account holder that a payment has been collected or sending a reminder about what the fee covers. This is the prime reason that unused accounts continue to be charged.

Auto-renewal without sending an alert

Sending a receipt is the absolute minimum a company can do; best practices dictate that a company should send an alert when a charge is forthcoming and ask the user to review it. Few SaaS companies are doing this, fearing that it will encourage cancellations.

Charging inactive accounts

Inactive accounts are a key sign that a tool is not useful to a subscriber. In fact, a study by customer success software company Totango found that almost every cancellation of a piece of SaaS software was preceded by a “period of non-use.” Yet, companies not only continue to charge customers, but they also don’t bother following up to see why the software is not being used—in short, they collect their money and keep quiet.

Requesting a call or email

This is very common: To cancel, the subscriber must email or call a live person. Emails have a way of getting lost or taking a long time to “get to the right person.” A call, on the other hand, usually turns into a high-pressure sales and renewal tactic. Isn’t it funny how we have so many convenient automated tools and good UX around getting users to sign up, but those all seem to disappear when they are ready to cancel? 

Hiding or burying the cancel button

Even when there is a more straightforward way to cancel with a web form, that form might be buried somewhere. The idea is to put up yet another barrier to cancellation in the hopes the subscriber will simply get frustrated and decide not to cancel.

What do all of these tricks have in common? While they all might delay cancellations (and thus churn) in the short run, they are also sure-fire ways of frustrating and alienating a user base. That’s not good for a company’s reputation, nor does it win them back any clients.

Nevertheless, the practices are still quite common. When multiplied dozens of times across the SaaS tools for an entire organization, it can mean that a significant portion of licenses are going unused but are still taking a bite out of the budget.

The Good: Examples of Gold Standard SaaS Cancellation Practices

So who is doing it right? Which companies are setting the “gold standard” when it comes to cancellation processes? Here are three that are pretty widely recognized:

Netflix

Netflix is the king of online streaming, and they have always made it a part of their brand promise that users can cancel at any time. This was extremely important in the early days of streaming when the business model still had to “prove itself” as a viable alternative to cable.

And while Netflix is not B2B SaaS software, it is nevertheless a subscription service, and so it’s a good model of how subscription services should handle cancellation. 

So how does Netflix make cancellation easy? First, they make the cancel button obvious: It’s right there on the account page, in its corner. Little searching is needed. When a subscriber does cancel, they are also shown an option of suspending their account for a time. If the subscriber still wants to cancel, Netflix clearly communicates when the service will end. They also inform the subscriber how long the company will keep their data and preferences, just in case they should change their mind. All in all, cancellation is easy, and Netflix does an excellent job of clearly setting expectations while still giving subscribers the option to rejoin later.

SaaS Netflix Cancellation
Netflix cancellation page

Mailchimp

Mailchimp started as a tool for sending email newsletters but has branched out into all sorts of marketing needs, such as landing pages, automated campaigns, creative services, and more. Like Netflix, they also provide options for the subscriber: Cancelling or merely pausing the subscription. Clear expectations are communicated for each option.

More importantly, Mailchimp accounts tend to have a lot of data associated with them. Mailchimp’s cancellation process gives the user an easy way to retrieve that data and a clear understanding of what will happen to the data upon cancellation.

Mailchimp cancellation page
Mailchimp cancellation flow

Basecamp

Basecamp is project management software with a suite of valuable tools. Again, Basecamp makes it easy to cancel a subscription and even goes so far as to include links to their refund policy in their cancellation message (as well as an option for undoing the cancellation if by mistake—a nice touch). The language used in the process is friendly and non-judgmental, too. 

Basecamp cancellation flow
Basecamp cancellation flow

What They Have in Common

What these and other positive cancellation designs have in common include things like:

  • An easy-to-find cancellation form right on the website or on the user account page
  • A friendly, non-judgmental language that encourages the user to come back
  • An option to pause service for some time, rather than cancel
  • A clear explanation of what will happen with the subscriber’s data (and how to retrieve it)
  • A clear description of any refund policies
  • A timeline for the end of service and what that entails

The frustrating thing, of course, is that these features usually are not apparent upon sign-up. Most subscribers won’t know what the cancellation process is like until they initiate a cancellation.

This means that there is rarely a good way of knowing whether the SaaS tool to which your company or department subscribes has a good cancellation experience or whether they practice some of those shadier cancellation tactics.

The (Ugly) Truth: Offboarding is Just Part of the Customer Journey

When companies talk about customer journeys, they often just mean the sales journey. But customer retention and exit (offboarding) are parts of their journey, too.

For SaaS companies, it is worth paying attention to the customer experience around cancellation. That can mean the difference between a future referral and a bad review.

But the lesson is somewhat different for companies that are the consumers of SaaS software. When there is an entire sub-industry built around making it difficult to cancel, subscribers are disadvantaged. Inactive subscriptions aren’t just falling through the cracks…they are actively groomed and profited from.

This is why SaaS management tools are so essential and one reason why we here at Quolum decided to make SaaS cancellation easier. You can’t truly say you are managing your IT costs if unused and underused licenses continue to eat away at the company’s budget.

If you are interested in finding out how Quolum makes SaaS cancellation easier, arrange a call with us or send us an email at saas at quolum.

feature image: pexels/Josh Hild

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