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Thursday
Apr192012

The Roach Motel Business Model

The one I am referring to, is the model where by a business makes it super easy to sign up and difficult to cancel. Most businesses now make it super simple to enroll. You sign up on the website, and voila you are done. If you need to change your address, credit card number or sign up for more features, again you can do it simply and easily on their website. If however you want to remove services or in any way decrease the amount of money you spend with them there are no visible clues as to how to do it.

For example. I recently subscribed to The Hill Times. It's not a bad paper, but I wasn't reading it enough to justify the cost. Via their website account control panel, I could update my credit card number, update my address, subscribe to other publications, but nowhere to be found was a cancel button or a description about how to cancel. I entered 'cancel' into their search bar and got zero hits. There was no information on their FAQ page about how to cancel. I was left with selecting a phone number off the contact us page, and working my way through to someone who could cancel my account.

Another example, a Rogers sub contractor contacted me last night with what appeared to be a good deal. He said I was paying $17/month for my iPad data plan. There was a new one that was $6 if I used less than 10mb in a month, but would revert to 17 if I used more than 10mb. It seemed like a good deal and I said go for it. Before the call was up, I asked to confirm that the 17/month included taxes ( I pay 15+ tax which is 16.95 ). They told me that it would now be $17 plus tax. So, not a good deal considering most months I would be over 10mb. I asked that I be left on my original plan. They said no problem. A couple hours later I received a confirmation email of my new plan. It has taken me close to an hour on the phone with 5 reps to find out that my SIM cannot be reverted to a pre-paid plan form the new post paid plan. So that brings me back to the point of my post. It was easy for them to convert me from pre-paid to post-paid but they can't go back. As an engineer, I know that this is not a physical impossibility, this is an accounting/IT impossibility. They have designed the system so that you can't go back to a lower cost plan.

You encounter the similar issues with monthly services. When you sign up they will immediately provide you service. But when you try to cancel, they can't possibly stop the service that day and pro-rate you bill. You have to stick it out to the end of the billing cycle. Rather convenient for them.

Not every business is like that. One of the selling points for moving my blog to Squarespace was the fact that they make it easy to cancel, and they allow you to export you data at any time. Without those two selling points I would never have made the jump. In the future I will be looking for the account cancellation link for any new service I may be looking to sign up with.

I assume that businesses think that since they are losing a customer they might as well give up trying, but they seem to forget a customer may eventually come back. To me this roach motel model pretty much ensures that they will lose the business for good.

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