Examining misleading online free trials and subscription traps experienced by European consumers

Background

Misleading 'free' trial or test offers that subsequently trap consumers into subscriptions to purchase the test product or services are a persistent malpractice affecting many online consumers across Europe.

The European Commission appointed GfK Belgium, RAND Europe, and time.lex to carry out a study on misleading online free trials and subscription traps experienced by consumers in Europe.

Goals

As part of the study RAND Europe had two roles. The first was conducting a website screening exercise across the EU28 countries, Iceland and Norway to:

1. Establish the business models used by companies offering free trials to consumers; and
2. Estimate the extent to which problematic practices occur with free trials for health supplements, cosmetics, online dating services, cloud-based backup services and video/music streaming.

The second role was to conduct a behavioural experiment to explore how the provision of different types of information affected the likelihood that respondents would sign up for a free trial and whether they noticed the subscription fee and cancellation terms. The hypothetical websites focused on seven hypothetical items: weight loss supplements, muscle-building supplements, skin cream, acne treatment, dating, streaming video and data backup.

The behavioural experiment worked on the hypothesis that consumers fall victim to subscription traps for two reasons. Firstly, they may not realise that they are signing up for a subscription and, secondly, they are overconfident about remembering to cancel the subscription during the free trial period. The experiment was designed to investigate whether more information helped to make people more aware of the subscription details about products, while elements were also included to assess the role of overconfidence.

Methodology

The video screening exercise used a combination of desk research and analysis of primary data collected through screening 900 websites, Facebook pages and mobile apps.

Over 10,000 respondents (10,132) from eight different countries across Europe (Italy, Lithuania, Sweden, Poland, Bulgaria, Netherlands, Germany and the UK) participated in the online behavioural experiment. All respondents were recruited through the GfK online panel. The experiment involved a 15-minute online questionnaire, with respondents being shown a series of websites designed to mimic common subscription sites for seven products. Each had variations in the amount of information about the product and free trial.

The questions were designed to collect information from respondents to:

• Assess their interest in the different product types;
• Establish whether they noticed details about the subscriptions;
• Assess how likely others would be to notice details of the subscription and how that could affect purchasing decision; and
• Assess their confidence in cancelling a free trial, as well as their confidence in others to do the same.

After exposure to the first website and questions, respondents were likely to be more aware of the fact that the experiment was about subscriptions. They might have realised that the fine print contained details about a subscription and might have also known where to look to identify similar traps for future tasks. Therefore, for the remaining websites, individuals were no longer asked whether they noticed the subscription fees themselves; rather, they were asked if they believed that other shoppers would notice the subscription terms.

Findings

Website screening exercise

There are broadly three typologies of 'free trial'–based business models:

1. Free samples and club membership, commonly used in health supplements and cosmetics markets. These business models typically use free samples as a marketing tool to encourage consumer interest in products. They rely on consumers trying their products over a prolonged and sustained period of time.
2. 'Freemium' and advertising, commonly used by dating services. These business models tend to allow users to have a restricted service for free. They are either time-restricted (e.g. one month for free) or feature-restricted (e.g. you can only do x but can't do y). The free sites are often supported by advertising.
3. 'Freemium' and relying on consumer inertia, commonly used by cloud-based backup services and video/music streaming services. These business models allow consumers to engage with the service for free, but rely on the consumers' forgetfulness or propensity to continue the status quo.

The study identified a number of problematic practices across the four different categories. Passing consumers' details to others, and the trader ID not being specified or unclear, were the practices with the highest incidence rates, with both ranging between 75 per cent and 45 per cent across the four different categories.

Health supplements and cosmetics were found to have the highest incidence of questionable or problematic practices of any category.

• 71 per cent of free trials for cosmetics and 69 per cent for health supplements were found to pass the details of consumers to others.
• The trader ID was not specified or unclear for 61 per cent of free trials for health supplements and 51 per cent for cosmetics.
• The procedure to withdraw was not specified or unclear for 56 per cent of the free trials for health supplements and cosmetics.

Cloud-based backup services were found to have the lowest incidence of questionable or problematic practices. However, 50 per cent of free trials for cloud-based backup services were still found to pass the details of consumers onto others.

Audio and video streaming services were found to have two questionable or problematic practices above 50 per cent. Passing consumers' details was at 61 per cent and unclear or unspecified trade ID was at 64 per cent.

Dating services were found to have a high number of questionable or problematic framing strategies that prompted consumers to sign up for a free trial, with the rate being at 54 per cent. However, both health supplements and cosmetics still had a higher rate, at 72 per cent and 58 per cent respectively.

Behavioural experiment

Respondents noted that they would be unlikely to enrol in trial subscriptions for the products presented in the behavioural experiments. Over two-thirds of respondents reported that they would be "not at all likely" or "not so likely" to order or enrol in a trial, while around 20 per cent reported being "likely" or "very likely" to enrol.

The experiment found that respondents were more likely to notice the recurring fees for digital products than physical products. However, this could be due to the different designs of the websites.

• For the digital products, where subscription information was very large and quite clearly marked, only about 42 to 45 per cent of respondents noticed the fee (and they reported that around 54 per cent of others would notice the fee information).
• For the physical products, where the cost of the monthly membership was hidden in the small print, only 11 per cent of respondents reported that they had noticed the monthly fees. There was no statistically significant increase in noticing fees when a notice of subscription (notice treatment) was provided or when a notice about the length of time to cancel (date treatment) was provided. However, the proportion of people who noticed the subscription fee more than doubled, to 24 per cent, when the subscription fee was presented explicitly. Again, respondents stated that higher proportions of others would notice the fee information.
• These findings are highly revealing. Firstly, there is a clear upper bound to the protection that labelling can have. Secondly, there will always be a significant proportion of people who do not pay attention to product detail descriptions.

Respondents did not typically notice the trial length associated with the subscription. However, like the fees, respondents were more likely to notice the trial length for digital products. On average, about 21 per cent of respondents noticed the length for the physical products, while 42 per cent noticed this for the digital products. None of the information treatments tested in the experiment had a discernible impact on respondents' observation of the trial length.

Respondents were more confident about their own likelihood of cancelling a free trial than other people. Overall, 53 per cent of people thought that they were likely or very likely to remember to cancel a subscription once the free trial is over. However, only 29 per cent believed that others were likely or very likely to remember.

Additionally, 52 per cent of respondents claimed that they subscribe to a free trial with the intention to cancel, but only 38 per cent actually do.

Overall, the findings from the experiment suggest the following:

• While salient labelling that includes a notice of the monthly fee to be charged after the end of the free trial can help to improve consumers' awareness of subscription traps, there will still be many consumers who do not notice the information. Therefore, labelling is unlikely to be sufficient to protect consumers from subscription traps.
• Subscription traps might be more effective for products that prey on the insecurities of consumers, such as weight loss supplements or acne treatments.
• Overconfidence in remembering to cancel a free trial is likely to contribute to the success of subscription traps.

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