Cancel anytime: How cancellation policies impact consumer buying behavior

By Sukki Yoon | January 9, 2024

Reading time: 3 minutes

Abstract

The pandemic has instilled a preference for flexibility, especially in services that traditionally require long-term engagement from consumers. The article discusses how retailers and service providers can better understand two commitment types: long- and short-term goals.

Research Topics:: Consumer Research | Shopper Insights
Industry/Market Focus:: Consumers
Content Type: E-Newsletter Article

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Understanding consumer behavior

Editor’s note: Sukki Yoon is a professor of marketing at Bryant University, Rhode Island.

If there’s one thing the pandemic taught consumers, it’s that life is too short for long-term commitments. This upended the way consumers perceived lengthy contracts, leading to increased hesitancy to commit to long-term items like gym memberships, even if these items had a positive effect on personal development and well-being. However, as life normalizes, retailers have a chance to rebuild consumer confidence.

Moving forward, offering flexible cancellation policies may be key, as they lower the psychological barriers to commitment. Evidence suggests that the option to cancel motivates consumers to persist with long-term services, treating the cancellation policy as an emergency reserve. This approach could re-energize commitment to self-improvement services post-pandemic, benefiting both consumers and service providers.

In the forthcoming study, “Cancel Anytime: How Easy Cancellation Options Enhance Purchase Intentions for Services that Require Long-Term Commitments” (to be published in the “Journal of Retailing and Consumer Services”), my co-authors and I looked at two commitment types – long-term goals, which were substantial and potentially life-altering, and short-term goals, which were immediate and less consequential – to determine if cancellation flexibility influenced their commitment decision.

Distinguishing commitment types

Past research indicates that while humans have the capacity to delay gratification for future benefits, the effort required can sometimes be at odds with the desire for immediate enjoyment. As people become closer to attaining their goals, they sometimes get derailed; however, constant reminders of an end result can help reignite commitment.

For goal-specific commitments like learning a language or embarking on a fitness regimen, research shows a need to balance long-term goals with motivation, which can wane in the face of daunting targets. If the goal is attainable and seen as valuable, people will pursue it.

However, the uncertainty brought by the pandemic ushered in a wave of consumer hesitancy with long-term commitments that come with things like a gym membership or a learning app.

Understanding the role of “cancel anytime” in consumer decisions

A strategy to ease this apprehension is the “cancel anytime” option. Such flexibility can make long-term goals seem more attainable and encourage consumers looking to sign up for services like language courses or gym memberships.

We tested this theory with two studies. In the first, The Language Learning Experiment, participants were more likely to commit to a year-long language program when they knew they could cancel, compared to just a two-week commitment. It seems the longer the commitment, the more attractive the option to cancel becomes.

In our second study, The Gym Membership Experiment, we told some folks their gym time would make them healthier, which gave them a long-term goal. For others, their goal was strictly aesthetic, which was seen as a short-term goal. Just like The Language Learning Experiment, the cancel anytime option was a bigger hit with the long-term crowd.

Findings and recommendations for brands

Cancellation options significantly increased the intention to join long-term programs by enhancing the perceived achievability of goals. However, this strategy may not be as effective for short-term commitments, where the ease of opting out can devalue the goal.

This research contributes to the understanding of consumer behavior by demonstrating that the option to cancel can serve as a motivational tool, especially for long-term commitments. Retailers are advised to implement such strategies to facilitate consumer engagement with services that contribute to their personal development goals.

As we transition to a post-pandemic world, “cancel anytime” offers could help rekindle the public’s commitment to long-term personal development. Nevertheless, caution is advised since the effectiveness of this approach varies depending on the type and duration of the commitment.