lesson learned when offering annual payments.

6 replies
This week, I had 3 annual subscribers cancel their account, and one even put in a paypal dispute. And of course that lead to a temporary hold on my paypal account. Now, I don't know if the hold was automatic or if it was after a review.

But here is the thing, the dispute said the transaction was unauthorized. Somehow I gained access to the account. However, if either the customer or paypal would have actually looked at the transaction they would have seen it was a renewal, from Nov 2007. And as a subscription it was already authorized.

So, the lesson:

If I continue to use annual subscriptions, and paypal you need to send manual reminders prior to the upcoming transaction date.

Some shopping carts can be automatically configured to send notices prior to the transactions.

#annual #learned #lesson #offering #payments
  • Profile picture of the author Michael Taylor
    Kelvin, I was thinking of this just the other day. I'm planning a membership site and was considering annual payments. I ran through the renewal scenario and thought, "What if they forgot about the renewal?"

    I thought the best solution would be to make annual payments manual and just use marketing muscle to earn their renewal.

    Your experience confirmed my suspicion!
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    • Profile picture of the author Kay King
      I've often wondered if the failure to send any renewal reminders causes a problem. A year is a long time and many people don't seem to realize they can check subscriptions in paypal to see what active subscriptions they have.

      I've never seen a membership site or recurring payment subscription where the owner reminds people the payment is coming up. I'm sure this is meant to prevent cancellations - but would be better to have cancellations before the payment than the complications afterward.

      If your reminder includes a small bonus for renewal or points out new features or testimonials, you might be able to limit cancellations and eliminate complaints.

      Saving one dog will not change the world - but the world will change forever for that one dog.

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  • Profile picture of the author tommygadget
    Yes, I think Kay is right. You must balance these disputes with cancellations if you send reminders. Say you have a 1,000 member site. What if 15% cancel because of the reminders as opposed to a handful of disputes? Which would you rather have? I think the choice is clear.

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    • Profile picture of the author schabotte
      Disregarding paypal, if you apply for a merchant account and you tell them on the application that your business model is an online subscription with annual payments, they are generally disinclined to approve your merchant account.

      I think the reasoning behind this from the merchant account's point of view is that you are collecting funds for services that must be delivered over the following 12 months and if you do not deliver, you (and they) could be on the hook for lots of chargebacks all claiming that you did not deliver the full 12 months of service as promised. They do not like that kind of exposure in their risk model.

      That is a big reason that you see most membership site type places having monthly and quarterly renewals. It makes it much easier to wind down the obligations if the site owner decides to cease business.

      It is also a short enough time for most people to remember that they did sign up for this.

      On an annual basis, definitely it would be best to send out notice a bit before to remind people that their annual renewal date is coming up and to give all the details to remind them what it is all about. It saves on the after the fact hassle that can arise.
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  • Profile picture of the author Shaun OReilly
    Something similar happened to me with a membership site
    that had an annually recurring fee, instead of a monthly
    recurring fee.

    When my PayPal charge came through, at first I thought:
    "What's this for???"

    I did a search in Outlook for the merchants' PayPal address
    and then I remembered the membership site.

    So I've still got another years membership that I've paid
    for. I didn't request a refund or anything because it's my

    However, I immediately went into my PayPal account and
    cancelled the subscription for next year's bill.


    Because the membership site owner wasn't considerate
    enough to remind me of the charge - before making the
    automatic payment.

    And guess what?

    If he'd reminded me beforehand, I'd probably have remained
    on for years to come.

    So, if you do have yearly recurring fees, be considerate and
    inform your clients that they'll be charged and remind them of
    the benefits of staying.

    Dedicated to your success,



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  • Profile picture of the author Kelvin Brown
    1 of the cancellations was because the customers thought they paid for a lifetime membership, instead of annual.

    Another was because the client just did not take advantage of the system.

    So, what did I learn? Some things I already knew, the real thing is to tighten up.

    Make sure people know what they have, and finally send those user tips, instead of waiting on them to contact me.

    Most of my customers are internet marketers like myself, so I did not want to send a lot of tips, and offers because I would be marketing to the same people my clients are marketing to.

    But, what I have to do is find the balance between helping, marketing, and being lightly more aggressive.

    I am most happy that this post has helped at least one other person.


    Kelvin Brown

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