You know we love good marketing. Everyone does, but marketing lawyers have a particular fondness for something that is done legally and well just brilliantly. This is the best ad we have seen in a long time. Shut your office doors if you have not seen the Dollar Shave ad as it is laugh out loud and hard good. And apparently good marketing can lead to a true overnight success story. The WSJ reports that Dollar Shave raised $1 million in seed money from venture capital firms and in the first 48 hours of business, after its launch video became an internet sensation, Dollar Shave signed up 12,000 people (and that probably would have been more had the server not crashed due to all the visiting traffic).
The subscription model is nothing new – remember Columbia House Record and Tape Club? – and one can still purchase pretty much anything on the planet by the by the month (I am a personal fan of a combination of Bacon and Wine of the Month clubs. There has been a very popular rebirth starting with Netflix and moving to success stories like ShoeDazzle with Chief Stylist Kim Kardashian. The Dollar Shave Club pitch promises to eliminate the hassle and high price of buying razors or “No more over-paying for fancy brand name shave tech.
No more forgetting to buy your blades.” Members have three choices: the Humble Twin (five two-bladed cartridges per month); the 4X (four four-bladed cartridges); and the Executive (three six-bladed cartridges). The latter two cost $6 and $9 per month, shipping included. The Humble Twin is just $1 monthly, but shipping is extra. The needed shaving handle comes with the first order. The club promises that upgrading or downgrading the plan is easy and one can cancel anytime.
With the emerging growth of these programs, we thought a reminder of the dos and don’ts would be helpful. The FTC has long looked at this sort of “Negative Options” selling and most recently issued a staff report in 2009 . A relatively new federal law mostly mirrors the FTC's guidance and several states also have laws regulating negative option programs. An FTC consent order announced earlier this week involved a negative option program that offered "free gas for life" (which was really just a book) and signed consumers up for unwanted magazine subscriptions.
The Dollar Shave Club is a continuity plan or one where buyers agree to receive periodic deliveries until they cancel. Other negative options include pre-notification plans where consumers get notice about a product and if they take no action sellers send the product and charge them. There are automatic renewal plans where the seller continues with the subscription until the buyer cancels and free-to-pay conversions where customers get free good for a period of time and then are charged full price until they cancel. The basics of what the FTC expects with any sort of negative option program are that consumers get clear notice of the terms of the offer written in plain language and presented clearly and conspicuously. This includes detail on the cost of the offer, whether and how billing information will be shared or transferred and how to cancel. These key terms must be provided before the customers pay or agree to the deal rather than after the fact. Affirmative consent is important – no prechecked boxes will suffice as evidence of agreement. Finally a program that is easy to cancel is also key, and easy includes no excessive wait times on hold. The biggest issues that the FTC noted with such programs is the failure to explain material terms, the failure to get informed express consent before billing and the failure to provide an easy means to cancel. Following these basics will not ensure you will become an Internet sensation like Dollar Shave but it should keep you from getting buzz in the form of an FTC press release.