Dark Patterns: Concerning Cost Trends in Software as a Service

Written by Lucas Hahn on October 25, 2024

Key Takeaways

Dark patterns are practices that steer, deceive, coerce, or manipulate buyers into purchasing decisions that are not in their best interests.

Dark patterns that result in hidden fees can quickly add up across a business, as software-as-a-service (SaaS) is one of the fastest growing purchasing models within the software industry.

You can combat losses from dark patterns and software subscriptions by educating other departments across the business, consolidating subscriptions, and ending duplicated or abandoned software.

A recent study by the International Consumer Protection and Enforcement Network (ICPEN) found that 76.0% of SaaS companies use deceptive tactics called “dark patterns” to charge users more for software subscriptions, with 66.8% of vendors making use of multiple dark patterns. Although the focus of this study was business-to-consumer (B2C) software, this study helped increase scrutiny around dark patterns across the software industry.

Dark patterns are defined by the Organisation for Economic Co-operation and Development (OECD) as practices that “steer, deceive, coerce or manipulate” buyers into making purchasing decisions that are not in their best interests. Dark patterns include automatic subscriptions, subscription traps, and hidden cancellation fees, which can affect buyers when signing up for a free trial. As dark patterns become a commonplace practice, more consumers end up mistakenly paying for subscriptions or free trials they meant to cancel, which software providers rely upon.

What you should know about dark patterns in SaaS

Buyers should understand and remain wary of dark patterns in subscription software, as software-as-a-service is one of the fastest-growing purchasing models within the industry. In an environment where businesses may contract multiple different software services to meet their needs, the potential money lost on dark patterns can quickly add up. Most organizations rely heavily on a long list of software products, including enterprise resource planning (ERP) software, customer relationship management (CRM) software, human resources software, and project management software. Furthermore, most software companies have switched to subscription-based pricing, with Productiv finding that the average organization used 371 SaaS apps in 2023. Estimates of average annual SaaS spending per employee vary, with Insivia putting the figure at $2,623 per employee in 2021 and CloudEagle giving a range of $1,000 to $3,500 in 2023.

A significant portion of this spending occurs without IT or procurement approval and may not be centrally tracked by a business. CloudEagle estimates that 40% of SaaS spending bypasses the IT department, while Productiv reports that 51% of SaaS apps are outside IT’s control. This environment increases the risk that software subscriptions may be duplicated, where employees might unknowingly subscribe to software the company already pays for. This also increases the risk of abandoned subscriptions, where employees might subscribe to software on the organization’s dime and then leave without canceling the subscription, resulting in recurring payments for unused software.

Although there are many types of dark patterns, dark patterns that result in hidden fees are some of the most concerning for procurement professionals as these costs can add up. Dark patterns are often disguised in the form of free trials, which are rarely 100% free.

Free trials often convert into software subscriptions once the trial period ends, which can cost your organization if it does not track these carefully. In many cases, no additional action is required from the user, as signing up for a free trial often means agreeing to a subscription once the trial ends. Users often must input their payment information for a free trial, so the software company already has all the information it needs to start charging money. This can cost your organization in the form of recurring fees if the user forgets about the software or leaves the company.

Furthermore, software companies do not make it easy for users to avoid getting trapped into subscriptions. ICPEN found that 81.0% of the vendors surveyed do not allow users to turn off the option for automatic subscriptions. Furthermore, 70.0% of vendors do not provide enough information on cancellation while 67.0% of vendors do not provide the deadline by which users must cancel their subscription to avoid being charged.

To make matters worse, your organization may also incur hidden fees even if your employee remembers to cancel before the free trial period ends. Subscriptions sometimes come with hidden cancellation fees; the Department of Justice and the Federal Trade Commission filed a lawsuit against Adobe in July 2024 for its alleged “hidden early termination fees.”

How can procurement minimize losses from dark patterns?

You can help minimize losses from dark patterns by increasing awareness of them across the organization. Procurement professionals should be careful with free trials and educate other departments about why they should be careful when signing up for free trials on the organization’s expense. Being careful means reading contracts thoroughly, even the fine print. Employees should ensure that they understand all terms, including pricing, renewal, and cancellation when signing up for a free trial. Employees should be encouraged to ask legal and compliance teams for help understanding the terms of an agreement. Finally, employees should be encouraged to be careful with payment information; they should understand that if they enter their payment information, it is less likely that this will be a truly “free” trial.

Procurement professionals can also limit losses by ending duplicated and abandoned software subscriptions. Ironically, while subscription software has created the problem of abandoned and duplicate subscriptions, it is also part of the solution. Companies like Beamy.io and CloudEagle.ai offer SaaS monitoring and management software that can tell you if you have duplicate or abandoned subscriptions.

While not every minor expense should be logged with procurement, business departments should know and record which services their employees are subscribed to so they can consolidate subscriptions and ensure the purchased software license is necessary for the employee’s position.