Subscription models aren’t going anywhere. From software and snack boxes to luxury cars and perfumes, subscription-based services continue to enjoy their popularity streak. One foil to their genial presence, however, is while renewals account for 62% of subscription revenue, involuntary churn puts a dent in that revenue.
What’s Involuntary Churn?
Involuntary churn occurs when a customer’s payment attempt fails, ending in a cancellation. Involuntary churn—which accounts for 34% of subscriber churn—can damage your relationships with customers, and lead to customer attrition and loss of revenue. While managing involuntary churn can be difficult, below are some tips to help you prevent customers from falling through the cracks.
Use a Single Platform
Instead of using separate systems to run your subscription business, consider using one end-to-end solution. 96% of business decision-makers feel that relying on a single solution for subscription billing can improve involuntary churn. Here are a couple of features to look out for when picking a single platform:
Order management: Choose a solution with management features such as shopping cart options, customized promotions, multiple fulfillment options to ensure customer satisfaction, and intelligent inventory management.
Payments: Select a solution that can accept payment from various digital channels, support integrations with well-known payment gateways, and handle multiple currencies. Look for a platform that safeguards payment methods and protects consumers against credit card theft.
Subscription Management: The best single solutions manage a variety of subscription types and execute life-cycle events including upgrades, add-ons, and payment terms. Additionally, ensure the platform allows you to immediately make amendments and queue them for automatic processing for future dates.
Improve Your Dunning Strategy
While dunning is a great way to collect an overdue payment, you need to go about it in a way that encourages customers to fulfill their payment. An effective dunning process varies based on a variety of factors, but the following tips can start you off:
Communications: Give customers a gentle reminder to update their card details. Each dunning email should include a cancellation date and a link that enables customers to update their billing information. Ensure each email is different and uses an increasingly firm and urgent tone.
Show Value: Incentivize customers to update their payment information by reminding them of how valuable your service or product is. Stick to messaging that explains what they’ll miss out on, instead of how much the service costs.
Timing: Customer and payment data will let you know when to nudge customers into making a payment. This information will help you deliver the right message at the right time to avoid constantly annoying your customers. Send at least two emails before canceling a subscription and consider giving consumers a grace period to renew their subscriptions.
Avoid the Spam Folder: Keep emails inbox friendly by writing non-spammy subject lines and send emails from a return email address so that customers can get in touch if they need to. Use email tools that track your inbox placement rate, include a sender policy framework to increase your trustworthiness, and look into your data to determine an appropriate email frequency. One mail a week is a good starting benchmark.
Prevent Payment Failure
According to Forrester, payment failure is the most common cause of involuntary churn. When this occurs, take a proactive approach. Below are some strategies that prevent declined payment transactions:
Billing Interval: Insufficient funds account for 53% of recurrent payment failure. To avoid this, ensure your solution can analyze your transaction success rate and provide you with the right insights about when to bill subscribers.
Account Updater: Credit card changes such as expiration dates, account for 40% of payment failures. Deliver uninterrupted service using subscription management platforms that monitors subscribers’ credit and debit cards for changes and automatically updates Visa and MasterCards to prevent declines. Just note that card updaters may not monitor international cards and those from certain carriers.
Offer Alternative Payment Methods
Another way you can reduce involuntary churn is by offering consumers alternative payment methods. Alternative payment methods not only reduce reliance on cards, but also makes payments more convenient for customers.
Presently, 22% of US consumers use a digital wallet for online subscriptions. Consider the following before offering alternative payments:
Understand How Alternative Payment Works: Before offering a menu of payment options, understand how each method works and its limitations. For instance, some alternative payments are affected by regulations and have a different authorization flow. To see which payment option best fits your business and maximizes the chances of success, work with a payment expert.
Know What Customers Want: Customer preferences vary by demographic, country and the products/services. It’s important to understand local preferences and offer alternative options in accordance with their needs. Additionally, monitor customer perceptions and payment expectations, to ensure you offer a mix that will drive conversion and growth for your business.
Don’t Lose Money
While involuntary churn is inevitable, you don’t have to sit back and watch it ruin your bottom line. In addition to the above, use non-intrusive notification bubbles inside your app or website to inform customers that their payment information is about to expire and ask them to update credentials as soon as possible. Most importantly, churn isn’t about transactions alone, it’s about the customer experience and relationships. Work towards constantly delivering a superior experience and frequently infuse new value into the existing service to create an experience customer can’t live without.