Tested Strategies to Reduce Subscriptions Involuntary Churn and Increase Customer Retention

Focusing on Involuntary Churn

Many SaaS marketers understand the techniques necessary to reduce voluntary churn. However, preventing involuntary churn can be much more enigmatic, because it is often caused by technical glitches that SaaS marketing teams have not considered or tested. And most importantly, involuntary churn is preventable to a significant extent, which means that you can eliminate as much as 20% of this churn with little effort.

  1. Soft declines are temporary authorization failures which may be successful upon re-trial of payment.
  • Insufficient funds
  • Card activity limit exceeded
  • Processing failures — timeouts
  • Expired cards
  1. Hard declines are permanent authorization failures that cannot be recovered and should not be retried. We estimate that 10 to 20% of declines are hard declines.
  • Stolen or lost card
  • Invalid credit card data
  • Account closed

Involuntary Churn Benchmarks

Industry benchmarks for involuntary churn vary by, well, industry. While the overall software industry average for start-ups is 6.73%, B2C companies can expect to see more churn than B2B companies, perhaps due to the less critical nature of solutions that consumers choose and also due to the buying process, which for B2B is more thorough and involves more people. On average B2B churn is about 6.22%, while B2C companies churn at 8.11%.

Tested Tactics to Improve Involuntary Churn

To combat both hard declines and soft declines, you should put in place some smart payment tools. As a SaaS, obviously, you shouldn’t need to worry about these or start building them. Just to be aware of what you need to look for when it comes to payment options, especially on the recurring side.

Prevent Payment Failures with Intelligent Payment Routing

Intelligent Payment Routing can route and re-route card transactions to the payment gateways that are best equipped to handle them, as well as retry authorizations using a failover or back-up mechanism. Combining these methods can increase overall card authorization rates between 2% and 5%.

Use Account Updaters

From enterprise-level solutions like Visa’s Account Updater to those focused on SMBs, an automatic account updating solution will provide the information needed to ensure that your customers do not end up dropping your product simply because their cards have expired.

Implement a Smart Retry Logic Strategy

The relatively common “soft card declines” are one-time payment issues that can typically be resolved with subsequent retries. What is the best strategy for retrying recurring order processing? If you want to decrease involuntary churn, consider creating an automated system that processes through the moments when transactions are declined due to technical issues, and retry the payment so that customers have the chance to choose.

Use Pre-Expiration Billing to Prevent Lost Revenue

To increase your authorization rates, some eCommerce platforms empower you to define when and how many times authorization attempts can be made prior to the expiration date for a subscription and notify shoppers about them in due time.

Use Dunning Techniques for Declined Cards

Dunning is the process of methodically communicating with customers to ensure the collection of accounts receivable. It’s a standard and effective way of addressing churn.

  • Say who you are. Be upfront and let the customer know from the start who is sending the email, to show credibility and grab attention. Include the brand and support agent’s name, even for automated emails — it’s a personal touch.
  • Address the situation clearly and directly from the start. Avoid getting distracted with brand talk or sales pitches. Be sure to include the key information related to the payment issue, the amount still owed and the subscription name.
  • Let the customer know what’s going to happen next. Tell the customer when the subscription will be stopped unless they pay.
  • Include the right ways to get in touch. Financial issues can lead to additional inquiries from the customer, so it’s vital to include information about how customer can reach you with timely questions. Foster an email dialogue by sending dunning messages from an email account that accepts replies.

Case study: How smart revenue recovery tools helped businesses fight involuntary churn

Absolute successfully fought involuntary churn using revenue recovery tools (RRT) on the 2Checkout platform. The company saw an overall 23% revenue uplift when using a variety of tools. The revenue recovery tools achieved an impressive 35% recovery rate on auto-recurring transactions. In addition, Absolute obtained 5% revenue uplift with shopping cart recovery on new acquisitions, further boosting its business.

  • About 8% of automatic renewal revenue was recovered specifically with 2Checkout’s Revenue Recovery Tools, representing 5% overall revenue uplift;
  • 9% of new customer revenue was recovered with follow-ups on unfinished payments, representing a 3% overall revenue uplift.

Develop a Customer-Service Mindset

The best way for your business to reduce churn of any type is by focusing on creating great customer service success. When utilizing these tools or any other software solutions for reducing involuntary churn, great companies approach the project with the attitude of systematic customer service. Customers are given the right tools to ensure that they get the product they want and expect, no matter what happens with their payment.

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2Checkout (now Verifone)

2Checkout (now Verifone)

2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.