Manually retrying payments? There's a better way
Involuntary churn strikes fear in the hearts of subscription businesses everywhere, and for good reason: over half of all churn is involuntary. And considering the fact that acquiring new customers costs 5 times more than retaining an existing one, nipping involuntary churn in the bud is critical for subscription businesses.
Unlike voluntary churn, when subscribers choose to end their subscriptions, involuntary churn comes down to payment issues. Declined payments compound every billing cycle for a subscription business: you lose not just that month or year’s revenue, but all future revenue as well.
You might be sitting there thinking, “As long as we can figure out how to stop payments from getting declined, we’re good to go!” Unfortunately, it’s a little more complicated than that. There are over 2,000 different error codes associated with failed credit and debit card transactions.
Reasons for declines range from customers failing to update payment information when a card is lost or stolen to invalid CVV2 codes to expired credit cards to generic bank declines. Each code is the result of a unique set of circumstances and requires a unique fix.
Trying to understand and remedy declined transactions can feel like going down a black hole. Most subscription businesses offer dozens, if not hundreds, of subscription offerings to thousands or millions of customers—and they all play in different industries, All of these factors create a situation with an enormous number of moving parts. Trying to fix these problems manually isn’t the answer when it takes time away from growing your business.
Fortunately, Recurly offers a better solution. Recurly takes a two-part approach to reducing involuntary churn by preventing it before it happens and then tracking down payments after they come due. In order to prevent failed transactions, Recurly works with participating banks to automatically update payment information.
Recurly also vaults and stores credit card data, which helps provide greater insight into why transactions are failing.
In the event a transaction fails, Recurly’s proprietary retry algorithm retries the payment. The algorithm uses machine learning and Recurly’s 11 years of transaction data to find the optimal strategy for each subscriber.
Finally, Recurly gives you the ability to send customized, automated dunning emails and monitor the effectiveness of your email strategy. These customized dunning communications matter a great deal—they’re a huge part of your customer communication strategy, and keeping them aligned with your overall brand personality and voice is key to ensuring a consistent customer experience.
These churn mitigation measures have been hugely successful for merchants like FabFitFun, Tailor Brands, and ViacomCBS, just to name a few. Recurly successfully recovers 73% of at-risk transactions. This resulted in rescued revenue of $610 million in 2020 alone and a reduction in average involuntary churn from 6% to 1%. The best news for businesses is that Recurly added an average of 12 months per recovered subscriber.
Check out our new infographic on maximizing subscription revenue recovery, and get a demo to learn how Recurly can cut down on involuntary churn and increase your business’s customer lifetime value (CLV).