4 best practices for a frictionless renewal journey
Recurring payments form the lifeblood of subscription commerce. Therefore, subscription renewals are critical to driving stable revenue growth and profitability. Any friction during renewals trickles down to the bottom line, making these journeys crucial. This article discusses some of the best practices to incorporate for a seamless subscription renewal journey.
What is a renewal journey, and why does it matter?
The renewal journey refers to the process an existing subscriber undertakes to continue their subscription into the next billing cycle. Subscription renewals may be both manual and automatic.
Manual renewals require customers to log in each time to renew. Any interruptions in this can annoy them and lead to involuntary churn. Automatic renewals don’t require customer intervention, and payments are auto-debited each time unless intentionally paused. They offer relief from the extra efforts needed to renew. However, sometimes they lead to disappointed customers who are surprised by unexpected renewals.
Renewal journeys for both billing types matter due to their contribution to revenue and growth goals. Statistically,
It costs five times more to acquire new customers than to retain existing ones. In other words, it makes better business sense to prioritize retention.
Research by Bain & Company suggests that a mere 5% increase in retention can translate into a 25% to 95% rise in profits.
As per Gartner, 80% of profits can be attributed to 20% of existing customers, making renewals an important part of the profit generation
Satisfied customers indulge in positive word of mouth, telling nine others, on average, how happy they are. On the other hand, dissatisfied customers tell almost 22 people about their bad experiences.
Clearly, a subscriber’s decision to renew, pause, or cancel subscriptions impacts the business fundamentals. Losing out on subscribers due to renewal friction is undesirable. Hence, optimizing the journey demands attention.
What are the essential elements in the renewal journey?
Most subscription renewals follow a monthly, quarterly, or annual cycle. Sometimes they may be longer depending on the nature or the type of contract. Regardless of the renewal cycle length, all renewal journeys are based on the same key elements. They are:
Generation of order records from within the subscription platform to track the user’s subscription status
Informing customers about their subscription nearing expiration
Charging the customer through their preferred payment option
Providing the product in case it’s a non-service subscription
Marking it as complete on the subscription billing platform
A frictionless renewal journey ensures that each of these steps is conducted smoothly.
What are the best practices to ensure a frictionless renewal journey?
Achieving a seamless renewal process is easy if you get the basics right. Here are some best practices to integrate into your subscription renewal journey:
Organized tracking and timely intimation It’s important to provide ample time to all customers to renew their subscriptions. Sending out reminders too close to the expiration date can result in involuntary churn. For renewals, especially in B2B organizations, there are several internal procedures to take care of, whatever the organization’s size. Not providing enough time for internal approvals may lead to churn. Often, subscription providers reach out in a timely manner to their big-ticket accounts but tend to ignore the long-tail segment until the last minute. Ultimately, each customer contributes to revenue, so an organized process is a good practice to incorporate.
Providing renewal quotations and support efficiently. In the case of manual renewals, you should respond promptly to customer requests for quotations or any support they may want. Automating quotations is helpful to ensure the speed and accuracy of providing any price estimates. Similarly, offering modern-day agile support is also beneficial in delivering excellent experiences. You may extend this in the form of a 24-hour customer helpline, live chat, or prompt email support.
Flexible and efficient payments process. Payments form another critical friction point in renewal journeys. Changed credit cards or expired card details are among the most common reasons behind payment failure, resulting in involuntary churn. A simple, timely update about expiring credit card information with proper dunning campaigns helps to ensure that renewals are not blocked due to card declines. Similarly, offering flexibility in terms of the renewal payment options is also important. For instance, 73% of U.S. consumers prefer paying for subscription services via credit cards. 31% prefer PayPal or Venmo. Providing a variety of payment methods helps.
Providing genuine cancellation options. This may seem counter-intuitive to optimizing renewals, but it’s essential. Making it difficult for your customers to cancel or pause hurts the business. This is even more applicable for auto-renew subscriptions. Suppose you offer a low-priced media subscription that renews automatically monthly. If you sneakily hide the cancel or pause button, you may collect extra revenue for some months from zombie customers who’ll be compelled to pay until they’re able to cancel. However, you will face their wrath and could be hit by strong negative word of mouth for your brand. So, it’s best to equip those who wish to cancel or pause with hassle-free options. Similarly, informing the customer about debited payments is important to avoid sudden shocks after the renewal is also a good practice.
While streamlining these processes in practice may seem complex, they don’t need to be. Relying on robust subscription management and billing platforms like Recurly can help while boosting customer lifetime value.