Reduce Passive (or Involuntary) Churn
Did you know that 20 to 40% of customer churn is due to involuntary churn? We want to avoid churn wherever possible, but passive churn is arguably the worst kind because the customer didn’t actively unsubscribe to the product; there was simply failure to take payment from the customer. Some examples of this include:
Customer’s credit card has expired
Customer has insufficient funds
Maximum credit card limit reached
Technical failure of payments processor
Customer has replaced their card
Regardless of the reason, here are a few ways to prevent that frustrating passive churn from happening.
Auto-update Card Information
As businesses, one of our goals is to make life easier for our clients or customers. With today’s technology, you don’t even have to rely on your customers to update their card information. Normally, companies would reach out to customers via email to remind them to update their credit card information as the expiry was approaching, a tactic that’s becoming increasingly outdated. In fact, a staggering 85% of customers fail to respond to the run-of-the-mill dunning emails that remind them to update their card details. Auto-updater technology is being offered on many major payment platforms such as Stripe and Braintree, removing the need for customer intervention. While there are fees associated with this feature, it’s well worth paying them to ensure your customers remain customers.
Sometimes simply trying again does the trick; no extra steps needed. It’s important to implement a system that re-attempts charges multiple times after an initial payment failure. Luckily for subscription businesses, a significant portion of failed payments prove successful at the second, third or fourth attempt. Each charge should be spaced out a few days apart to give time for any issues to get resolved (e.g. insufficient funds, temporary security holds etc.)
Use Multiple Payment Methods
In cases where the customer’s first method of payment fails, even after multiple attempts, having a second method of payment is an efficient way to avoid any interruptions in service. Show your customers you’re all about flexibility and give them the option of adding a backup card.
Send Reminders with In-app Notifications
Creating automatic and subtle in-app notifications and let your customers know that they need to update their card (e.g. two weeks or a month in advance). This is an unobtrusive way to remind customers about something that many of us forget.