One of the biggest challenges to running a subscription-based business today is retaining customers – a lot of factors go into successful customer retention programs and efforts. Billing and payment plays an important role in the process as many companies are surprised at the number of accounts with charge issues. Typically, merchants see failure rates from 5-35%, depending on business, type of customer, seasonality, etc.
Most missed payments are unintentional, however, and caused by a variety of reasons. How many of us have lost our wallets or misplaced our credit or debit cards? And how many of those cards were linked to an autopay plan? Other reasons for declination include: forgetting to update info, expired cards, or, more recently, the reissuing of cards because of data breaches or EMV chip implementation.
Considering the rate of credit card transaction failure, it’s important for businesses to think about the customer experience and how to handle errors in a way that does not hurt the customer relationship. Remember, when it comes to a recurring revenue business, customer retention is just as important as customer acquisition. Freezing an account too quickly can be unfair but being too lenient can result in revenue loss.
The good news is that about 70-80% of failures are recoverable. As a result, the need for reliable dunning management in enterprise businesses has increased. Dunning is defined as the process of making a collection, usually in the form of a payment. In today’s digital age, billing systems are capable of automated dunning management, handling everything from credit card payment declinations to triggered customer notifications, and transforming simple billing transactions into monetization opportunities.
Dunning management is beneficial to the enterprise for a number of reasons, including: increased revenues – current payment details improve customer retention and reduce involuntary churn; time saved – manual handling is tedious and prone to human error; friendly interactions – personally reaching out regarding missed payments can be awkward; and a stronger business strategy – analyzing declination and churn stats can provide valuable insight.
When a customer account shifts to unpaid, you want an automated dunning process to take over so you can continue to focus on other aspects of the business while feeling assured payments are properly handled. Solutions will manage this process until you get paid or the customer ultimately goes into suspension.
So what should you look for in a dunning management solution? Because this process is directly connected to customer retention and revenue, it’s important to choose a solution with the following capabilities:
- Automated electronic collection and retry attempts: There are a handful of reasons the initial collection attempts can fail (expiration, credit limit, bank system maintenance, etc.). A good system will retry the attempt rather than immediately move the account to unpaid.
- Fully customizable email notifications: It’s important to customize your email notifications to reflect your company logo and messaging for each step in the process (overdue, late fees, account status, etc.).
- Automatically triggered customer notifications: If a collection fails to go through or an account accrues a late fee, an email immediately goes out to notify the customer.
- Automated dunning follow-up: Each step in the process is given an action item for customers to take.
- Active orchestration: “Machine-to-machine” (M2M) event notifications inform you of the account’s status and/or a final suspension.
- Credit card expiry notices/payment reminders/account updater: “Pre-bill” functionalities alert your customers and help them stay in good standing.
- Unlimited dunning configurations: Enterprise businesses have thousands, sometimes even millions, of customers. Make sure you deploy a system that can account for the various steps in your process.
Remember, customer retention is just as important as customer acquisition in recurring revenue business. Deploying a reliable dunning management system will help keep your customer accounts in good standing without expending large amounts of resources.