Posted: by Bronte
Decrease Your Subscription’s Decline Rate and Recover Your Profits
The churn rate in the subscription industry is one of the biggest issues that business owners face. No matter how hard you market, advertise, or acquire, churn is there to stunt your growth. Customer churn is divided into two categories: voluntary and involuntary. One is a conscious choice made by the customer to stop services while the other is caused by preventable issues. Both are equally devastating to your ROI when acquiring and maintaining a subscriber base. But alas, there are ways to mitigate this decline and recover consistent profits.
Understanding Voluntary Churn
This type of churn is voluntary and relies on a conscious choice on behalf of the consumer to end their subscription (or reduce its frequency). It occurs for a number of reasons such as loss of interest, affordability, and even competing services. The age-old question of how to acquire and then retain customers comes into play in a significant way for subscription businesses. Changing up your offerings or the price of subscriptions can mean the difference between gaining and losing customers.
Understanding Involuntary Churn
Failed payments, incorrect credit card information, and server errors cause the majority of issues that lead to this type of churn. With recurring billing comes the risk of failed payments.
Whether due to a lack of funds or the user’s bank flagging the transaction, failed payments make up a significant percentage of involuntary churn. Other errors such as incorrect information and service errors are very much out of your hands as the service provider. While this can be frustrating, it’s part of the assumed risks of the industry type.
Combatting Involuntary Churn
There are steps to prevent failed payments both internally and with your bank. Outside plug-ins and add-ons can end up becoming a lifesaver for your business. If you notice your card not present (CNP) transactions failing at an increased rate, you should look into this option. In fact, CNP transactions are declined at a 30% higher frequency than other types of payments. Start by contacting your subscription payment gateway for options that they may be able to provide. This way integrating their tactics into your business can be seamless. The following are the top three strategies to help you before and after a declined payment.
Step 1: Automatically contact the customer if/when a payment fails
Built-in operations for generating an auto email or text when a payment fails is the first line of defense. When a payment is unable to process, your gateway issues an error code explaining the problem to you, the merchant. But why stop there? You might as well have that message sent to your customer so they have a chance to rectify it.
Step 2: Apply a decline salvaging solution to your payment processing
The majority of customers who experience a failed payment blame the merchant, even though it rarely has anything to do with them. All transactions go through a long list of approvals before it is actually accepted. This process is basically like a line of handshakes. If one of the hands along the line is gone or unsteady, the transaction is declined. Decline salvaging solutions monitor this form of involuntary churn and reinforce the chain. With solutions of this type, merchants are able to recover over 30% of their declines, which could mean a huge increase in revenue month over month.
Step 3: Implement an automated card info updater
You have the option to implement this into your business if you utilize Visa’s Account Updater (VAU) or Real Time Account Updater. At some participating acquiring banks, Visa grants the option to enable this feature which reduces the hassle of updating banking information. Many times a cardholder will receive new card information when their card expires or has a security issue. And with so many other places requiring an update on their new information such as their rent, car, or phone companies, oftentimes their subscription doesn’t make the list. With VAU, the merchant receives a notification when banking information is altered. Then the Real Time offering automatically updates the card on file with the new information in the blink of an eye.
This tool, when used in a scaling business, can mean the retention of hundreds or thousands of dollars from happy subscribers. Changes in banking information happen, but they shouldn’t be crippling.
Tackle Your Strategy
While it may seem like common sense to come up with a comprehensive strategy before pumping money into strategic initiatives, some businesses don’t take the necessary time to do so. Don’t make this mistake. Implementing a comprehensive strategic plan for your business–for the present and where you hope to go–will not only guide your services, but it will also steer your investments in the appropriate direction. Combatting churn, both voluntary and involuntary, takes strategy and execution before it happens.
Rome wasn’t built in a day and neither was any successful business. As long as these temporary setbacks are just that, temporary, your business should begin to see some growth. Don’t be afraid to take some risks but make sure to keep your eye on the prize. Set yourself and your business up for success with simple risk mitigation tools that help prevent involuntary churn.