When you’re hustling hard to grow your customer base, it’s always frustrating to churn customers.

And nothing is more frustrating than losing good customers to failed payments, aka passive churn.

This is why subscription companies rely on dunning best practices.

The term “dunning” can be understood as a process for recovering missed payments. For online businesses, this either means finding a way to clear payment using the existing credit card on-file, or acquiring a credit card that works. Successful payments should reliably bring a subscription back into an active state, so the customer can continue receiving value from the service.

Small mistakes while addressing failed payments will cost your business today, and hamstring growth forever. The problem only gets worse, as lost customer value compounds month-over-month.

Who are we? Churn Buster has been helping subscription companies fix their billing problems since 2013, working with some of the fastest growing E-commerce and SaaS companies in the world.
While safeguarding billions of dollars of subscription revenue, we’ve learned exactly what works, and what doesn’t. 

In this detailed guide, we’ll show you how to fight involuntary churn like a real pro.

1. Pre-dunning: don’t do it.

dunning and payment related churn and failed payments

Pre-dunning used to be a best practice.

Years ago, it was a best practice to warn customers 30 days, 15 days, and 3 days before their card expired. These pre-expiration emails were called “pre-dunning.”

The experience always felt spammy and aggressive. But you could get in front of a billing date before the payment failed, causing interruption of service until a new credit card could be collected.

Today, Stripe, Braintree, and many other payments platforms include a process called Card Updater.

It communicates with Visa, MasterCard, and other card issuers to update expiration dates automatically. It’s not even fully implemented worldwide, and already effective for over 70% of cards that look like they’re going to expire.

Yeah, it’s freaking AWESOME for subscription payments.

Why does this matter?

Imagine we are “pre-dunning,” sending customers emails with warnings that say YOUR CARD WILL SOON EXPIRE!

For every 10 customers we email, 7 are going to be auto-updated.

There is no problem. The payment will not fail.

These emails are aggressive, poorly timed, and create friction with your customers.

When you turn off pre-dunning, these 7 payments clear without an issue. Recurring billing doesn’t skip a beat. The renewal is seamless and low friction, as subscriptions are designed to be.

Interrupting 70% of these customers provides zero value in the best case. In the worst case, it introduces cancelation risk and support issues.

If you’d like to get in front of your customers before their billing date, focus on friendly messaging that adds value for them.

But spare them the warning letters—let Card Updater work its magic in the background.

2. Don’t be trigger happy ✉

Most basic dunning is done “the easy way,” wiring up emails inseparatably from failed payment attempts.

With emails sending each time a payment attempt fails, you have very little control over optimizing the recovery process.

However you manage your dunning, we strongly encourage you to take the extra time and decouple emails from payment attempts. It’s a big project, but also the key to effective passive churn optimization. Churn Buster campaigns have this built-in by default.

Here’s an example of what this can do for you: by our records, up to 40% of payment issues can be resolved within the first few days—21% on average—simply by allowing for card retries *before* sending emails.

Ongoing, that means 21% fewer emails being sent every month. This can quickly add up to thousands of customers who are blissfully unaware there was a temporary billing problem.

It may seem strange that the “hard way” includes a process for not doing something (no emails are sent while cards are retried). But good design knows when to get out of the way.

The success of the subscription model relies on continuity. As a best practice, try not to intervene with a mission critical message (demanding a credit card to continue) until you actually need to.

Side benefit: By allowing time to resolve payments via reattempts, your recovery metrics will actually make sense. When emailing right away for a card update, there is no way to separate necessary card updates from frivolous ones.

Doing nothing when payments fail isn’t an option, but doing nothing for the right amount of time… that’s what a bulletproof system will do. This is why we’ve made passive recovery via card retries our top priority at Churn Buster, treating card updates as a last resort.

3. Treat customers to a seamless card update experience 📱

When you get to the point of asking customers to update their card information, you have to understand the nature of your request. When someone signs up for a subscription service, the expectation is automatic payments that they don’t have to concern themselves with. So, you’re asking them to break away from whatever they’re doing and update information they never thought they would need to.

In order to gain positive responses from your update requests, you want to make the experience of updating card information seamless and easy for the customer.

Here are a few tips for optimizing your card update pages to create a painless customer experience:

  • Host dedicated card update pages: Avoid using quick modals for card update forms and splurge for the full page. Modals can easily conflict with the code on the page, creating an issue for both you and your customer. Going for the full-page ensures that as your site grows and changes, card updating shouldn’t be affected.
  • Make the page mobile-responsive: Most of your customers will update their cards using a mobile device. In fact, we see over 70% of updates happening on mobile devices. They will read your dunning email, click through to the page, and (if you’ve got it set up well), quickly input their information. Done deal. If your card updating page is not mobile-friendly, you risk losing these people to simple frustration– and that’s just not worth it.

  • Bypass the log-in: Again, simplicity and ease of use are key on your card update pages. The less friction you add into the process, the more likely your customer is to input that information. If your customer clicks through to update their card info, then is prompted to input a password you’ve established a real hurdle for them. Most people won’t know the password off the top of their head. Some will guess, get it wrong, and feel frustrated. Neither is a good experience, and neither results in a recovered customer. Simply put, if you ask for a password, and they don’t think you’re worth the time to find it, they will churn.
  • Encrypt the page: Keep your customers and their information safe– it’s your absolute #1 priority.
  • Check-in on your pages: It’s easy to forget about card update pages as your company grows. But as site changes are made, things can break. You never want to send a faulty card update page to a customer, it’s a massive load of friction on their experience. Create a schedule to check the functionality of those pages and avoid a massive headache.

Read more about Churn Buster’s Card Capture Forms here.

4. Personalize your emails

When we’re talking about dunning, trust is key. Consumers are more aware than ever of phishing schemes and credit card scams. This makes people weary about clicking on links that are requesting credit card information.

How can you combat this mistrust? Personalization. You might be thinking this means inserting first name variables or crafting compelling copy to increase conversions, but it’s all about establishing trust, and often it’s subtle changes that help most.

Keep in mind, these are transactional emails you are sending to established customers. The copy in the email is important, yes, but ensuring those customers can trust who the email is coming from should sit higher on your priority list.

Here are a few quick tips that can increase personalization and trust:

  • Keep your branding consistent: If your marketing emails have your logo on the top left corner, make sure your transactional emails do too.Ensuring your branding is consistent and evident on your dunning emails will give customers peace of mind. That being said, Churn Buster recommends including one plain-text email in your campaigns, just in case your customer has a dedicated filter against HTML emails.
  • The “from name” is recognizable (and from your organization): When dunning management providers don’t supply you with a DKIM DNS record to connect to your domain, any emails they send on your behalf will show in the inbox as: “From: Your Company via dunning-provider.com” or worse, “From: [email protected]”. This can quickly increase customer anxiety and reduce recovery.In the end, it’s up to you to decide who the email comes from. The right choice usually depends on your current customer communication style. If your customers are used to, or would appreciate, receiving emails from “Name at Your Company”, make sure your dunning emails fit the bill.If they are not quite used to that personal touch, you can send from “[email protected]” or “[email protected]”. Only you know your customers best, so think carefully about this decision; the from name carries a lot of weight when it comes to customer trust.

Hot tip: Try changing the sender as the urgency of your emails increase. If the first emails come from a less recognizable individual in your organization, try sending the more pressing ones from the CEO (or someone easily recognized by your customers).

  • Spice up the copy: Your dunning campaigns should include multiple emails, and each email should have it’s own content. The copy should reflect an increase in urgency as the customer gets closer to cancellation.In addition to changing up the copy for each email, make sure it lines up with your current style guidelines. If your company’s writing style is formal and straight-forward, don’t send overly conversational or witty transactional emails.This all goes back to trust. Your customers will recognize your tone and messaging when it’s on brand–and they’ll also recognize if it’s off.
  • Limit your links: When it comes to dunning emails, getting the coveted link click from your customer is your #1 goal. Limit the number of CTAs, links, or promo within the email to ensure your customer doesn’t get distracted. There should only be one path for them to take, and that is to update the payment info.
  • Create a system for replies: If a customer replies to your dunning emails, you want to make sure that reply lands in someone’s inbox (and that the person receiving the replies knows how to handle them).Even if you are sending your emails from “CEO at Your Company”, make sure the reply-to email is set to someone who can handle those responses. Missing out on customer engagement is never beneficial, especially when it comes to failed payments.

5. Make sure emails get seen

If you’ve ever handled marketing emails, deliverability is a huge concern. What good is your weekly newsletter if it never even reaches your customer’s inbox? While ensuring deliverability is a no-brainer for marketing emails, many companies fail to consider this key aspect when it comes to transactional emails– and it’s costing them.

Transactional emails often carry a much heavier weight than your marketing emails. Everything from password resets to, yup, you guessed it, dunning emails, are extremely important to your bottom line. What good is your card update request if it never even reaches your customer’s inbox?

Extra reading: What Happens When Your SaaS Transactional Emails Bounce?

When it comes to dunning management, ensuring email visibility should be top priority. It doesn’t matter when the emails send, what they say, or how optimized your schedule is if the customer never even receives the email. So what steps can you take to ensure visibility?

  1. Use an email delivery tool  that only sends transactional email. Mixing with your marketing ESP is a surefire way to ruin your performance.
  2. Set up SPF/DKIM records to build trust, improve deliverability, and help you get paid. (Learn more about SPF/DKIM records here)
  3. Set up alerts for bounced emails so your team can take necessary steps to get in the right inbox. For Churn Buster customers, this can be done via Zapier, Slack, or webhook notifications. Learn more about our email bounce notifications here.
  4. Automate spell check on signups. Use Mailcheck in your signup flow to reduce the number of email misspellings (such as [email protected]) that make it into your customer list.
  5. Ensure email updating is easy for your customers. If their email changes, or if a new email takes over the account, make it simple for the customer (or your support team) to update the information. After that, make sure that when an email is updated on your platform, the data is shared across every channel so the customer data is fluid and no issues arise.

6. Reach out personally when appropriate

Automating processes is all the rage– as it should be. However, with every automated system you have, you should set up some checks and balances to make sure things continue to flow correctly. And the same goes for your dunning.

Whether you’re running basic or extensive dunning protocols, there is a time to step in and reach out to customers. You’ll want to set up a system to track non-responsive customers, customers not opening your emails, and high-value customers at risk of churning.

As your campaigns run, the urgency for customer action should increase. Have you sent 5 emails and not a single one was opened? Maybe the point of contact for your customer has changed. This may take some manual work to find the right contact information, but if it’s a high-paying customer, it’s worth the effort.

Is a high-value customer at risk of churning, but have failed to respond to your card update requests? Consider stepping in and sending a personal email (preferably from someone recognizable in your company) and try to get on their radar.

Note:Make sure you get notified of high-value failures. If every failure looks the same to your automated system, a $10 account and a $10,000 account will be treated the same. Set up systems to notify you of high-value failures so you know when to bring in resources and customer success team members to make the save.

Automation is wonderful, and has greatly increased the efficiency of businesses everywhere. But as they say, with great power comes great responsibility. When it comes to dunning management, that responsibility is knowing when to manually step into the process.

7. Track the right metrics 📊

Performance visibility is usually missing from any in-house build.

And for those with dashboards provided, poorly attributed metrics can create a misleading picture of where value is being created.

Note: for services charging fees based on performance, you should understand how performance attribution works.

Without a clear picture of what’s happening, optimization becomes extremely difficult as you grow. Churn Buster gives you deep visibility into every customer and their campaign history, so you can recover as much as possible, especially when manual intervention is required.

dunning best practices retry logic

dunning recovery rates

And beyond performance stats, it’s important simply to know what’s going on with your customers experiencing payment issues.

Here are some good things to know:

  • Who is currently past due? (failed a payment and has not been resolved or considered churned)
  • Where is each person in your “funnel?” (i.e. emailed 3/5 times, next email on Friday)
  • When a funnel ends in a “win,” what was the cause? Did they update their card? Was that before or after you emailed them? Was it reattempted successfully?
  • Are emails getting delivered/opened?
  • Are your card update pages loading reliably?

These metrics won’t always be immediately actionable. But over time you’ll get to know your business better and that’s always a good thing.

For example, if you see a gradual drop in card reattempt successes, you may want to drill down to a root cause. Are more customers signing up with pre-paid debit cards? Are banks flagging your charges as high-risk for some reason?

Or if your emails aren’t being opened. Have you set up DKIM/SPF records to authenticate the emails? Are your subject lines too aggressive, or too passive? Are emails being flagged as spam?

In addition to understanding your business better,and having the ability to drill down into potential issues, you’ll be able to trust that the system is working as expected without relying on blind faith. When you’re emailing thousands of people about billing issues — you‘ll enjoy knowing that things are working as expected.

8. Prioritize regular maintenance 🔧

A basic system can be fun to build as a one-time project, but who will keep the gears greased?
With all this revenue at-risk month after month, simple oversights can be costly when they take months to discover.

Once you’ve set up your system, routinely watch for broken links, pages that aren’t responding, deliverability issues, updates in your payment processor API, etc. What’s measured can be improved, so when you notice a failure point you’ll be able to jump in and fix it.

Automated monitoring systems obviously can help take the load off your team.

Slack alerts are a great way to monitor your process and get notified of issues ASAP. Again, just make sure someone is watching the alerts.

Beyond basic maintenance, here’s an example of something to watch for:

Customer updates card, card gets declined, customer doesn’t try again.

Depending on your setup, you may automatically reset and start emailing them the same messaging all over again. Or you might see a card update and remove them from future outreach. In either case you may want to jump in and offer help to this customer who is making an effort to pay you.

If it becomes a regular problem, tune up your system so customers are treated to the right experience automatically.

9. Set up emergency handling

UX issues aside, some leaks will sink you more quickly than others. These are stop-everything moments that you want to know about immediately, instead of next time you check in on things.

Establish a process of alerts for your payment processor API uptime, and monitor your dunning system for critical failures.

  • Did a recent code push take down your card update pages? Can you detect who tried to access those pages during the downtime?
  • When your email service provider has downtime, or their queues back up…are emails still getting sent out?

If these kind of hiccups routinely happen without emergency handling, you will routinely miss out on opportunities to renew subscriptions.

10. Follow up!

If you ask Steli from Close.io to give you one tip, it’d likely be, “Follow up ’til you die!!”
And he’s right, too many people give up early whether they’re sending sales emails, or retention emails.

Our brains tell us that the person we’re working with is no longer interested, they think we are harassing them with too many emails. But it’s rarely the case. With dunning emails, you can expect a spam rate of well under 0.05%.

We see card updates come in at every stage of our process, and we’ve had to lengthen our recovery funnels to retain a higher percentage of customers.

People have long to-do lists, they go on vacation, they require approval to use the company card, they are waiting on a reissued card, they get distracted… and all they often need is a nudge.

Wrapping Up:

Failed payments can be a silent killer for your company, if you don’t handle them properly. Involuntary churn may start small, but without proper dunning management set in place, it can quickly become a huge problem and drastically shrink your bottom line. Luckily, you just read 8 sure-fire strategies to improve your failed payment systems today.

If you’re looking for a service that covers all of these bases, you’re in the right place. Your business is unique, so automating workflows to collect past due payments can’t be one-size-fits-all. And that’s what we’re here for. Here at Churn Buster, we provide a proven set of tools to help you regain control of your churn by resolving failed payments and delivering automated support to your customers.

Request a consultation with one of our churn experts and see how Churn Buster can help your business recover more money.

Ken Johnson

Author Ken Johnson

Riding the first wave of subscription ecommerce, Ken co-founded Manpacks.com in 2009. He now resides in San Diego, dedicated to client success at Churn Buster and learning how to lose at tennis and poker.

More posts by Ken Johnson

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