How to fix your negative churn problem
September 8, 2022
Business-to-consumer (B2C) subscription companies focus on two key areas as growth drivers: customer acquisition and customer retention. Businesses win customers with advertising, free trials, and other promotions. But true growth and profit come from increasing customer retention by reducing the type of churn that could easily be solved by fixing technical problems in your billing processes – that is, fix passive churn.
Passive churn is when a customer who has no intention of leaving your service is disconnected from it, most often due to a failed (declined) payment transaction. There are many reasons for failed payment transactions, but one thing is clear: The subscription industry has proven that fixing failed payments leads to huge increases in subscribers and revenue over time – boosting subscription business metrics such as customer lifetime value (CLTV) and subscriber return on investment (sROI).
Because passive churn destroys CLTV and sROI, preventing passive churn is vital to the health of all subscription businesses. Churn prevention needs to be integrated into your business’s marketing plan. Without a capable churn prevention strategy, you are losing happy customers and steady revenue.
Do it yourself: fix passive churn
Figuring out how to recover failed transactions has a substantial learning curve involving experimentation, expertise, and adaptation of methods to desired results. Start with these steps:
Study payment failures and payment retry successes. What works and what does not work? Analyze the credit card issuer error response codes. Experiment. Look for patterns. Repeat the analysis every month to isolate uncharacteristic and exceptional results. This activity will help you get the most from the four retries that credit card issuers prefer you not exceed.
Experiment with retry patterns. Look for the best days of the week and the best date in the month to retry cards. Hint: it’s not Thursdays in countries where payday is usually Friday or the 31st of the month when payday is usually the 1st. Instead, explore over time to find a pattern that delivers better results for your customer base.
Be persistent. Keep your eyes on the cost for retrying and the success rates. Dig into the response codes to gain insight into why the payment failed in the first place and why some retries worked and others didn’t. Know when it makes sense to retry a transaction more than the recommended four times without annoying your customers with “update your billing and addresses” notifications.
The do-it-yourself approach to passive churn reduction can be difficult and time consuming. And success may be limited. The last step I recommend? Outsource when you need it. Use Vindicia Retain. As detailed in the actionable eBook “How to crush passive churn and boost subscription revenue,” subscription businesses can follow one of two approaches to manage passive churn caused by declined payment transactions: the “do-it-yourself” approach or work with a payment expert like Vindicia.