Subscription businesses can lose the happiest of subscribers because of involuntary churn. But machine learning can automatically reduce this passive churn and boost monthly recurring revenue by an average of 9 percent. Learn more about how to improve transaction success rates and billing continuity when you join this VB Live event!
Even slight variations in a subscription business’ churn rate can have significant impact on revenues, says Emma Clark, director of product at Recurly. And since it’s usually more expensive to acquire new customers than it is to invest in retaining and growing the existing customer base, it’s most critical to address involuntary churn — the kind of attrition that happens when cards are declined and invoices fail.
It’s also known as passive churn, because a subscriber doesn’t always know it’s happening. They’re not making a conscious decision to cancel their subscription, but rather the subscription is ending after a period of time because they haven’t paid. Why does it happen so often — and how can you prevent it?
“A transaction decline, at first glance, seems pretty basic,” says Clark. “You run a credit or debit card. It gets declined. You don’t get the funds. But in reality, when you dig into it, you’ll see that each decline is quite unique.”
There are more than 2,000 things that can go wrong with a credit or debit card transaction. Anything from out-of-date information to insufficient funds, gateway issues, a temporary hold on the card on the bank side, potentially fraudulent activity, and more.
All these reasons are why an average of 13 percent of monthly recurring transactions fail. That impact can be pretty significant for your business.
“At best, it’s a delay in realizing your revenue, getting a successful transaction and payment on that invoice, Clark says. “At worst, it results in involuntary churn, lost revenue, both from that initial transaction decline and from any transactions in the future from that customer you lost.”
It can even damage relationships with banks, card issuers, and sometimes gateways, she adds.
But the ongoing impact of these declines on your business, if you leave them unchecked, is astonishing.
A Recurly Research study looked at data points across 1,200 subscription commerce sites to uncover the impact of decline management and dunning to prevent involuntary churn. The metric they looked at specifically was potential subscriber loss: what percent of subscribers you could lose if you don’t employ decline management strategies.
“If you’re not using decline management strategies to prevent involuntary churn, you could lose up to five percent of your subscribers every month,” Clark says. “That’s huge, and it has a compounding effect over time.”
So they studied the effectiveness of automated decline management strategies at bringing down that five percent churn, and found that in the B2B space, they were able to reduce 75 percent of that churn, and in the B2C space, 63 percent, by automating those strategies and keeping them going without the customer having to lift a finger.
What does that mean for your business’s revenue? Almost 9 percent lift in revenue.
“It makes a substantial difference to your revenue if you’re able to manage involuntary churn,” she says. “If you’re not, you’re going to see loss month over month.”
The good news is that since transaction declines are an operational issue, there are systemic ways to address them, and even automate your decline management strategies, Clark says.
To prevent a decline from happening in the first place, the key is ensuring credit and debit card information is up to date — and the easiest way to do that is by using account updater services, which monitors various card processors and updates billing information even before the renewal comes up, solving for friction in the customer experience.
But if the initial transaction decline happens for any of those 2,000 reasons, how do you make sure that you’re able to recover the money from that invoice and ensure the customer doesn’t churn out because they haven’t paid you? Machine learning powers a dynamic retry schedule that’s specific to the type of decline, the type of invoice, and the business.
“It creates a dynamic schedule that is specific to the invoice and not a one-size-fits-all model,” Clark says. “We’re able to then turn the past due invoice into a paid state and bring that at-risk customer back into your active customer base.”
Find out how you can make a positive impact on your specific revenue streams, and optimize decline management and revenue recovery strategies based on your own unique business needs when you catch up on this VB Live event. You’ll learn how to start and where, plus get a deeper look at the latest Revenue Recovery Benchmarks, which reveal the powerful impact of machine learning.
Don’t miss out!
In this VB Live evnt, you’ll learn:
- The power of dynamic retry logic, optimized for each individual invoice
- The incremental lift that a well-designed dunning strategy can have on revenue
- The key metrics every subscription business should understand to prevent churn
- How to develop a comprehensive decline management and revenue recovery plan using proven strategies for successful transactions
- Emma Clark, Director of Product, Recurly
- Devin Brady, Data Scientist, Recurly
- Stewart Rogers, Analyst-at-Large, VentureBeat
- Rachael Brownell, Moderator, VentureBeat
Sponsored by Recurly