What Is Involuntary Churn and How Can You Reduce It?

Customer retention is key to success for subscription businesses. It doesn’t matter how sexy your latest feature drop was, or how flashy your sales and marketing campaigns are. If you can’t keep customers onboard long enough to make a profit, your business will never grow. 

Voluntary churn is one thing. Even with strong customer success initiatives, the best businesses will lose some people along the way. Involuntary churn, on the other hand, is an entirely different beast; an unnecessary barrier to success that your business can’t afford to leave unaddressed. 

The right tools can help you to reduce involuntary churn, and improve your ability to seamlessly collect recurring payments.

What is involuntary churn?

As the name suggests, involuntary churn happens when a willing customer gets booted—involuntarily— from your customer roster. While this can happen for many reasons, it usually owes to a simple misunderstanding. 

• An expired payment method. Credit card issuers send out new cards every three to five years. When a card expires, all of the recurring payments associated with it will be declined. When this happens, businesses will usually lock the customer out of their account until the payment issue is resolved. Makes sense, right? Except if rectifying the payment failures isn’t an easy task for the customer, the more likely it is they won’t be coming back. 
• Overdrawn card. It happens more than many people realize. Each year about 30% of people overdraw on their credit cards. If you try to collect payment when their balance is at zero, it will result in payment failure. Oftentimes, the customer doesn’t even know they are overdrawn until after the payment fails. 

When a customer actively decides to leave, that’s one thing. Losing a customer to a misunderstanding is entirely different. 

For them, the situation is embarrassing and stressful. For you, it’s expensive. 

3 tips to reduce involuntary churn

Experts estimate that as much as 40% of churn could be involuntary. That’s a staggering amount of recurring revenue getting tossed out. Fortunately, there are ways to reduce unnecessary churn and keep willing customers around. 

Automated dunning emails

Dunning emails are a good first step in collecting missing payments. They have a success rate of about 15%. That may not sound like much, but it can add up to significant sums of money—particularly when you view it as one phase of a multifaceted collections strategy. 

Of course, the better the message, the more effective your collection efforts will be. To write the best possible dunning email, you should:

• Be friendly. Remember, there is a good chance this is the first the customer will be hearing of the situation. Treat it like a misunderstanding. You won’t get anywhere putting them on the defensive.
• Keep it brief. This is no time to write a novel. The most effective emails are between 50-125 words, which equates to about thirty seconds of the recipient’s time. 
• Tell them what to do as simply as possible. A solid call to action can boost your message’s engagement level by almost 400%. The key to written communication is to keep your message as clear.  
• Get familiar. People are almost 40% more likely to respond to an email sent by an account associated with a real person. You can boost your odds of dunning success simply by sending the message from a customer service professional’s account. 
• Create a sequence. Sending more than one email naturally increases the odds that your recipient sees your message and will take action. 

What do most of these tips have in common? They are all about removing barriers for the customer. You’re asking them to do something unpleasant. The easier you make it for them, the better your odds of success become. 

And when you automate the entire dunning process, even better. Set your cadence up once and let it run on its own—leaving your team free to handle the tasks and projects that really need humanpower.

Automated credit card updating

The average millennial has seventeen active subscriptions. When their credit card expires it’s a big chore to update their payment methods with every. single. provider. You can make things easier for your customer by getting a payment gateway that automates credit card updating. 

Account updaters work by automatically requesting information from Visa, Mastercard, etc. on declined cards. The card brands send the new expiration dates to your gateway, which updates the information you have on file for payment collection. 

You may also be able to sign up for this service directly with many major credit card brands. It’s an effective way to avoid payment errors without ever involving the customer at all. 

Establish a payment retry schedule

Just because a payment fails on the first, doesn’t mean it will on the third. There are many reasons a customer may have insufficient funds in their account. Maybe they had a big, unexpected bill. Maybe they just have gotten paid yet. 

Whatever the case, when you boot an account for a failed payment on the first attempt, chances are that you are saying goodbye to that customer forever. Studies show 62% of customers will never come back after a failed payment.  

Not only does that mean losing the money they owe you in the moment, but it also means missing out on months of future payments they would have made. 

A payment retry schedule allows you to collect your money in a non-invasive manner. Create a schedule of when to try your customer’s card again. Ideally, the funds will be available the next time you try the card, and the issue can be settled without the customer ever knowing there was a problem. 

Payment retries can be done manually, but this is only practical for businesses that don’t have many failed payments. Subscription management software provides an automated, scalable solution to this and many other payment-related needs.  

Collections assurance made simple

The right subscription management software automates or simplifies all of the processes described above, helping businesses to radically increase their collections assurance potential. 

Consider the case of CoConstruct, a construction software used by thousands of builders all across the world. CoConstruct felt its collections assurance was bogged down by manual processes. After switching to Stax Bill and automating its dunning and payment retry processes, the business was able to recover around $2000 every month in missing revenue. 

Collections assurance may feel manageable while your business is in its infancy. However, the bigger you get, the bigger the job becomes. With the right tools, you can make your collections process both scalable and effective. 

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