Subscription Dunning: How to Improve Revenue Recovery

Key takeaways:

Subscription dunning is an essential practice for SaaS brands to prevent involuntary churn, voluntary churn, and loss of recurring revenue
Dunning processes allow subscription companies to notify customers of failed payments that could otherwise result in a canceled plan
It’s essential to make it easy for customers to update their billing information
Dunning tools like Baremetrics Recover helps SaaS companies leverage in-app notifications and emails to engage users and prevent lost revenue

Most subscription-based companies face at least some involuntary churn because failed payments are inevitable for every business. However, the amount and impact of involuntary churn can vary dramatically based on the way businesses choose to handle it.

An effective dunning process can help improve revenue recovery by resolving failed payments and even preventing them in the first place. In this guide, we discuss how subscription dunning improves revenue recovery as well as the four steps you can take for success.

Understanding Subscription Dunning

Subscription dunning is a way for SaaS and subscription businesses to recover failed payments from customers. A failed payment can occur because of insufficient funds, incorrect billing information, an expired credit card, and many other small issues.

In many cases, subscription customers don’t even know their payment has failed unless there’s a dunning process in place to help them fix it. Besides the loss of revenue, a failed payment can lead to involuntary churn if it’s not resolved quickly. That’s why a dunning solution is essential for most startups and enterprise SaaS companies.

How Subscription Dunning Improves Revenue Recovery

Dunning management is an essential process for most SaaS and subscription companies because it prevents the loss of both customers and revenue due to failed payments. It’s also a great way to increase customer engagement through more frequent emails and other interactions.

Dunning Process with Baremetrics

Here’s a closer look at three reasons SaaS companies need subscription dunning.

Reduces Both Voluntary and Involuntary Churn

Voluntary churn must be addressed due to a product issue or poor customer experience. And in some cases, voluntary churn can’t necessarily be prevented. Involuntary churn, however, is preventable so long as you have a dunning process in place.

A customer who is completely satisfied with your product might not be aware that their payment has failed. Their subscription only ends due to neglect. By implementing a dunning process, you can proactively identify and help customers resolve any small issues that might lead to involuntary churn.

Prevents Recurring Revenue Loss

As mentioned above, churn can be extremely detrimental to SaaS businesses. That’s because it leads to small losses in revenue that can compound over time and significantly limit monthly recurring revenue (MRR) growth.

In fact, Baremetrics has found that SaaS businesses are losing on average 9% of their MRR due to failed payments. However, payments that fail only result in lost revenue if a business does nothing about them. Developing an effective dunning process can help you avoid recurring revenue loss.

Increases Customer Engagement

Scaling customer interactions and customer service can be challenging as a SaaS business grows. By sending helpful emails through an automated dunning process, you can add customer touch points that allow you to engage with users more frequently.

Customer service teams can also spend less time resolving payment issues and more time providing higher-impact support to customers. Over time, this helps you build stronger customer relationships and foster brand loyalty.

Subscription Dunning: 4 Steps for Success

An effective dunning process is a golden ticket for reducing churn and growing your subscription business. Here are four steps you can take to develop one specifically for your SaaS business.

1. Consider a Subscription Dunning Management Tool

Since implementing a dunning process can significantly impact churn and MRR, every SaaS company should consider using an automated dunning management tool. This tool can make it much easier to take action to improve revenue recovery quickly and efficiently.

A dunning solution like Recover can offer much more than basic dunning features by helping you set up custom email campaigns, optimize credit card capture forms, and implement in-app paywalls and reminders. We’ll cover these dunning tactics more thoroughly throughout the next few sections.

2. Write Effective Dunning Emails

Another important aspect of a dunning process is writing dunning emails that customers will actually read and take action on. Dunning has had a bad reputation in the past as many companies have used generic email blasts that look like spam and fail to get customers to update their payment information.

Instead, SaaS companies should consider a solution like Recover, which offers nearly a dozen turn-key templates that make it easier to craft compelling email campaigns. Using these templates to create highly personalized email drip campaigns can mean the difference between frustrating customers and actually recovering revenue.

Here are a few best practices to keep in mind when writing your dunning emails:

Choose a catchy subject line that makes customers want to open the email.
Include your brand name so customers (and spam filters) know the email is real.
Keep emails brief by quickly explaining what happened and what customers should do.
Send multiple emails over a longer period of time to catch customers at the right moment.

3. Make Billing Updates Simple

As we mentioned before, many failed payments result from incorrect credit card information. That means subscription businesses should ensure their customers can easily update their billing information to prevent failed payments and involuntary churn.

Recover allows you to customize your credit card input forms to match your company branding. You can add your own logo, colors, text, and more. Plus, it helps you develop a simple and optimized credit card capture form to improve your recovery rate.

Baremetrics Recover- Credit Card Form

4. Implement In-App Notifications and Paywalls

A dunning email campaign is a great way to reach customers, but it’s also important to offer a seamless payment experience within your SaaS product. For example, in-app notifications can help warn customers that their credit card is about to expire or that there’s another issue that might disrupt their subscription.

Meanwhile, a paywall can force customers to resolve their failed payments before they can continue using the product. Recover makes it simple to add in-app notifications and paywalls by including a JavaScript code snippet in your SaaS application. This allows you to double down on your dunning efforts and reach customers wherever they are.

Baremetrics Recover- Paywall

Baremetrics Recover: Your Subscription Dunning Solution

Baremetrics Recover is an automated revenue recovery feature that can help subscription businesses optimize their dunning process. Using custom dunning email campaigns and in-app notifications, Recover helps SaaS companies stay on top of any payment issues.

Recover is also combined with the Baremetrics analytics dashboard so you can track revenue, churn, and other SaaS metrics. This allows you to analyze the performance of your dunning process to make sure you’re trending in the right direction.

Altogether, these features help you put dunning management on autopilot to prevent involuntary churn and recurring revenue loss.

The best part? We’ve found that Recover pays for itself 38 times over on average.

Boost Revenue Recovery With Baremetrics

When payment issues inevitably arise, it’s important to have a dunning process in place to resolve them. This is the best way to reduce churn and revenue loss and, in turn, optimize the growth of your SaaS business.

With Baremetrics, you can set up Recover within minutes and immediately begin boosting revenue recovery. Then you can optimize Recover by setting up automated drip campaigns, implementing in-app paywalls, customizing your credit card capture form, and tracking everything along the way.

Tired of wasting time on spreadsheets? Get a free trial of Baremetrics today!

FAQ

What is subscription dunning and why does it matter for SaaS businesses?

Subscription dunning is the process SaaS and subscription businesses use to recover failed payments before they result in lost customers and lost revenue. When a payment fails due to an expired card, insufficient funds, or incorrect billing details, most customers have no idea it happened. Without a dunning process in place, that subscriber quietly churns, not because they wanted to leave, but because no one told them there was a problem. For subscription businesses tracking MRR, even a small failed payment rate compounds quickly. Baremetrics data shows SaaS companies lose an average of 9% of MRR to failed payments, making a structured dunning management system one of the highest-return investments a SaaS operator can make.
How do I reduce involuntary churn caused by failed payments in my subscription business?

Here is how to measure and reduce involuntary churn caused by failed payments in a subscription business. 1. Connect your payment processor, whether Stripe, Braintree, or Recurly, to Baremetrics to separate involuntary churn from voluntary cancellations in your churn analytics. 2. Monitor your failed charge rate and the MRR at risk in real time using a subscription metrics dashboard. 3. Activate automated failed payment recovery, such as Baremetrics Recover, to retry failed charges and trigger email and in-app recovery sequences automatically. 4. Customize your credit card capture forms so updating billing information takes customers seconds, not minutes. 5. Track recovered MRR over time to measure the direct revenue impact of your dunning process. Involuntary churn is preventable, but only if you have visibility into the right metrics before the revenue is permanently lost.
What platforms offer automated failed payment recovery for subscription businesses?

Baremetrics Recover is an automated failed payment recovery tool built specifically for SaaS and subscription businesses running on Stripe, Braintree, or Recurly. It handles the full dunning process in one place, including smart payment retries, customizable email drip campaigns, in-app notifications, paywalls, and branded credit card capture forms. Because Recover is built into the Baremetrics analytics platform, you can track recovered MRR, monitor churn trends, and measure the performance of your dunning strategy alongside all your other subscription metrics. Baremetrics reports that Recover pays for itself 38 times over on average, making it one of the most direct levers a subscription business can pull to protect recurring revenue.
What are dunning best practices for SaaS companies that want to recover revenue without frustrating customers?

Here are the dunning best practices that help SaaS companies recover revenue while keeping the customer relationship intact. 1. Send multiple touchpoints across different channels, combining dunning emails, in-app notifications, and paywalls so customers are reached wherever they are most active. 2. Personalize every message with your brand name and a clear explanation of what happened and what the customer needs to do, so the email does not read like spam. 3. Use a subject line that creates urgency without being alarming, and keep the email body short and focused on one action. 4. Link directly to a pre-filled billing update page to remove friction from the payment recovery process. 5. Space your dunning sequence over several days, since customers are often busy and may miss the first or second message. 6. Use in-app paywalls as a last resort to prompt customers to resolve failed payments before continuing to use the product. A well-timed, low-friction dunning process protects MRR without damaging customer trust.
What is the difference between voluntary churn and involuntary churn in subscription businesses?

Voluntary churn happens when a customer actively decides to cancel their subscription, usually because of a product issue, a pricing concern, or a poor customer experience. Involuntary churn happens when a subscription lapses not because the customer chose to leave, but because a payment failed and was never resolved. The practical difference matters because the two types require completely different responses. Voluntary churn demands product and retention work. Involuntary churn is preventable with a dunning strategy, since the customer often still wants the product and simply does not know their billing details need updating. For SaaS businesses tracking net revenue retention and MRR growth, separating these two churn drivers in your analytics is the first step toward addressing both effectively.

Subscription Dunning: How to Improve Revenue Recovery

Table of Contents

Understanding Subscription Dunning

How Subscription Dunning Improves Revenue Recovery