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.
What Is Subscription Dunning?
What is dunning, anyway? 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, 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.
Here’s a closer look at three reasons SaaS companies need subscription dunning.
Reduces Both Voluntary and Involuntary Churn
Voluntary churn is due to a product issue or poor customer experience that must be addressed. 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 that 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.
1. Consider a Subscription Dunning Management Tool
Since implementing a dunning process can have such a significant impact on churn and MRR, every SaaS company should consider using an automated dunning management tool. This 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 in more depth 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.
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.
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.
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.
The best part? We’ve found that Recover pays for itself 38 times over on average. Get started today and sign up for a free trial of Baremetrics.