How to Keep Customers and recoup Revenue for Your SaaS Business
Subscriptions are vital to any SaaS commercial model.
In the beginning, it's a perfect model. Customers sign up to your service and, each month, they are charged to keep their access to it. Simple, right?
Incorrect payment details can lead to one of the unspoken reasons behind customer losses in the SaaS industry--involuntary churn. Involuntary churn occurs when a client does not realize that they are doing it, or against their will. Churn that is voluntary makes up 7.2% of overall churn, and 7.5% of all churn in the SaaS space.
Let's examine the ways you can implement these processes into play in your enterprise.
The reason for involuntary and failed payment customer churn go together
And one aspect that underpins both of these factors is providing your clients with an exceptional user experience. If you have the right procedures in place, it is possible to keep your customers content and continue to generate income at the at the same time.
Before diving too deeply into the ways to keep your income running, you must examine what involuntary churn is. Picture a typical payment cycle you've set up for your customers:
- You sign them up to receive the product you offer
- The payment date is set for the 28th day of the month.
- The first charge of their card on file fails
- Your system sends your customer an email informing them that their purchase is not valid and that they could be denied access to your service If they do not take immediate action.
- The customer doesn't act in the first attempt, and their next try to charge their card for payment also fails
- Following the third unsuccessful attempt to take payment, the system deactivates their subscription and either switch them to the free version of the software or even cancels their account completely.
But what this report isn't able to show are the various reasons that could be causing failures in collection collections.
This is why planning for involuntary churn is vital to ensuring revenue recovery. Planning can take many forms, such as:
- Setting up a series of "dunning" emails to create a cycle of payment reminders to your clients to update their payment card information or processing choices
- Examine how the card information change internal to the system. If a customer updates their information, is it being transferred to your payment system properly?
- Make sure your payment processing is not impacted by security issues at the gateway, and also stops fraud transactions.
There are three steps you can follow to collect the revenue you earned and reduce the rate of involuntary churn among your customers.
Three methods you could try to collect on revenue
1. Make sure your customers have a seamless experience for collecting payment
We just entered into 2020 and we are living in an age when customers do not expect to receive payment automatically; they expect that you do.
If you're sending out invoices to customers and requiring them to pay their subscriptions in person, not only does this add a layer of friction on the way, but it can cause payments to be delayed. The invoices are lost and while not on purpose certain customers may not pay for them, and inadvertently put their subscription in danger.
The easiest way to avoid this is to give your customers a seamless, automated experience while making their subscription payment. The payment page you create should not only provide customers with an easy experience while they sign up for a subscription. It should also be effortless for them when they need to change the details of their payments.
Here are a few methods to ensure that your customers' subscription payments are smooth and seamless:
- Set up a specific portal or webpage where customers can update their details: A customer should be able to modify their details for payment whenever they need, and not only if the payment fails. You should make sure this option is available for your customers at all times.
- Safety first When a user inputs payment information, it should be done so in an encrypted space. Making sure that your customers' card details secure is a crucial part of maintaining them. What person would want to work with a business that doesn't provide a safe payment method?
- It's easy to use even when they're using a smartphone: Your clients are very engaged users. Be sure that your payment page can be responsive, regardless of what type of device they're using. If they're able to modify their details for payment no matter if they're in an office or on a commute and the greater chance they'll do it.
- Verify that all is functioning according to the way it should: As great as technology may be, we know that sometimes, it fails. Make sure you check up on your payments cycle or update webpages to make sure that they're functioning as they should be. In the event of a glitch, you may find that your customers are trying to correct their details on their payments, but aren't able to.
With a subscription service, you are able to collect subscription payments on autopilot. manages subscriptions using various payment gateways, and it supports all major payment methods, currencies, and languages.
2. Give them breathing room if the first installment fails
The possibility of payment failure can occur. This is a normal element of subscriptions.
If a card of a client does not work, they should give them time to determine why it happened. Thanks to technology such as card updaters surfacing on the scene, information about cards tend to be updated immediately. But, there are instances where a customer's information on their card won't stay up-to-date, and this is where the dunning emails are a factor.
The dunning email should not be used to harass your client about an unpaid payment. Instead, it should be used to check in with the customer to ensure that everything is ok, and give them the option to update their payment details, like this dunning email by Hulu:
- Let your clients know that your product is worth it: Don't demand payment right off the bat. Instead, compose the email in a way to remind your clients what they paid to your service initially. In the Hulu instance above, the dunning email reminds the customer that they can continue watching their preferred shows when they renew their subscription.
- Be brief and simple: Don't send a lengthy email in the same way as an entire novel. Reduce it to just two or three paragraphs and make sure each one has a reason for it. It could be to remind the client of the benefits your product offers to them, followed with a quick explanation of the paid-for transaction that failed. Make sure that the message isn't all about the failed transaction However, you should emphasize that if the customer doesn't take action this will revoke their membership.
- Give a simple CTA Just like Hulu did in the email above. Instead of incorporating an "pay now" button and reminding the customer that it's simple to "reactivate" the account. Make sure to include a simple CTA, so your customer is aware of what they have to do to maintain their subscription.
Then, you should make the updating process as seamless as possible. The CTA should link directly to an update for your card webpage that responds to whatever device the customer is reading the dunning email on. Keep in mind that the more simple it is for customers to update their account information, the more likely they are to complete the process.
3. Don't be afraid to give them a second chance.
Be sure to give your clients possibility of knowing the reason why they have had their payments bounced and then work in partnership with them to suggest alternatives to their subscription package.
In the event that a payments fail, don't immediately delete their account, or even remove them from your customer database. Instead, reach out to them and ask them what you can do to help.
It is possible to offer:
- Make sure their subscription is active, but on a lower cost that they can manage.
- Change them to a no-cost version of the product the time being
- Stop their account
When it comes to SaaS and especially when you're selling a pricey product and you don't want to let your customers off as soon as their first payment bounces. Maybe they've hit a rough financial patch that they aren't able to pay for their subscription this moment. If that's the case you can offer to transfer them to a free-tier of your product and/or temporarily suspend their subscription until they are ready.
Of course, treating your customers well when they are having problems with their payments will keep them satisfied. They want to know that you can handle the fluctuating peaks and valleys that come managing a business. But pausing their account, instead of removing it, saves you having to put them through the process of re-onboarding after they have reactivated their subscription.
It's a win-win for you--and your customers.
The process of recovering failed payments is the key to reducing churn involuntary
If they don't work If they fail, you must set up the proper process to not only recover your profits, but also keep your customers too. It's vital that, if the payment of a client fails, your first communication with them shouldn't be just to get their money back. The goal should be to contact your customers, ask them if they have any issues or issues, and then try to work together.
Your customers are the lifeblood of your company, and recovering revenue doesn't mean that you'll lose them. On the flip side when you approach things right, there will result in a positive experience for your customers and your business.
