Question for the day: If your subscription business could recover failed payments, how much would that add to your monthly revenue?
Ah, failed payments—the bane of subscription businesses and membership sites. Unfortunately, these happen more often than one might think.
In fact, a 2020 study from LexisNexis Risk Solutions reported that failed payments have cost the global economy an estimate of $118.5 billion in fees, labor, and lost businesses. Pretty alarming, right?
When a payment fails, it means your business just lost revenue. Right there and then. Plain and simple.
However, here’s some good news: not all failed payments are lost causes. Read on to learn more about how your brand can recover failed payments.
Why do payments fail?
Did you know that you’re losing 10% of your revenue due to failed payments? Let’s take a look at the most common causes behind failed payments:
- The credit card has already expired
- The customer’s credit card is already at the maximum spending limit
- The credit card used or payment method doesn’t have a sufficient balance
- The payment gateway has detected suspicious or fraudulent activity and blocked the card or payment method from being used
- Human errors such as incorrect card number typed or typographical error
All of the reasons listed above have one thing in common: they are all involuntary.
The customers didn’t do this on purpose. In fact, there’s a big chance that they may not even be aware that their payment failed.
How can you recover failed payments?
Since most of the reasons for failed payments are involuntary, the possibility of recovering your lost revenue is high—if you play your cards right.
Here are three strategies to help recover failed payments.
Set up a dunning email automation
Dunning emails are the automated emails sent when customers’ payments fail. These emails remind your customers to settle their pending payments—usually in sets of three to five emails.
There are also various dunning software options that can help bigger companies set up and monitor their dunning attempts.
But while dunning emails are a good attempt to recover failed payments, some business owners are not comfortable with this strategy—mostly due to their own bad experiences of receiving badly written dunning emails.
Here’s a tip: Create a personal approach, and avoid sounding too generic or even robotic. Personalized emails can give you higher transaction rates (up to six times).
Plus, badly written dunning emails can result in customer complaints after multiple follow-ups instead of the desired outcome of recovered revenue.
Reach out via outbound recovery calls and emails
Some businesses prefer doing manual outbound calls or emails instead of setting up an automated system.
For example, start-ups and smaller companies usually do this because their outbound specialist can still handle the number of “lost” customers. Though it can be tedious and time-consuming, the greatest advantage of this strategy is the amount and quality of personalization you can put into the customer experience.
If you are considering this strategy, here are some quick tips for outbound calls and emails:
- Identify the customers to reach out to and familiarize yourself with their profile and their customer journey so far.
- Review the individual customer’s subscription and payment history.
- Take note of two things: why the payment failed and the last dunning email the customer received.
- Use this information for a super personalized conversation when you call your customer or when you send out an email.
Use the opportunity to build an actual conversation so you can guide your customers through the process of payment.
Tip: If you can’t reach your customer via phone call and if they are not responding to emails either, try leaving a voicemail message. Don’t forget to leave a number they can call back if they want to.
Outsource failed payment recovery specialists
As your business grows, the instances of failed payments will also go up. While reasons will vary from technical issues, involuntary churn, or suspicious acts—it will get to a point where it will be too tedious for you to handle.
At the same time, you can’t just ignore the slew of failed payments. So what should you do?
Consider hiring a failed payment recovery specialist who can solely focus on handling the entire recovery process. They can also implement outbound communications via email, chat, or phone to expand and complement your existing dunning system.
Because a specialist can focus on recovering failed payments, you can focus on other aspects of your business such as strengthening your customer retention strategies, product development, and operations.
How to use ecommerce analytics to recover more failed payments
Regardless of the strategies you choose to execute, you will need to assess, monitor, and evaluate the results by looking at the numbers.
That way, you’ll know what’s working and what’s not so you can figure out the payment recovery strategy that works the best.
Here’s where data tracking and ecommerce analytics come in:
- Check your customers’ purchase and engagement history so you can further personalize your approach.
- Review recurring charges and subscription product performance to pinpoint the exact instance of the failed payment.
- Access demographics of your churned customers to have a better understanding of how to reach out to them. For example, their location will give you an idea of the best times to call them.
One important thing to note: data tracking and analytics are not limited to the recovery process. With access to powerful and comprehensive data, you can set up your entire customer lifecycle strategy to be data-driven.
You’re not just moving around blindly trying strategy after strategy. You’ll be moving along efficiently with strategies that are backed by data.
Here are some examples of how you can maximize a data analytics platform:
- Study your churn rate patterns by comparing numbers from different time periods. Pinpoint the reasons for churn to see if there’s a recurring reason that you can tackle.
- Analyze demographics, purchase behavior, and marketing channels to determine where revenue comes from.
- Connect the platform with your other tools. Littledata, for example, integrates with Shopify, BigCommerce, and even Recharge.
- Get an overall view of how your eCommerce store is really doing—so you can act accordingly depending on what’s needed.
The better your customer experience is, the less you’ll have to worry about customer churn.
While failed payments may still occur, your brand already has an established relationship with your customers. Recovering your lost revenue will be a much smoother process.
Wrap up: Use eCommerce analytics as your strategy’s foundation
Data is literally power and knowledge at your fingertips.
Start making better business decisions with accurate data across all touchpoints and channels. Combine Littledata and Recover Payments and start recovering more failed payments—you’ll be surprised at how much more revenue there is.
This is a guest post from Regina Ongkiko, content writer at LTVplus. She is passionate about creating content that provides value and impacts businesses. You can read more of her work at reginaongkiko.com. She loves getting her inspiration and ideas from the great outdoors.