5 ways to prevent involuntary churn for your subscription business

Churn is unpleasant for subscription businesses but at least in most cases, customers actively decide to jump ship. But what can you do when involuntary churn impacts your revenue?

What is involuntary churn?

In most cases, we talk about involuntary churn when a customer subscription gets cancelled due to a technicality such as failed payments or a forgotten renewal.

As such, the customer never wanted to unsubscribe but still did because their payment didn’t go through, or their subscription ended pre-maturely.

For subscription businesses, involuntary churn is somewhat of a lose-lose situation.

1. If the customer wants to keep the subscription, they still have the frustrating experience of having to update their payment methods, check their billing and subscribe again. In some cases, it’s even possible that the customer had some losses of their own due to the cancellation.

For B2B businesses, any involuntary cancellation can even cause loss of revenue or worse, so prevention is crucial.

2. If the customer was on the fence about their subscription, they might not even try to subscribe again which is a total loss for your business. Trying to convince them would always include incentives such as discounts or vouchers which add to the overall cost of the involuntary churn.

Payment declines: soft vs. hard

According to Integrated Research, only 10-20% of payment declines are so-called “hard declines”, e.g., the payment rejection by the customer’s bank.

That means that the majority are “soft declines” which usually have different reasons such as technical issues (internet connection or some connection issue with the bank or the acquirer). They also include authentication problems, when the customer fails to authenticate the payment properly.

Whereas hard declines are pretty much set in stone, the vast majority if payment declines can be managed with automatic retries and customer support.

How do you prevent involuntary churn?

1. Credit card tokens

For credit card payments, the use of tokens can not only reduce involuntary churn but also increase fraud protection which is good for your business and your customers.

A token works as a digital authentication code of the customer’s credit card. The customer never has to share their credit card details with you. They only have to verify it with their bank which then provides the token which is like a secret handshake between your business and the bank.

This token is active even if credit card data gets updated (e.g., the customer receives a new credit card) and the customer does not have to do anything. Read more about it here.

2. Automatic retries

A good subscription management software (such as provided by Billwerk+ ;)) usually has automatic retries if a payment fails. That’s because a failure does not necessary mean that the payment information is wrong. Sometimes, it can be due to a bad internet connection or technical issues with the bank or the acquirer.

3. Automatic reminders

A thorough and transparent communication with your customers is crucial when it comes to anything that can come between them and their subscription.

Whether you remind them that the free trial is ending, that the subscription renewal date is closing in or that their payment methods need to be updated: the earlier you inform your customers, the easier it is for them to take any necessary steps.

We recommend, to set a so-called “grace period” between a payment failure and the cancellation of the subscription, so you can inform your customers of the issue and give them some time to fix it without stopping their subscription.

4. Self-service payment and subscription management

Given how annoying involuntary churn is both for you and for your customers, it’s always good to provide your customers with all the tools to fix the issue independently and around the clock.

In fact, according to a Gallup report, customers put more importance on the “how” an issue is handled compared to whether it can be solved. If the problem gets solved but customer service was curt, customers had to call often or work hard to get it fixed, they’re less likely to be engaged than if the overall experience was positive (with or without a proper solution).

A self-service portal to manage and update payment methods and continue subscriptions coupled with a support page that guides the customer through the issue and offers fixes is perfect to make the best of a bad situation.

We recommend to always add an email and phone number to your support team, in case the customer runs into problems. Make sure to provide information how long it takes for your support to return a call or write back, so the customer knows what to expect.

5. Dunning management (automation)

Failed payments can be a very sensitive topic for the customer, so it’s important to make sure that the process to fix the issue is handled delicately.

A proper dunning management includes predefined reminder emails, a grace period and further actions such as the pausing or cancellation of the subscription or even the handover to a collection agency (usually something for bigger sums and issues).

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You might have already guessed but Billwerk+ provides you with a variety of different features, communication templates and self-service options to manage and reduce your involuntary churn. We offer automatic dunning management, credit card tokens for Visa and Mastercard, a self-service customer portal, and more. Try our recurring billing platform Billwerk+ Optimize for free and see for yourself.

You have a more complex business case? Set up a free consultation meeting with one of our experts and we’ll find the right solution for you.