4. Your billing support team
It’s essential to have a support team on hand to assist with any issues relating to payment. Customers may need help with payment-related difficulties when signing up, refunds, or a variety of other general payment concerns, so a friendly and timely response is crucial to customer retention. A slow response to a customer query or refund request also leaves you vulnerable to a chargeback, so it’s important you have an experienced team set up here which is also aligned with your order management and payments platform.
Renewal and retention
It’s important to note that the factors already discussed also attribute to subscription renewal, but if the first month’s sign-up payment was successful it is very likely the renewal will be as well.
However, there are many moving parts that can cause involuntary churn of a subscriber. Failed payments are a big factor here, with a recent report from ProfitWell finding that failed credit card payments account for 20-40% of churn for B2B and B2C SaaS companies and, of those that don’t renew, companies are only recovering around a third of those customers. Below are the five main areas for minimizing any payment-related disruptions for your subscribers.
1. Validate card at signup
Processing a $0 authorization is an easy way to validate a card at the point of signup. No money is deducted from the customer and putting this step in place before the first subscription payment provides assurance that the next transaction will be successful. If there are problems with validating, you will also have the customer in front of you and engaged so can either try a different card or offer them direct support from your billing team.
2. Dunning and retry strategies
Retry strategies are very useful to cover for when your customers have insufficient funds or expired cards in a month. By putting this process in place, you’ll build a list of overdue payments to work with, as opposed to a list of canceled subscriptions - so much better! It’s important to set up your dunning process right from the beginning by setting retries over the best intervals and timeframes.
You should also look to automate your actions following each retry success/failure, for example, whether a failure should move a customer to suspension or even to being revoked. Revoking is a last resort, however, as it’s very unlikely you will be able to recover these customers after this. Another tip is also to align your monthly payment cycle closely after typical paydays - you stand a much better chance of a successful payment when your customers have money in the bank!
3. Offer annual subscriptions
This might seem obvious, but having a smaller volume of transactions for the same amount of gross sales will mean there are fewer opportunities for failed payments and delinquent churn to occur. Annual subscriptions also offer more consistent revenue for forecasting and better cash flow. It’s advisable to consider if your billing model is optimized for your business and to offer an annual subscription option for your product as well as a monthly plan. From conversations with our sellers, we’ve also found that one of the best ways to incentivize customers to make the commitment is to offer 2 months free use so that they can get used to your product - and importantly, integrate it into their workflow.
Take B2B lead generation platform Albacross as an example. Its monthly/annual slider not only clearly signals that it offers different subscription plans, it also flags the benefits of paying upfront for an annual subscription, with the promise of 20% off and the satisfying drop-down of cost when you switch the slider to ‘annual’.
4. Pre- and post-billing notifications
The use case for setting pre- and post-billing notifications depends on the nature of your customers and product. Some customers may want regular subscription renewal receipts. For others, a monthly email would be a nuisance. We would, however, always recommend sending an email receipt and invoice following the initial sale for customer assurance and also to provide your support team’s contact details should something be incorrect. Occasionally, buyers forget they’ve subscribed to a product and don’t recognize a transaction. Pre-billing notifications directly prevent this scenario and are a proven means of reducing chargeback rates and disputes.
Take the hassle out of your recurring billing
There are always more strategies to roll out and new tools becoming available to help improve both acquisition and retention for your SaaS business. You could work directly with a payment gateway and look to handle these on your own to improve your payments… or you could let Paddle take the stress out of the process.
Paddle is unique. As a merchant of record, we sit between you and your customers, taking care of payments, subscriptions, and international taxes so you can focus on growing your business.
By taking on the liability of the sale, Paddle can route each new customer to pay through the gateway most likely to accept the payment. We power checkouts and subscriptions for hundreds of SaaS companies and have built the experience and tools to ensure successful first transactions and a smooth renewal, all the while providing you with out-of-the-box subscription tools and a dedicated billing support team for your end customers.
Want to see how this works in practice for your SaaS company? Book a demo here.