5 ethical tactics for increasing your subscription renewal rate
With the right tactics, though, involuntary churn is almost entirely preventable, and it’s one of the quickest and easiest ways to increase customer lifetime value (LTV). Here are a few tips on how you can make sure customers renew their subscriptions, without resorting to questionable tactics.
1. Avoid involuntary churn and recapture lost revenue
As your subscriber base grows, credit card delinquencies account for a larger portion of your churn—sometimes up to 40% of overall churn. Fortunately, most of this lost revenue is easy to recapture.
Early-stage companies can manually reattempt failed credit card charges or send payment request emails to customers—even a basic email campaign can save up to 30% of involuntary (delinquent) churn. As you grow, though, you’ll want to invest in a solution to capture these failed payments automatically. An effective automated dunning process can save you potential customers, recover lost revenue, and drive down delinquent churn.
Dunning is the process of asking customers for money they owe the company. This usually happens after a credit card has been declined, a subscription service has encountered an error when charging the customer, or the customer has insufficient funds in their account.
Tools like Paddle's ProfitWell Retain can help you recover nearly 80% of lost revenue automatically.
2. Be proactive, be empathetic
The reason dunning gets such a bad rap stems from the way many companies manage the process. Companies frequently abandon best practices of customer service when approaching their users about failed payments. Instead, they play the role of the cold-hearted debt collector.
Sending over 1.4 million dunning messages and recovering nearly $5m in lost revenue for ProfitWell Retain customers taught us an important lesson: always put the customer first. In all your interactions, from email receipts to failed payment notifications, the dunning process is an opportunity to recover lost revenue, not a channel to harass customers into paying up.
If a payment fails, don’t blame your customers. They’re most likely completely unaware their payment didn’t go through, let alone why. Explain why their payment wasn’t made, with as many details as you can provide; let them know if you plan to recharge them automatically, explain how they can update their credit card details first if needed, and give them options for moving forward.
Even before payments fail, it’s important to be proactive with your communications. The best way to combat forgotten renewals is by sending friendly reminder emails before each customer’s subscription expires. Jason Lemkin of SaaStr suggests that enterprise SaaS companies send out multiple renewal notifications 60 days in advance of their renewal date, 30 days in advance, and then a final notice 5-15 days before the subscription lapses.