We get asked about cold calling.
There’s still a feeling that cold calls are effective means of failed payment recovery.
We get why people may think that. The reasoning probably goes something like this:
Client: If you get them on the phone, you can get them to commit to paying you right then and there.
Retention Specialist: Right, but how often do you answer a strange phone number?
Client: Very rarely if ever.
Retention Specialist: And are you more likely to answer it if the call is coming from an area where you don’t know anybody?
Client: Nope, less likely in fact.
You get the idea.
Still, we get asked a lot about cold calling.
So we decided to take a look at the merits of the cold call compared to other outreach methods to have a successful touchpoint with a customer.
We define a successful touchpoint as one that gets the customer to respond and gets them back on their subscription.
In other words, revenue recovered.
It’s not that we don’t feel cold calling doesn't work - we simply have enough data available to us to know for a fact.
Let’s break this down.
Why Cold Calling for Delinquent Churn isn’t Effective
We’ll get to the data next, but first let’s go into the why about cold calling.
Why do we feel cold calling doesn’t work?
As a failed payment solutions provider, our entire ethos is around relational revenue. Leveraging the power of relationships to bring revenue back to our partners and help them grow.
Here’s the problem with the cold call: as much as today’s consumer is bombarded with emails that are useless, low value, or strictly meant to sell or promote - strange phone calls are even worse because they’re nothing but telemarketing.
You get hotel membership reward offers, cruise line promotions, phony insurance scams, or automated message offers with false urgency.
These are even worse intrusions of a customer’s personal space than those email outreaches. They’re the height of disruption. And people avoid them.
How much do they avoid them? Take a look at our data and success rate for one such client who we do cold calling for at their direction:
Out of over 2,000 touchpoints with this client’s customers, only 2 of them were successful via the cold call.
Six sent the call to voicemail and ended up taking action upon it.
Compare that to 200+ via email or text message.
That’s a pretty compelling case that other methods aside from cold calling get your failed payment customers back online.
Even beyond our own internal data, what do the numbers look like across industry benchmarks?
Email Response Rates by Industry
Whether you use the data from HubSpot, Privy, or some other benchmark guide, the data across the board is in that 20 - 21% range.
Depending on the specific industry, it can be as low as 15% or as high as 25%.
This data compiles both automated and personalized emails. You can bet strongly that the open rate for personalized emails is higher than 21%.
How about cold calling?
That is data that can be more difficult to find, but the team at Brevet has a couple of interesting data points to keep in mind when considering cold calls as an outreach method to recover a failed payment, but one sticks out in particular:
- It takes on average 8 tries to get a person on the phone
Now, Brevet calls this a prospect and technically the customer is already familiar with your brand. But how many times prior have you used phone calls to reach out to them in your business?
If you haven’t used the phone call as a regular part of your customer cadence already, you or your payment recovery partner calling them to get a payment back online might as well be a cold call, so expect similar efforts being needed to get that customer on the phone.
And what if you’re calling from an unknown phone number? The prospects are even more daunting.
Take this stat from the team at IMPACT:
- Over 87% of people screen or ignore phone calls for unknown numbers
Think of that in terms of the email open rate stat above. 13% of people “open” a phone call from a strange number. Compare that to 21% of email.
Also consider the context of a phone call. People could be answering a phone anywhere.. In the car, watching soccer practice, in the middle of cooking dinner.
Do those sound like settings where a failed payment customer would be prepared to pull their new credit card and update payment information?
So how does SMS Messaging compare to email OR cold calling?
This is where the data gets pretty interesting.
According to Snapdesk, SMS text messaging has a 98% open rate.
Which, when you think about it, makes a lot of sense given how often the average person responds to a message.
That’s not to say text messaging is panacea, which we’ll detail more below why that’s not the case.
Why Do Failed Payment Customers Not Answer Calls?
While there are some who do insist on the cold call technique to get an involuntary churn customer back on plan, this isn’t practical for some companies for several reasons.
First, it’s not common on membership sites or even on subscription services to get a customer’s personal phone number at the point of sale.
Without collecting that data, the ability to cold call or SMS text message doesn’t exist.
But even without actively collecting that information for the purpose of using it in a recovery, cold calling isn’t a good idea.
First, customers now find being on the phone anxiety inducing. Think about the types of companies you typically need to call in order to deal with payment problems:
- Cable companies
All of these industries have notoriously poor customer service and customer experience reputations and customers loathe having to call them. And feel worse after doing so.
Do you honestly want your brand associated with them by proxy?
Customers also find getting called for a delinquent payment an embarrassing conversation to have. They don’t want people to overhear their phone calls. It’s stigmatizing. It’s a hit on morale no matter how benign the call might be, and people will naturally become defensive about it.
Why would they become defensive?
Because an outbound cold call eliminates control from the recipient.
Once you catch them off guard with a cold call for a delinquent churn payment, the usual and natural reaction will be to get defensive, feel harassed and unvalued as a customer, and churn voluntarily as a result.
Remember, your business is likely one of several options this person has. Sullying your brand by being overly direct in your failed payment recovery efforts can be a sign you’re difficult to deal with - and may be even worse to work with should they ever need to cancel or terminate their plan early.
Cold Calls are Frictional
Cold calls are also full of friction. When you get a person on the phone, you have no idea where they are. They could be driving, waiting for a doctor’s appointment, or in the middle of helping their kids with homework.
None of these scenarios are conducive to getting a successful card update on your payment gateway link if they were to answer.
Also, consider the mechanics of a failed payment. Even if the person does answer the phone and agrees to update, they still need to take that additional step to their email and update their payment information on the payment link.
Getting a failed payment customer back online is about ceding control to the customer, and allowing permission to get them back.
Phone providers are also getting more sophisticated in giving a phone call recipient more information about incoming calls. This includes flagging calls for potential spam and providing advanced call screening features.
Now, because we use a 1:1 recovery service, getting flagged likely would not happen. But, what would happen if the caller’s location is listed?
If the recipient sees a strange area code and a place in the country where they have no roots or contacts, their guard is immediately up upon answering.
If they answer at all.
Email Still King on Involuntary Churn
Yes, email has been ruined by companies overloading inboxes with useless information and promotional offers.
Yes, companies like Hey are making concerted efforts to make email more friendly and less a wasteland of automated marketing with zero relational value.
But still, yes, email is going to be the most effective way to get your failed payment customer back in the fold.
Because unlike most of these cookie cutter automated email cadences, a failed payment recovery service is going to send an email outreach to your failed payment customer like an actual member of your team would.
Not like a dunning software or a person on your team trying to check this off their to-do list in 30 minutes.
We saved 19,303 failed payments in the last three months (May, June, and July 2020)
Of all those invoices recovered, >95% were saved via an email outreach.
Mind you, this recovery is happening while a lot of people are making tough financial decisions in the face of an ongoing pandemic.
Email works, people. When leveraged correctly it’s still the most powerful tool for reaching customers.
Most of the reasons for email being most effective have to do with the amount of dexterity you’re able to apply within an email along with the assumed control you put in the customer’s hands. SMS text messaging and phone calls have a limited amount of testing, features, design, and calls to action you can apply to a communication.
Email is the least intrusive of all these methods for failed payment recovery. Remember how we described people not wanting to have a conversation about payment recovery eavesdropped from a phone call? Email gives customers a sense of privacy and safety when they receive one, and gives them the control to act upon it.
At that point the effectiveness of email in failed payment recovery comes down to empathy, timing, copy, and personalization.
Text Messaging for Failed Payment Recovery
Text messaging is a broad communication method. Beyond the standard phone text, messaging apps like Facebook, WhatsApp, and Instagram Messenger all fall within the text message category.
The metrics on text do look promising. And sure, there are companies using text messaging more as part of their communications mix, even for failed payment recovery.
But there are limits and downsides to text. One of the most obvious for your subscription business is you’re not always collecting phone numbers for your customers. Emails are almost universally a needed contact property because of receipts, content, updates, program changes, etc. You will always have that information available, and the customer will come to expect to hear from you via email, even if they only see your communication in passing.
Text messaging has the ability to become intrusive with too much frequency. I think often about the most common sorts of B2C text message conversations that go to customers. It’s usually in the form of a retail coupon or a promotion to an event like a concert.
Each time I get these, they feel intrusive. I get messages on my phone expecting to hear from friends, family, and coworkers. Not companies. It feels like an encroachment. Customers probably feel the same way, and want to keep that area of their life cordoned off to companies hijacking their attention.
Especially those trying to hijack attention to recover an involuntary churn.
Something else to keep in mind for texting is that even if you send the right message to the right person in the right place at the right time, it still can be frictional. Your mobile payment link may be too cumbersome for the customer to use (have you looked at your payment recovery link in mobile?), and punching credit card numbers in mobile isn’t the most joyous task to do.
If you were to want to use text messaging as a primary communication method, set that expectation early with your customers. Give them a choice, even, via a simple check box on your sign up form.
That way, you can automate that first message to establish that communication, set ground rules for both them and yourself, and be able to utilize text message as a primary communication method, reap the benefits of it and it’s early returns, while not coming off as intrusive to their messaging box.
Read our post on why $100 million in returned revenue to businesses that
Gravy serves is just the beginning.