Dunning 101: What Is It and Does It Work?
The nemesis of subscription-based businesses is customer churn. Until recently, dunning solutions have been seen as the holy grail of reducing customer churn.
But, does dunning software really work?
Find out below whether dunning really is all it’s cracked up to be and is a viable alternative that skyrockets your payment recovery rates?
What is Dunning?
So, what exactly is dunning? The root word of dunning is ‘dun.’ According to the Merriam-Webster dictionary, this means to make persistent demands upon for payments or to plague or pester. It doesn't sound very charming, does it?
So, a dunning solution is payment recovery software that takes steps to contact customers about collecting payments that are due on subscription-based businesses.
Given that small businesses in the U.S. have around $825 billion worth of unpaid invoices and 81% of these invoices are over 30 days past-due, you can see the importance of having dunning or other churn-reduction software.
There are many reasons that credit cards fail. These include:
- Card expiry.
- Card numbers keyed incorrectly.
- Card has been reported stolen or lost.
- The bank has blocked a transaction.
- The bank believes that the transaction is fraudulent.
No matter what the reason is for failed credit card payments, it still stings.
And if this aspect of your subscription membership site or SaaS business is left unchecked, it will have a crushing effect on your bottom line.
Even though most subscription businesses know that failed credit card payments eat into their profits, most of them don't know how much it actually costs. This is because they don't take into account the compound effect.
At Gravy, we're experts at calculating exactly how much failed credit card payments cost businesses. After we've had a chat with subscription business owners, they always have a look of surprise after they’ve had an ‘aha’ moment – that their business is losing much more money than originally thought.
If you want to find out exactly how much your business is losing because of failed credit card payments, book a discovery call with Gravy.
How Does Dunning Work?
There are different tactics that dunning software employs before and after card payments are due. Most of them deal with templated emails.
Dunning tactics before an account becomes past-due include:
- Card expirations emails. The premise here is that prevention is better than cure, so these emails remind your customers that their cards are about to expire and they need to take action. These emails can be automated to trigger at different points to contact the cardholder a certain number of days before expiration.
- Retries. This is a tactic that’s used after an account is past-due. Dunning software also sends emails to the customer at this stage. These emails include information about how much is owed, how long you will retry their cards and how they can update their payments.
Why Should You Consider a Dunning Alternative?
Because of the lack of viable replacements, dunning solutions have embedded their way into the psyche of subscription-based business owners as a must-have technology.
Despite subscription-based businesses making every effort to tailor their payment recovery software to encourage customers to update their payment details, it remains a fact that dunning solutions only recover around 15% of the total number of billing failures. That's quite a sad reality, isn't it?
Maybe one of the reasons is that your customers know they’re getting something that's automated. Think about it. It's human nature to put off until tomorrow what should be done today. When your customers see automated emails, they think, "We can leave this for another day."
Lack of Empathy
Another reason why the payment recovery rate with customer churn software, like dunning, is so abysmal at customer retention is because it’s very hard to show empathy with automation.
Empathy is an essential human trait and helps customers to feel respected, understood and heard.
In fact, an article published in the Harvard Business Review (HBR) found that an emotional connection matters even more than customer satisfaction.
Part of the research found that a company who employed an emotional connection-based strategy, including how it communicates with customers got the following results:
- Increased its customer base by 21% or 26%.
- Reduced customer churn from 37% to 33%.
- Grew the number of active customers by more than 50%.
The reason these results come down to the human and emotional connection is that, simply put, payment recovery and churn software can't care. They can't sympathize or empathize with your customer.
They also can't work with customers to find different payment methods or different payment structures to make their subscription more manageable.
Dunning solutions can't show empathy when your customer has a valid reason for their credit card failing.
Allowing this customer retention aspect your business to be completely taken over by automation is very high risk.
Another HBR study found, human touch can make all the difference between customer retention and customer churn.
Inability to Problem-Solve
Another thing is that churn or dunning software can't do is solve problems.
Your Dunning software can't pivot, change its mind, negotiate with customers to find out different ways to make their payments work. It can only be on the one track that you've instructed it to be on.
This means that, although you have automation, you need someone to constantly be looking at analytics and making tweaks and changes to get the most out of it. This can take up a lot of time.
You save time, guesswork and headache when you use Gravy's customer retention services.
An Effective Alternative to Dunning
The bottom line? Dunning isn’t all it’s cracked up to be. But, what's the alternative?
Gravy: The Proven and Viable Solution
Remember the pitiful 15% recovery rate from dunning emails? Here are just a few stories about payment recovery rates when using Gravy.
"Imagine having a 24/7 engagement team that contacts customers within hours of a failed payment, updates billing information and saves clients you worked hard to win. Gravy took my recovery rate from 33% to 79%." Amy Porterfield, Online Marketing Expert
Here's another one for you:
"Gravy means it when it says that everybody wins. They've invested in becoming a part of your internal team while delivering personalized and heartfelt services to your clients. Thanks to them, my failed payments recovery rate has grown to 68%." Nicole Walters, Business Coach
Want more of these stories? Click here to find out how Gravy has skyrocketed the recovery rates of different subscription-based businesses.
So, let's compare. Dunning software recovery rates of around 15% versus Gravy's recovery rates of 68%, 79% and even higher.
So, How Does Gravy Work?
Gravy is powered by people and amplified by technology. We've created efficient and effective engagement strategies, the best scripts and convergent technologies to emerge as one of the industry's leading customer retention solutions.
We assume customers who miss payments may not do this intentionally. But, they go on to ignore dunning emails because of email fatigue. It can also be hard to part with their hard-earned cash.
As you can see, using churn software means that there's a big risk of you losing customers. With more than 805,000 touch points, we found that adding a human touch to payment recovery works better than run-of-the-mill dunning emails.
But don't just take our word for it.
Again, have a look at the stories on our website.
We take a common-sense approach, which means that we engage failed payments quickly. And we know that putting a human face and a voice to your business shows that you care about your customer and you empathize with them to make them feel comfortable.
The results? Better communication, deeper brand engagement and a higher chance that payments will be reinstated.
We ensure that you're the first person that your customers hear from. This gives your business an attentive and professional look, which will always go down well with the customer.
Our services, as well as being successful, are also cost-effective because they only cost a fraction of the price of hiring a full-time team member to do this.
How Gravy Leaves Dunning in the Dust
- Full-time focus
For increased customer retention, we provide a full-time, human focus on payment recovery and customer retention, amplified by our technology. The best position you could be in is to have someone (or a team) who is focused solely on payment recovery and customer retention.
However, that's not feasible, especially if you’re a small business. So, even if you try to delegate this task to someone who already has a million and one things to do, this is not going to get the attention it deserves.
What we provide is a full-time focus for a fraction of the cost, so you can benefit from having someone who cares 24/7 about recovering your failed payments.
- A tried and proven communication process
Personalized follow-up is the magic bullet of recovering failed payments. One-on-one communication is key because you put a human voice (and face) to your organization.
A higher percentage of payments will be reinstated because an empathetic person is at the end of the communication. That’s where our full-time, U.S.-based Retention Specialists come in.
Communication from our specialists make your customers feel more comfortable, resulting in them feeling that they can be more open about the reasons for their payment failure. Action can then be taken and suggestions can be made about how payment can be reinstated.
- Recover more payments, quicker
Payment recovery should be measured just as you measure any other important business metrics, like marketing and sales. If you don't have an eagle-eyed focus on customer retention efforts in your business then, unfortunately, you may be leaving money on the table.
Our system has created a framework to gain payment recovery that saves around 51% of revenue within only 30 days.
- Easy set up
The best thing about Gravy is that it can be set up in just three quick and easy steps:
- Integrate your data and systems with Gravy
We work with all payment processors, product delivery systems and CRMs. Our implementation teams will sync your tech stack with our platform to ensure failed payments and customers are synced as soon as it happens.
- Say ‘hi’ to your virtual Retention Specialist
Your Retention Specialist has a focus on one thing, and one thing only: Recovering your failed payments and reengaging your customers while boosting your retention and customer lifetime value (LTV).
You will be introduced and partnered with your Retention Specialist who is full-time and also based in the U.S. This aspect helps you to keep payroll costs down as well as boosting your profits.
- Recovering failed payments begin
Enjoy the rewards of your subscription- and membership-based business with our new approach to customer retention. This is done while maintaining your brand image and providing a consistent service with a human element that outsmarts and outperforms dunning and other churn automation software.
Customer Retention Experience
When dealing with failed credit card payments, you really have to zero-in on the customer experience.
Being too quick to freeze accounts or resort to harsh collections-type tactics will ensure you will not retain your customers’ loyalty if or when you do get the payment back online. But, at the same time, leaving it too long will also mean that you won't recover your payments — or the customers you’ve worked so hard to earn.
With Gravy, you get to enjoy the rewards of running a subscription business because our team gives you vastly greater benefits than the dunning software you have been relying on.
Goodbye, customer churn. Hello, customer retention.
Your Retention Specialists, a human face, is on standby to retain your customers 24/7, with empathy and problem-solving, whose single aim is to recover your payments.
So you and your team can go back to doing what only you and your team want to do — and love doing.
Let’s get a free, simple discovery chat on the books for you to personally discover just how much we can outperform your dunning software and retain the customers and payments you have worked so hard to win.