SaaS companies depend on subscription renewals to keep their businesses going. After all, that’s the whole point of a recurring revenue model.
So, anything that threatens the heartbeat of a SaaS company's survival must be tackled seriously. When it comes to failed payments and customer churn, there's good and bad news.
The good news:
Issues normally come down to simple problems with customer credit cards and not with annoyed customers. This is especially the case if your onboarding has been on-point.
Now, for the not-so-good news:
Irrespective of the reason, failed payments have a massive, negative impact on a SaaS company's bottom line.
Here are some ways your SaaS business can avoid failed payments, which leads to a boost in customer retention.
To make the right decisions about avoiding failed payments in your SaaS business, you must be on top of the stats that show what’s really happening with your business.
Using run-of-the-mill reporting from payment recovery software may not give you the full picture.
You'll only be able to avoid failed payments when you know exactly what's going on and have a bird's eye view of why, how and when payments are likely to fail.
Get up to speed with the different stages of the payment cycle to answer the following questions:
On the face of it, it looks like your reporting software will tell you all you need to know, but that's rarely the case. Unfortunately, it's not easy to make sense of payment failure stats.
At Gravy, we’re experts in analyzing customer churn caused by failed payments. We get ‘under the hood’ of your failed payments to find out what's actually going on.
And time and time again, SaaS and other subscription-based business owners are taken aback by the fact that they’re losing much more revenue than they originally thought.
If you want to discover the true cost of failed payments, request a pricing guide to learn more.
The number of reasons for customer churn is as long as a piece of string, but it's worth spending dedicated time to question all aspects of your SaaS business to ensure that you avoid failed payments.
Use payment recovery software, customer service stats, reports from your CRM and other relevant systems to answer to the following questions:
Answering these questions will give you more in-depth knowledge of your failed payments and customer churn. You should have a plan for every eventuality, so you don't get caught off guard.
We've already shown you why Dunning emails don't work. Now, it appears that SaaS businesses have the opportunity to do away with pre-Dunning emails as well.
Although these seem like the bread and butter of getting customers to update their expired cards, all those emails sent at different intervals (three days, 10 days or 15 days) before the card expires, just seems like too much.
It feels like a bombardment of emails and also requires too much effort for customers to update their credit card details themselves.
But, at last, we have an alternative to pre-Dunning emails, called card updater. Card updater gives you the freedom to automatically check for changes in your subscriber's card and update them.
With the card updater you have access to:
This gives you the satisfaction of knowing that your subscribers' payment details are up to date.
The additional benefits of using the card updater are huge for SaaS businesses include:
Quite a few payment platforms, such as Fattmerchant, already offer this service. And it’s likely that this service will be commonplace in the near future.
If you don’t have access to card updater and subscribers need to update their cards themselves, the less work you give them, the better.
Make updating billing information as quick and easy as possible to increase customer retention. Your card update page should be so easy that even a sixth-grader should be able to use it. Remove any barriers that will make your customers feel like there’s too much to do and push it to the back of their to-do list.
The point is that, although people may love your service, they may feel they have better ways of spending their time than updating information.
If your SaaS company provides services for B2B, you could meet someone who is resistant to your product or service. Therefore, make every effort to remove as much risk as possible and make it as simple as ABC to update cards.
Use the following to ensure that your card update page is easy to navigate:
There are different retry settings to choose from depending on the needs of your SaaS business. Some payment processors retry a customer's card even after it's been marked as cancelled or unpaid. Other payment processors won't automatically retry the payment after it's been marked unpaid.
This could be a disaster in terms of customer retention because, if your customer got around to updating their payment details late, your payment processor won't automatically try to take the payment again.
This means that, although your SaaS customer wants to be retained, the reactivation settings on your payment processor are putting a big wedge between your eager customer getting your products or services and you getting paid.
Reducing and avoiding failed payments in SaaS businesses isn't a one-time deal. Instead, you have to continue to monitor the right metrics and systems to find out what’s happening with customer retention month after month.
Keep an eye out for issues like:
Have someone dedicated to keeping an eye on failed payments and develop a churn strategy to deal with it.
Lastly, what's your plan of action to recover failed payments if everything else is unsuccessful and a payment for your SaaS subscription fails?
This is where Gravy comes in.
At the time of writing, we've recovered more than $20 million in failed revenue for SaaS and other subscription-based businesses.
We go above and beyond dunning to provide a human approach that uses the best engagement strategies and conversion technologies to recover payments and customers for your business.
Let’s get a free, simple discovery chat on the books for you to personally discover just how much we can outperform your current customer retention solution and failed payment solution to retain the customers and payments you have worked so hard to earn.