How to Keep Customers and Recover Profits for Your SaaS Business
Subscriptions are vital to any SaaS company model.
It appears to be a perfect model. A customer subscribes to your service, and each month, they pay to maintain their subscription. Simple, right?
Incorrect payment details can lead to one of the unspoken reasons behind customer losses in the SaaS industry--involuntary churn. This is when a customer does not realize that they are doing it, or against their wishes. Churn that is voluntary makes up 7.2% of total churn across all industries as well as 7.5 percent of all churn in the SaaS sector.
Let's take a look at ways to put these techniques into your enterprise.
What causes failed payments? Involuntary customer churn goes hand in hand
And one aspect that underpins each of these aspects is providing your customers with a stellar user experience. If you have the right procedures in place, you can keep your customers happy and keep generating revenue--at the at the same time.
Before we go too deep in the process of keeping your revenues flowing, it's essential to examine what involuntary churn is. Imagine a payment process you've set up for your customers:
- You sign them up to receive your product
- They are scheduled to pay on the 28th of this month.
- The first charge of their card in their file is not successful.
- The system will then send your customer an email informing the customer that their payment was not successful and they could lose access to your products if they don't take action
- The customer doesn't act, and the next attempt at charging their card for the payment is also unsuccessful.
- Following the third unsuccessful attempt to take payment, the system suspends the subscription, and then return them to a freemium version of the software or cancels their account altogether
But what this report does not reveal are the numerous reasons that could be causing the failed payment collections.
It's because of these reasons why planning for involuntary churn is vital to ensuring revenue recovery. It can be done in a variety of ways like:
- Set up a sequence of "dunning" emails, which will send out a series of payment reminders for your customers to change their card details/payment processing choices
- Look at how card details change within the internal system. If your customer changes their details, is it being transferred to your payment system properly?
- Make sure your payment processing is secure and free of problems with your gateway and prevents fraudulent transactions.
There are three steps you can use to increase profits and prevent involuntary churn from your customers.
Three ways you can attempt to recover revenue payments
1. Make sure your customers have a seamless process for collecting payment
Just entered 2020 and are now living in an age when customers aren't hoping you will collect the payment on a regular basis; they want you to.
If you're still sending out invoices and asking customers to pay for subscriptions by hand This doesn't just increase the friction to the process, but it can cause payments to be delayed. Invoices get lost, and although not intentionally, some customers might forget to pay them or inadvertently place their subscription at risk.
The easiest way to avoid this is to provide your customers an effortless, automatized experience for paying their subscription. The payment page you create should not simply provide your customer with a seamless experience when they are signing up for their subscription, but make it easy for them whenever they want to update the details of their payments.
Here are a few ways you can help your customers make their subscription payments a seamless experience:
- Set up a specific portal or webpage that allows customers to update their details: A customer should be able to update their payment details anytime they want, not only if the payment is not successful. Make sure this option is available for your clients at all times.
- First, security: When a customer inputs their payment details they should do using a secure channel. Making sure that your customers' card details secure is a crucial part of maintaining them. What person would want to work with a business that doesn't use a secured payment system?
- Make it easy--even when they're using a mobile device: Customers are active users. Make sure your payment portal/page is responsive no matter what type of device they're using. If they're able modify their details for payment, whether they're in the office or commuting and the greater chance they will do so.
- Make sure everything is working as it should be: As great as technology can be, we are aware that there are times when it fails. Be sure to check on your payment cycles as well as update page to be sure that they're functioning as they should be. In the event of a glitch, you may find clients have tried to update their payment information--they simply haven't succeeded.
With a subscription service, you are able to collect subscription payments on autopilot. Manages subscriptions with multiple payment gateways and accepts all payment options, currencies as well as languages.
2. Allow them to breathe if their first payment fails
The possibility of payment failure can occur. It's aspect of subscription games.
If a card of a client fails, give them some time to understand the reason for it. Thanks to technology such as card updaters coming onto the scene, details of cards are now more likely to be updated in a timely manner. There are however circumstances where customers' card information won't be up to date which is why the dunning emails are a factor.
Now, a dunning email should not be used to harass your customer about a missed payment. Instead, it can be used to check in with the client to ensure that everything is in order, and offer them the opportunity to edit the information on their payments, like this dunning email by Hulu:
- Remind your customers why your product is worth it: Don't demand payment immediately. Instead, compose your email in a manner which reminds customers of what they paid for your product to begin with. In the Hulu instance above, the dunning email reminds the customer that they can watch their favourite shows if they choose to renew the subscription.
- Be brief and simple: Don't send a lengthy email in the same way as a novel. Limit it to only a few paragraphs and be sure that every one has a purpose. One might be to remind the client about the value of your service and then be followed up by a short explanation about the paid-for transaction that failed. Do not make the email solely about the payment that failed however, make it clear that if the customer doesn't take action the issue will affect their membership.
- Provide a clear CTA: Similar to what Hulu did in the email mentioned above. Instead of incorporating a "pay now" button, they've reminded the customer that it is easy to "reactivate" their account. Add a clear CTA for your customers, so that they understands exactly what to do to ensure their subscription is still active.
Also, try to make the update process as smooth as you can. The CTA will direct customers to a payment update page that can be responsive to any device your customer is reading the dunning email from. The simpler it is for your clients to change their details on their card and update their card information, the more likely they are to complete the process.
3. Always give your customers the chance to win.
Be sure to give your clients benefit of the doubt about the reason why they have had their payments bounced and work in partnership with them to suggest alternative options to their subscription.
In the event that a payments fail, don't immediately cancel their account and eliminate them from your database. Instead, call them to ask what you can do to help.
Consider offering to:
- Make sure their subscription is active, but on a lower level that they are able to afford.
- Move them to a freemium version of the product the moment
- Stop their account
If you're in the business of SaaS particularly if you're selling an expensive product it is important to not let the customers as quickly as their first payment bounces. Maybe they've hit the financial cliff, and they can't afford to pay for their subscription right now. If so you can offer to transfer them to a free-tier of your product or suspend them for a short period of time subscription until they're able to.
Naturally, ensuring that you treat your clients well when they are having issues with payment keeps them content. They would like to know you understand the peaks and valleys that come with running an enterprise. By putting their account on hold, instead of removing it is a better option than needing to go through the onboarding process again once they reactivate their subscription.
It's a win-win for you--and your customers.
The process of recovering failed payments is the key to cutting involuntary churn
If they don't work, you need to set up the proper procedure for not just recovering your revenue but to keep your customers as well. If a customer's payment fails, your first communication with them should not be to come back with revenue. Your focus should be to check in with your customers, inquire whether they're experiencing any issues or concerns, and try to resolve the issue in a coordinated manner.
Customers are the heartbeat of your company, and getting them back on track doesn't mean you're going to lose them. However, if you do it right, it can be a positive outcome--for both your clients and for your company.
