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Dunning Software with Product Analytics to Recover Failed Payments

Combining Dunning Software with Product Analytics to Recover 95% of Failed Payments

Customer Service 9 min read

As the SaaS market is estimated at $623.3 billion, you may think that running a SaaS business is a bed of roses. However, anyone who has been in this industry for long enough knows very well that involuntary churn is a big issue. 

Finding success in dunning campaigns still remains elusive to a huge number of SaaS companies out there. Therefore, the search for effective ways to recover failed payments needs to be among their top priorities. 

One of these methods is to use product analytics and thus help customers see the value they’re getting from the product. Some companies are great experts in this field, and we at LTVplus gladly reach out to them to get an insight into their processes.

To help you learn how to use product analytics with dunning software to fight customer churn, we consulted Phillipp Wolf. Philipp is the founder and CEO of Custify, a customer success software for SaaS companies. 

Take a look at his expert opinion which will give you a fresh perspective on reducing involuntary churn.

What are the current trends when it comes to failed payment recovery?

It is common knowledge that the SaaS industry faces a high level of customer churn. As a result, various trends have emerged around failed payment recovery. 

Specialized services for failed payment recovery

Nowadays, there are a number of specialized services that can help with recovered payments. You can install them on top of your payment gateways, and they can be great tools for recovering revenue.

Lack of focus on customer churn

The two main challenges for SaaS companies are lead generation and customer churn. While both of these are pressing issues, most companies focus on lead generation much more than on fixing their churn.

They have advanced tools and big teams that deal with customer acquisition, as well as plans on how to get someone to become a customer. However, they don’t put in nearly as much effort into keeping those customers satisfied.

And that’s where issues start to arise. For a SaaS company, the sales process doesn’t end when the customer subscribes to the service. Quite the opposite, this is when it only begins, as most SaaS companies need to make that same sale every month.

How Custify’s customers are solving the failed payment recovery problem in their businesses

What makes Custify different from pure payment gateway dunning strategies is that they put in the time and effort to really integrate into their customer’s ecosystems. They collect data from their payment gateway but also other systems they use, from their CRM to their ticketing system.

However, the most important information they have is the company’s product information, which they use to great effect. Since they’re so highly engaged, they have all the important statistics and product data. This allows them to go into a lot of detail when they discuss failed payments with customers.

Custify’s strategy

Most of Custify’s customers have a strategy in place where they show their churning customers the real value they received from the company’s product. They put emphasis on the value of the product and focus on the customer’s fear of missing out.

  • First, they make their customers realize why they need the software. They show them the value it has already provided and even more value it will provide in the future. 
  • After that, they ask them to fix the problem by updating their credit cards, for instance. If the customer isn’t interested in paying the fee, they simply offer to shut down their account, thus using the fear of missing out.

This tactic does wonders, as you clearly show that your goal is not just to take your customers’ money. Instead, you’re reminding customers why they should continue paying for your service.

Integrating product analytics with your dunning strategy

When you add in product usage data and focus on its value, you can clearly see how analytics and user statistics can help the company down the line.

In Custify, they use playbooks where their customers can set up automations that are activated with certain triggers. For instance, if a customer doesn’t pay their invoice and the need for dunning occurs, you can set up a sequence of actions to get in touch with customers.

You can do this in different ways:

  • by email
  • by SMS
  • making a phone call
  • via in-product messages

This is where the user statistics is really helpful because you have all the information about how often and in which ways the customer used the software. You can use that information to create a carefully worded message with the goal of recovering the payment.

This message can be completely automated. All you need to do is let the software fill out the correct information based on the data you’ve collected by using an email template.

The template has blank spaces that the software fills out with information such as the customer’s first name and how many times they’ve used your service recently.

Results of integrating product analytics with dunning software

Custify has shared with us some great examples where they’ve helped businesses solve their dunning challenges. For instance, one of their customers had serious dunning issues but wasn’t very knowledgeable in the IT department.

Low touch businesses such as pet shops, manufacturer services, or hairdressers, can’t solve their problems the same way as those which are more IT-related. They often don’t check their push notifications or emails every day because they don’t use those channels as much to run their business. 

Since email usually isn’t their primary channel of communication, they need to switch over to a different one, like telephone calls.

Reducing churn by 95% via phone calls

In this case study, Custify set off to prove that even low touch businesses can have a high ROI when they reach out to customers via telephone. As a matter of fact, they can reduce unwanted churn by as much as 95%. For clarification, a low touch business only charges around $30-40 per month for their product.

Many people think that calling customers for such a small amount of money isn’t worth it, but don’t make the same mistake. While it may seem pointless to do this with a single customer, when all of those failed payments add up, you’ll see that it’s worth more than just a phone call.

After all, these customers were happy with your product and they were using it until the moment you weren’t able to charge them anymore. As a result, they were forced to shut down their account.

When can’t you reduce churn?

There is always one small subset of customers who just can’t pay for your product anymore. They may have gone out of business or there may be another reason that you cannot influence. With those customers, you can’t use any dunning strategies because they basically disappear.

However, that is a very small percentage of your failed payments. The rest probably occurs because a customer doesn’t have enough funds on their credit card or just forgets to update their card. In those cases, you can reduce dunning to only 5% with the right methods.

What channels should you use?

  1. The first channel of communication you can use is email, as it’s the most common and also the cheapest channel to use. 
  2. The next channel is SMS if you have the customer’s phone number. For both of these channels, you can use the same tactic of reminding the customer of your product’s value.
  3. If neither of those channels works, make a personal call. In some cases, the customer might not even have seen the email or text message. Some people also prefer to solve these issues with an agent. 

Even though higher-touch businesses call more often because they earn a higher profit, this channel can still be used by low-touch businesses.

The takeaway here is to simply start your communication via email and other cheaper channels and then slowly move to phone calls.

Pro tip: Remember that the agent who deals with the call must know how to talk to customers in a friendly manner and guide them through the process of resolving the issue. They don’t need to be your most experienced sales manager, just a person who is willing to solve the problem.

Finally, keep in mind that there is no one right channel. You need to experiment with different channels and messages to find what works best. However, always make sure to demonstrate the value of your product.

What can other SaaS companies learn from this approach and where should they start with dunning strategy?

  • The key takeaway from this strategy is that you need to observe it like a funnel. Start with email, SMS, and in-app messaging as the cheapest channels, and only then transition to phone calls.
  • Another important thing to remember is that, while all of those people are your customers, they’re still individuals who respond to different methods and channels of communication.
    For example, when customers realize there is a problem, some of them will be willing to solve it right away. Others will admit to not paying because they just don’t see the value of the product anymore. When you get this kind of feedback, you can try some of the mentioned tactics to get the customer interested in the product again.
  • Most of the time, customers don’t see the value just because they can’t interpret it correctly. In those cases, try to pique their interest by offering them a special discount and product training. When you’re talking to these customers on the phone, you have a much higher chance of convincing them to stay.
  • Keep in mind that your retention specialists are presented with a unique opportunity to solicit feedback from churned customers regardless of the method you use.
  • As for those companies that don’t have any type of strategy for recovering failed payments, the best advice is to get to the basics. For instance, try to come up with basic email templates you can alter to fit your business.
  • Another tactic you can try out is to use phone calls right away and do some testing on a sample of customers. For instance, call 50 customers, see how much time it takes, and how many of them you can recover. Then do ROI calculations to see if that tactic pays off.

Whatever happens, don’t give up on your customers or block their accounts if their payments fail. Instead, for the best results, take the time to learn why those payments failed and make sure to use product analytics in combination with your dunning software.

Ready to recover those failed payments?

As a seasoned SaaS business owner, you know that involuntary churn is inevitable. However, the choice is ultimately yours – you will either do nothing about it or work on getting the failed payments back. 

It’s not enough to just use a dunning software. You also need to keep track of product analytics so you know exactly how to approach your customers and which tactics to use in your dunning campaign.

You can use Phillipp’s advice to start recovering those failed payments yourself. On the other hand, if you would rather rely on experts, schedule a call with our retention specialists. Our team will be happy to help with recovering failed payments for your business.

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Book a consultation with us and we’ll get you set up.

Digital Marketing Manager @LTVplus Actively participating in the digital marketing world for more than 5 years. Currently making sure that our website content is up-to-date and our blog is filled with actionable tips and advice for online retail businesses. Very passionate about dogs, topics on spirituality and Unicorns.

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