How to Reduce Involuntary Churn

In any subscription business, there is inevitably churn - subscribers who end their contract and move on. There is, however, a difference between those who choose to end their relationship (voluntary churn) from those who stumble into it (involuntary churn). The involuntary churn demographic generally slip out of the merchant’s grasp for maddeningly simple reasons - often a problem with payment, like an expired card, an exceeded card maximum, or hard declines following fraud attempts on a card that the customer may not even know about yet.

Why Involuntary Churn is a Silent Business Killer

Subscribers who opt to leave their subscription can be won back with promotional offers, higher engagement, or other sales techniques (assuming their business is valuable enough to rescue). Involuntary churns, however, having not made an active decision to leave, can be particularly hard to recover because, often through no active fault of their own, they can feel as though they have been thrown out of the service.

Even worse, involuntary churns can play havoc with the fundamental models that make subscription offerings work. Given that credit cards generally have a three year lifespan between renewals, fully one third of all subscribers may need to update their details each year - and failing to do so can result in failed payments, and, if the correct processes aren’t in place on the merchant’s side, canceled subscriptions. And in a business environment increasingly dominated by credit card-paid subscriptions, the regularity with which corporate cards accidentally exceed their limits is increasing, once again driving the possibility of a failed payment.

Getting Ahead of Involuntary Churn

Fortunately, many of the direct causes of involuntary churn can be predicted and prevented. Three of the most prevalent - and most easily prevented - reasons for involuntary churn are

• Expired credit card 
• Soft decline for exceeding credit card limit
• Processor decline to incorrectly-coded billing (i.e. the charge is not properly submitted as a subscription payment)

With a well-executed payment automation system, merchants can offset these risks by:

• Contracting with a service that effectively updates credit card numbers, also known as updater services. For those who prefer not to sign up for such services, simply letting customers know in advance of their impending expiration can help: the merchant should have stored the expiration date, and can fairly easily establish an email sequence to encourage the customer to update their information.
• Creating a dynamic payment recovery process - dynamic response handling, performance-based routing, and optimized attempt schedules can lower overall costs and retain more subscribers, i.e. recover more revenue. Using a pre-built solution can automate recovery of failed payments, often the main source of involuntary churn. Solutions like Butter Payments, pre-built requiring no developer time, can deliver 5%+ ARR growth and can recover more payments faster. How? Leveraging machine learning they analyze all the variables for each payment—GEO, payment processor, decline code, etc. putting an end to involuntary churn.
• Always ensure that subscription charges are properly coded when presented to the processing environment. Although it is perfectly possible to submit one-off transactions of the same amount on a regular basis, such an approach will eventually trip a failsafe on some system that will decline on suspicion that this is an unintended charge.

Customer Experience Helps Involuntary Churn (Really!)

While it is arguable that the customer is to blame for involuntary churn as often as not (it’s their credit card that is failing, after all), the reality is that it is generally the customer who feels the pain when their subscription is canceled - and therefore the customer who feels somehow wronged. This means that the immediate negative of an involuntary churn (loss of revenue) can quickly compound into the negative of an unhappy customer who will share their frustration with other, potential, customers.

Customer experience, therefore, is key to not only recapturing potentially lost revenue, but also to preserving positive customer satisfaction. Subscription systems should be designed to give involuntary churns a real opportunity to solve their payment issues prior to jeopardizing the continuity of the subscription. Examples include

• Grace periods: when a payment fails, rather than shutting down a subscription, place the account into a grace period where an email sequence alerts the administrator of payment challenges, and, where users login to a service, a banner also lets them know they need to fix things.
• Subscription pauses, not cancellations: when a payment fails and all grace periods are used up, consider pausing subscriptions rather than canceling them, so that the customer can come back to find all the hard work they’ve put into the system can be reacquired.
• In-app reminders: don’t rely on email for your messages, whether in advance of a credit card expiring or in response to a failed payment. Instead, ensure that anything being communicated via email is also reflected in-app. Also consider using SMS and in-app messaging options before actually closing an account.

Control of Payments = Controlling Involuntary Churn

Whichever tactics a merchant intends to deploy to prevent and remediate involuntary churn owing to payment processing failures, it’s vital to ensure strong control over the payment process. This means having access to things like

• Expiration dates, so that messages can be sent to the customer before the card ceases to function.
• Payment automation and decisioning, so that soft declines can be captured and sent into appropriate follow-up processes that maximize the chances of success
• Multiple payment processors to ensure that payment failures are legitimate, and not merely a product of a single processor rejecting a user’s card

Choosing a partner like Basis theory can help merchants outsource card data management and reduce involuntary churn. Collect card data, send it to processors or partners, and store it as if it's in your own database while satisfying up to 95% of the compliance requirements that come with PCI.