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Jan 11, 2023
Every company offering a subscription model experiences customer churn — whether you sell content, physical goods, or SaaS, B2B or B2C. Let’s break down the primary scenarios in which companies lose subscribers into a few basic buckets… and see what, if anything, you can do about it:
First is the category that is, to put it bluntly, “on you”; you may have caused the problem, but it’s almost always too late to fix it yourself for this individual: A subscriber wakes up one day and decides that your product simply isn’t worth their money. Perhaps their needs have changed, they haven’t been using it, or they conclude after a trial period that you aren’t consistently delivering quality. Hopefully, it isn’t only a periodic bad customer-provider match, and not an inherent, broader problem with your offering. Regardless, that customer is gone.
The second cause is financial and is also mostly out of your control. Especially in these times of economic pressure, people cut back. For an independent contractor, for example, SaaS billing software is critical, but 14 subscriptions to industry content may not be. You can offer discounts and incentives within the cancel flow, but whereas in our first example, the product wasn’t doing the job, here, a customer’s personal finances leave you fewer options.
These two examples are what we call voluntary churn. The customer makes an active decision, based on classic value-for-money considerations. Both offer some opportunity to save the relationship. You’ll lose most of them regardless of what you do, but you might have a shot if you’re creative and proactive.
But there’s another type of churn, and this one traditionally offers you virtually no control: The tactical, technical, systematic process of using a credit card to pay for the subscription. More specifically, we’re talking about the customers who online subscription companies lose when their credit cards are declined. A recent Profitwell survey reports that credit card declines account for 20-40% of B2B customer churn, so it’s a phenomenon you can’t ignore.
Before we continue, let’s be completely clear on why this scenario is particularly painful: A third party — namely the credit card issuer of the customer’s card who you don’t interact with directly — has the ability (and the right) to simply ruin your relationship with a customer by making them feel frustrated, confused, and yes, insulted. Worst of all, these customers often can’t even distinguish between the players — they don’t know where that rejection is coming from, and as a result, often blame you, the merchant.
Let’s take a step back to review the process. You spend money and manpower on branding, advertising, website user experience, customer support, and many other funnel-filling tactics. Having acquired a customer, you ask for their credit card information for a one-time or recurring payment. If their card is rejected — perhaps it’s expired or they are temporarily short of funds — they never even become a customer.
But even worse is when all your efforts earned you a dedicated customer who has been with you for some time and is enjoying your product. That same rejection can trigger the dreaded churn phenomenon – even though it’s an existing customer who you can trust and for whom you already have a reliable card on file.
The bank or card issuer has a lot less skin in the game than you do, and would rather protect themselves with a conservative approach when there’s a hint that there’s some risk that they won’t see the funds.
To reduce credit card declines, you actually have a card to play: The bank is worried about carrying the risk…alone. Yes, they have their own limited data sets and recognize that many transactions are, in fact, valid. But it’s just too expensive to keep “tossing the dice” alone.
How can you help encourage them to accept that risk? Simple: offer to share it.
Kipp lets the card issuer send a request to the merchant just before declining a transaction. That request includes an “ask” amount they would require as an incentivizing premium — usually a few percentage points of the total cost. On the merchant side, a parallel automatic, pre-configured set of algorithmic rules responds with a “bid”; it lets Kipp know how much you are willing to pay to authorize that transaction. If the numbers match, the transaction goes ahead, and everyone wins – the card issuer earns the commissions, the merchant keeps the customer (often with the ensuing recurring revenue), and of course, the customer has a fluid, successful experience.
Give our team a call to discuss your specific needs, and we’ll get going to help you save those subscriptions!