Stop losing subscribers: the proven revenue recovery strategy that turns churn into retention

There’s a massive revenue issue affecting subscription businesses today: involuntary churn.

Ever wondered how many of your subscription customers who leave, didn’t really mean to? The number is staggering: over 53% of churn is involuntary.

That means over half of subscription cancellations occur without your customer’s knowledge, causing your business to lose loyal subscribers and revenue.

The good news is that with the right operational strategy, failed payments don’t have to mean farewell to customers.

Top subscription companies are already reducing churn and increasing customer retention by implementing grace periods and strategic partnerships with debt collection agencies. Read on to learn how they’re doing it.

The domino effect of subscription payment failures

Any number of reasons could result in a failed subscription payment — from temporary problems with a payment processor, to expired cards. When this happens, businesses go into damage control, which often looks like this:

1. A customer subscribes
2. Their payment fails
3. Dunning communications begin
4. Payment is retried internally using other tactics
5. Last payment attempt fails
6. Subscription is cancelled

More often than not, the customer is unaware that their subscription is cancelled. This passive customer churn has a negative knock-on effect.

For many, subscriptions are an essential part of everyday life. If a food delivery doesn’t arrive or access to CRM software is cut off, this disruption can cause frustration and stress. Such an inconvenience can erode trust in your business.

While you may be able to save the customer relationship, it takes valuable internal resources to contact customers, resolve missed payments and maintain a positive brand experience.

At worst, the inconvenience of resubscribing can turn the customer off. This can cause a chain reaction of negative reviews or a rise in complaints that deters potential subscribers and harms your brand reputation.

When it costs up to five times more to acquire a new customer than to retain current subscribers, is overlooking involuntary churn worth the risk? Leaving it to chance could ultimately impact customer acquisition and retention rates, not to mention your bottom line.

Fortunately, there’s a different way of doing things. Leave the “no payment, no fulfilment” approach behind and start recovering more missed payments by taking a different approach.

How to reduce involuntary churn with a grace period and partnerships

The hallmark of the best subscription services is a seamless customer experience. You’ve mapped out and invested in every milestone in the customer journey, to increase satisfaction and build long-term loyalty.

But what sets market leaders apart is their focus on maintaining subscriber relationships to increase retention. This can be achieved with a grace period and teaming up with a collections partner.

Here’s what this could look like for your subscription business:

1. A customer subscribes
2. Their payment fails
3. Dunning communications are sent to the customer
4. Payment is retried internally using other tactics
5. Payment retry fails
6. Customer continues to receive their subscription without interruptions
7. Last payment attempt fails
8. Customer is referred to a debt collection partner to recover missed payment and get their account back on track

Cancelling a subscription automatically means you’ve lost your customer. This approach removes friction, preserves customer trust and goes a long way in maintaining the best brand experience. Service continuity and ongoing support from a debt collection partner means that the customer remains engaged, so you have a higher likelihood of retention — once their payments get back on track.

The benefits of a grace period

Continuing to send products after payment failure may sound counterproductive. After all, there’s a cost to sending the product and the risk of accumulating missed payments. Is it a risk worth taking?

The short answer is yes. This strategy adds a human touch and maintains a positive customer experience. It’s a value-add that market leaders have adopted to put their customer’s minds at ease when they’ve come to rely on their weekly delivery.

Ashley Hard, Growth Manager at InDebted, explains how taking care of your customer first can be the difference between losing and keeping a subscriber.

Recover more revenue with a debt collection partner

Missed payments are an inevitable part of doing business, but they don’t always have to result in revenue loss. When you’ve exhausted all avenues, referring overdue accounts to a debt collection partner can be the strategic move you need to reclaim your lost revenue.

This operational model isn’t new — but only the most savvy subscription businesses are currently harnessing its potential. In fact, at InDebted, we’re already partnering with several industry-leading subscription businesses that use this strategy to recover millions in revenue that they would have otherwise written off.

Another appeal of this approach lies in the fact that many debt collection partners (us included) work on a commission model. There’s no financial risk to you: you only pay when we recover your accounts. This means our success relies on yours, making it a win-win partnership that scales alongside you.

We know it’s not all about profits either. You want to ensure your subscriber’s collections experience is positive rather than causing stress or frustration. That’s where finding the right recoveries partner that understands your subscribers and retention efforts comes in.

Collections are an extension of your brand experience. Your partner should support customers in getting back on track in a way that works for them. Ultimately, this protects your brand reputation while extending customer lifetime value.

This could look like:

• Personalising customer communication with an omnichannel experience across SMS, email and live chat, among other digital and voice channels
• Offering customers the freedom to self-serve so they can resolve their debt when it’s convenient for them
• Giving customers the option to talk to a Customer Experience team when they need extra support.

The right debt collection partner will give your customers the same level of attention and care as your own teams would. They alleviate the internal pressure to recover missed payments, with efficient recovery strategies built around retaining happy subscribers – and recovering lost revenue. Referring them to a debt collection agency after dunning focuses on engaging customers before they churn to turn a loss into long-term gain.

Could your subscription business benefit from partnering with a debt collection agency?

Read our next post, The revenue impact of failed subscription payments — and how to recover it, to discover the hidden costs subscription businesses are suffering from, and how a collections partner can help.