From gym memberships to music streaming, subscriptions are ubiquitous in the modern digital economy
When they work well, subscriptions can build a strong relationship of trust between businesses and their customers. But even the slightest friction can cause issues when it comes to retaining and attracting customers, preventing businesses from reaching their full market potential.
The nature of the subscription model means that businesses that invest time and resources into developing a seamless e-payments process will be rewarded. But how many businesses know how to identify the issues that may inadvertently be harming their retention strategies?
Take re-billing, for example. What can merchants do when a customer’s payment fails (perhaps due to insufficient funds or a general ‘do not honor’ decline code)? In this situation, businesses can try to pursue what’s known as ‘error-specific handling’, with the aim of using available information to try to find a solution to the problem.
This process will consider the specific cause of failure and how this can be addressed in a targeted manner. For example, if there is an issue with insufficient funds, the system may wait a few days to retry or perhaps attempt a payment for a smaller amount
Communicating over payment issues
Businesses can also implement a more intelligent system for how they communicate with customers experiencing payment issues. Most of us already know that failed payments can lead to involuntary churn, as customers let their subscription slide by default. But what if businesses could engage with those customers to prevent this from happening?
By using webhooks, merchants provide users with additional guidance on why their payment may be failing. For example, if there are insufficient funds in their account. This will typically be in the immediate screen after the first payment has failed, giving customers a chance to retry their payment once their account has the necessary funds to complete the transaction.
Get automatic updates when details change
If businesses are looking to improve their payment processes, they may also want to consider an automated account updater service (otherwise known as card account updater or CAUs). These services will automatically refresh payment details when a customer receives a new credit card, ensuring that customers don’t encounter issues with their next payment.
Read More:Â SalesTechStar Interview with Monica Lewis, VP of Product Management at LinkedIn
The value of these systems to businesses is self-evident. Credit card providers like Visa and Mastercard have systems to provide merchants with updated information. This is particularly useful given that many customers may not even realize that their card details have changed – and thus may have no idea why their payment has been declined.
Investing in data analytics can also reduce churn. Businesses can utilize their own customer behavior data – including engagement metrics and typical payment patterns – to calculate their typical churn rates. Companies can then assess how particular retention strategies and campaigns are performing and adjust these accordingly.
Transparency can help reduce chargebacks
Many businesses are actively trying to reduce chargebacks (when customers dispute a transaction, potentially leading to lost revenue). The main strategy here should be to provide customers with clear and effective information throughout the payment process, thus avoiding the risk of chargebacks in the first place.
For example, merchants should ensure that customers receive clear and transparent billing notifications ahead of each renewal. This gives subscribers plenty of time to review their subscriptions and make an informed choice. It also reduces so-called ‘surprise’ charges, which can be a source of frustration for customers.
Businesses should also avoid the classic trap of thinking that customers who want to cancel can be ‘persuaded’ to keep their subscription active by inertia. Industry best practices have repeatedly shown that having a frictionless cancellation process will prevent the kind of frustration that might lead customers to request a chargeback from their card provider.
As a rule of thumb, it should always be easier to cancel a subscription via the correct channels – for example, going to your website and finding the cancellation button – than for a customer to have to call their bank to complain about an unauthorized charge. Businesses that get this wrong risk undermining their own retention strategy by alienating their customer base.
How can merchants spot chargebacks? One popular solution is to use chargeback alert systems like Ethoca, which offer real-time alerts to notify them of potential chargebacks before they happen. With this information at hand, subscription businesses can respond promptly and attempt to address any issues that may have otherwise led to a chargeback.
Automate parts of the dispute process
Smarter communication can also improve dispute resolution processes, alleviating potential frustrations and giving customers a justified feeling of control over the process. Automated dispute tools like Rapid Dispute Resolution Tools take care of the dispute process, utilizing intelligence and best practices to resolve issues before they escalate to chargeback status.
Not only does this help keep customers satisfied, but it also ensures that merchants protect their own status and reputation. As many businesses know, higher chargeback rates can lead to companies being penalized or blacklisted by card issuers and similar schemes.
In short, subscription providers should recognize that staying on top of their payment processes is no longer just part of doing business – it is, in itself, a core function. Those businesses that master these strategies and apply them to their payment infrastructure stand to gain a clear commercial advantage.
Read More:Â Maximizing Outreach Success: Strategies Informed by Out-of-Office Data
