How to Retain Customers and Earn Revenue for Your SaaS Business
Subscriptions are at the heart of every SaaS company model.
On the surface, it's an ideal model. A customer subscribes to your service and, each month, they pay to maintain their subscription. Simple, right?
Incorrect payment details can lead to one of the unspoken reasons behind customer losses in the SaaS industry--involuntary churn. It is when a user is churning without realizing it or against their will. Churn that is voluntary makes up 7.2% of churn in all sectors as well as 7.5 percent of churn within the SaaS sector.
Let's examine how you can put these processes into play in your own enterprise.
Why failed payments and involuntary customer churn goes in tandem
One of the factors that supports each of these aspects is providing your clients with a stellar user experience. If you've put the right processes in place, it is possible to keep your customers happy and keep generating revenue--at the at the same time.
Before diving too deeply into how to keep your revenue in the flow, it's important to explore what involuntary churn means. Picture a typical payment cycle that you've established for your customers:
- Sign up to your service
- The payment date is set for the 28th of that month
- The first charge of their card in their file is not successful.
- Your system then sends your client an email informing them that their purchase is not valid and that they will lose access to your product If they do not take immediate action.
- The customer doesn't act in the first attempt, and their next try to charge their card for payment also fails
- Following the third unsuccessful attempt to make payment, your system then suspends the subscription, and then move them back to the free version of the software or even cancels their account completely.
What this cycle does not reveal are the numerous causes that may be behind the failed payment collections.
These are the reasons that planning for involuntary churn is crucial to revenue recovery. The planning process can be diverse, such as:
- The process of setting up a set of "dunning" emails to create a cycle of payment reminders for your customers to update their payment card information or processing choices
- Check how your card's details are changed internal to the system. If a customer updates their information, is it being transferred to your payment system in a timely manner?
- Check that your payment processing is free of problems with your gateway and prevents fraudulent transactions.
Three steps that you can follow to collect the revenue you earned and reduce involuntary churn from your customers.
Three ways you can attempt to collect revenue
1. Give your customers a seamless process for collecting payment
We just entered into 2020 and we are living in an age when customers do not expect to receive payment automatically; they expect that you do.
If you're sending out invoices and asking customers to pay for subscriptions in person, not only does this increase the friction to the process, but it can cause payment delays. It is possible that invoices will be lost. while not on purpose, some customers might not pay for them, or inadvertently place their subscription at risk.
One of the easiest ways to prevent this is to provide your clients a seamless automatized experience for making their subscription payment. Your payment page should not simply provide your customer with a smooth experience while they are signing up for their subscription, but also make it effortless for them when they need to change their payment details.
Below are some methods to help your customers make their subscription payments smooth and seamless:
- Create a separate portal or page where customers can update their personal information: A customer should be able to update their details for payment at any time they require, not just if a payment does not go through. You should make sure this option is readily available to clients at all times.
- First, security: Every time that a client inputs the details of their credit card the information should be entered by entering them into a secure space. Making sure your customer's payment details are secure is essential to keeping them around. What person would want to work with a firm that does not have a secure payment system?
- Let them use it easily, even when they're using a mobile device: Your clients are very engaged individuals. Be sure that your payment page is responsive regardless of the kind of device it is that they're employing. If they can update their payment details no matter if they're in working or traveling to work, the more likely they are to do it.
- Make sure all is functioning as it should be: As great as technology is, we all are aware that there are times when it's not perfect. Be sure to check on your payments cycle as well as update page to be sure the pages are functioning as they ought to be. If not, it could be that your customers are trying to update their payment information--they simply haven't succeeded.
With a subscription service, you are able to collect the payment for subscriptions on autopilot. manages subscriptions using different payment gateways. It also accepts all payment options, currencies and languages.
2. Allow them to breathe if their first payment fails
The possibility of payment failure can occur. It's a natural part of the subscription game.
When a customer's credit card isn't working, allow them time to understand the reason for it. Thanks to technology such as card updaters coming onto the scene, card details are now more likely to get updated on file automatically. However, there are some circumstances where customers' card details won't be kept up to date which is why the dunning emails are a factor.
Now, a dunning email should not be used to harass customers about missing payment. Instead, it should serve to keep in touch with the customer to confirm that all is ok, and give them the option to update their payment details, like this dunning email by Hulu:
- Make sure your customers know why your product is valuable: Don't demand payment right off the bat. Instead, compose the email in a way to remind your clients the reason they chose to sign up to your service to begin with. In the Hulu example this email reminds the customer that they can continue watching their preferred shows if they decide to renew their subscription.
- Make it brief and sweet: Don't send a spam email that's as long as a novel. Keep it to a couple of paragraphs, and be sure that every one is geared towards a particular reason for it. It could be to remind the client of your product's value and then be followed up with a brief explanation of the payment that was not successful. Do not make the email solely about the payment that failed, but be clear that if the client doesn't take action this will revoke the subscription.
- Make a clear CTA: Like Hulu did in their email above. Instead of incorporating an "pay immediately" button, they've reminded the customer that it is easy to "reactivate" the subscription. Add a clear CTA for your customers, so that they understands exactly what to do in order to ensure their subscription is still active.
Finally, make the card changing process as easy as you can. The CTA should link directly to a payment update webpage that responds to whatever device the customer is browsing the dunning email on. The more simple it is for clients to make changes to their credit card information and update their card information, the more likely they are to make the change.
3. Always give your customers the chance to win.
Give your clients the possibility of knowing reasons for the bounce, and then work with them to offer up alternative options to their subscription.
For example, when their failure to pay, you shouldn't close their account or remove them from your customer database. Instead, call the person and ask how you can do to assist them.
Consider offering to:
- Keep their subscription active however, on a lesser cost that they can manage.
- Transfer them to a trial version of your product for the moment
- Shut down the account
In the case of SaaS, especially if you're selling expensive products it is important to not let your customers off as soon the first time their payment is rejected. It could be that they've experienced the financial cliff, and they can't afford to renew their subscription just right now. If this is the case, offer to move their subscription to a no-cost tier of your subscription or suspend them for a short period of time subscription until they're able to.
Naturally, ensuring that you treat your clients well when they are having issues with payment keeps them content. They'd like to know you are aware of the fluctuations and troughs associated with running the business. However, putting off their subscription instead of removing it, saves you having to put them through the process of re-onboarding after they have reactivated their subscription.
It's a win-win for you--and your customers.
Recovering failed payments is key to cutting involuntary churn
In case they fail, you need to set up the proper process for not just recovering your profits, but also keep your clients as well. In the event of a customer's payment fails, your first communication with them should not be to come back with revenue. The goal should be to follow up with your customers, ask them whether they're having any problems or questions, and attempt to move forward with them.
Your customers are the lifeblood of your business, and getting them back on track doesn't mean they're likely to leave. In the opposite direction, if you do the right thing, it could be a positive outcome--for both your clients and for your company.
