Payment Failure Now The #1 Cause Of Business Churn

Keeping customers happy, reducing churn, and stopping failed payments - how legendary companies make money and navigate the waters of our time....
Payment Failure Now The #1 Cause Of Business Churn
Written by Brian Wallace
  • Supplier churn is more prevalent than ever, and it is costing big businesses much more than customers.

    Researchers estimate that the cost of customer churn has risen to more than $136 billion. This number is expected to rise due to a higher volume of subscription based business models in the market. Subscription based models with monthly opt-in services are projected to be hit hardest by involuntary renewal churn, with over one third of consumers relying on auto-renewal programs.

    Consumer churn may be attributed to many factors, but research suggests that payment failure is by far the highest contributor to turnover. Payment failure may be attributed to:

    • Insufficient funds: 53%
    • Credit card limits: 42%
    • Credit card changes: 40%

    Business subscription revenue often enters from the top of the payment funnel, accounting for more than 62% of business profits. However, auto renewal programs in subscription plans drive churn costs up and lose more than 47% of retained customers.

    Failed payments and business churn do more than lower the bottom line. In a research study done by Forrester Consulting, failed payment structures have the ability to decimate business models and profit margins by a significant degree. Nearly half of all businesses expect to lose profit from chargeback rates in their forecasted yearly revenue. The cost of repairing failed payments is just as costly as discovering them, with customer service interactions significantly raising operating costs for at least 43% of businesses.

    The true cost of failed payments is more than dollar signs. One in every three customers will end their relationship with a business after their first bad experience. These customers often take to social media or digital review platforms to vent their personal experiences, which further impact brand sales and bottom lines. Every failed payment may generate a higher risk of customer loss and lower retention.

    In order to combat consumer churn in subscription based businesses, the management of failed payments should be monitored. Done correctly, the avoidance payment failure negates the negative effects of business churn, consumer turnover, and negative reviews.

    Retaining previous customers costs up to five times less than scouting new customers, and significantly lowers expenses related to business churn. The best way to retain customers according to industry research is to maintain all of the following factors:

    • Offer multichannel customer service mediums. These include call centers, emails, text messages, and related systems.
    • Reduce the number of card declines on your roster. The installation of basic software may lower payment failures to 0.5%, which is a 70% reduction in involuntary churn.
    • Only 15% of customers will reply to emails asking for updated payment information. To mitigate this, utilize software such as automated card updaters or retry logic systems to vet supplied payment information behind consumer data. This process increases consumer satisfaction while lowering costs associated with mass communication.

    The goal of every modern business should be to lower business churn in payment failure by harnessing current technology and solid business practices.

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