What is it?

An email that goes out to the customer when a payment method is about to expire asking them to update soon or else (the closer the expiry, the stronger the language).

How easy is it to implement?

It depends on how you would like to use them.

If you would like to send a common email out to all the customers who are using cards for example (whenever expiry is around the corner), it's not all that difficult to do.

If you would like to use this tactic only with customers who have a history of delayed payments, on the other hand, that means monitoring a subset of expiry dates and writing custom emails. A little harder to get off the ground.

What are the pros?

• Get in front of customers before payment method expiry.
• Get the renewal conversation started early.

What are the cons?

• These emails can feel spammy and aggressive.
• They are quite intrusive. There are less intrusive tactics available (see: card/account updaters and in-app notifications)

All things considered?

Use pre-dunning emails only if you don't have other systems in place to catch credit card updates or ask customers to update their information. They also make sense if you want to specifically talk to certain customers when their payment method is about to expire.

Are there other tactics on the list that complement this one?

Your pre-dunning emails should (ideally) contain a link to a card update page where your customers can update card information. Consider optimizing this page to make sure they don't leave without doing so.

What is it?

A non-intrusive notification bubble inside your app or website that informs customers that their payment information is about to expire and that they should make an update as soon as possible.

How easy is it to implement?

Extremely, with tools like Intercom.

What are the pros?

• Get in front of customers before payment method expiry
• Non-intrusive

What are the cons?

You might miss out on the segment of your customers that don't use your app or website very often. Customers who use your service via API, for example.

All things considered?

Implement! Although, note that you should use these notifications as an alternative to the pre-dunning email rather than a companion - an update notification can make your pre-dunning email sound all the more aggressive.

Are there other tactics on the list that complement this one?

Yes, card/account updaters (which automatically update card information with zero intervention from customers required) go well with both in-app notifications and pre-dunning emails making them a great tactic irrespective of how you're planning to update expiring cards.

What is it?

Payment gateways like Stripe and Braintree have tied up with card networks like Visa and MasterCard to automatically update the cards in your system without customer intervention.

How easy is it to implement?

Extremely (if you're using Stripe or Braintree)

What are the pros?

• Automatic, with close to no effort required from you or your team
• Creates a frictionless renewal experience even if a card is set to expire. (wow)

What are the cons?

A few cards can slip through the cracks - international cards, prepaid cards, and cards belonging to unsupported card networks are not updated.

All things considered?

100% implement this if you can.

Are there other tactics on the list that complement this one?

This is a tricky one, because you want to catch the three in ten cards that could possibly fall through the cracks, but you don't want to send out emails or otherwise disturb the customer with cards that have already been updated. In-app notifications are the way to go - they're non-intrusive and can be targeted to reach the customers you want.

What is it?

If you're getting cards updated without customer intervention make sure that you display up-to-date numbers (the last four digits commonly appear in more than one place on a payment form, especially if it's pre-filled) in your website or customer portal. You don't want your customer to believe they have to update their card information when an update isn't required.

How easy is it to implement?

Easy, it's just a question of pushing information from your card/account updater to your website.

What is it?

If you're linking your customers to a page where they'll be able to update their card information, make sure the page is optimized so they don't leave without finishing.

How easy is it to implement?

Easy. Here's Churn Buster's guide to doing it.

Are there other tactics on the list that complement this one?

If you're sending out pre-dunning emails then they should (ideally) contain a link to a page like this.

What is it?

Merchant Category Codes or MCCs are four digit codes assigned to a business when it begins to accept online payments. They are good ways for payment processing companies and banks to identify your business and the category it belongs to. This matters for two reasons:

• There are transaction limits assigned to certain categories of business (especially high-risk ones).
• Issuing banks have been known to reject transactions because the description on file against your MCC is vastly different from descriptions of your company (that the bank puts together by itself).

It's worth it to figure out if your category code accurately reflects the kind of business you are running. Moz, for example, got its code changed from 5734 (computer software store) to 5817 (digital goods) to more accurately reflect the business they were in.

How easy is it to implement?

Difficult. You can petition for your MCC to be changed but the decision ultimately lies with your bank.

What is it?

Backup payment processors and backup payment gateways can continue to process payments in the event that the primary processors and gateways have outages or have server downtimes. It can happen.

How easy is it to implement?

Depends on the gateway/processor. Getting your backup gateway off the ground can take anywhere from a few hours to a few days (depending on what kind of business you have and what kind of merchant account/bank you are using).

What are the pros?

• Technical emergencies or outages won't get in the way of your customers paying you.
• If a legitimate payment gets flagged by a gateway and cannot be processed, you can use an alternative.

What are the cons?

Gateways can be costly. You'll have to weigh this cost against the advantage of always being prepared to accept payments.

All things considered?

Implement. In the event of a gateway outage, a backup system to handle payments will ensure that your customers have a seamless renewal experience. Always.

Are there other tactics on the list that complement this one?

Payments can fail at the gateway level for more reasons than an outage. If you are unable to implement MCCs that better suit your business or are unable to tag payments as recurring, it's possible that legitimate payments are caught up in a gateway's fraud detection nets and stalled. Backup systems will help you get around issues like these.

What is it?

Tagging a payment as recurring with your gateway so that multiple charges on the same payment method aren't tagged as 'suspicious'.

How easy is it to implement?

Extremely.

What are the pros?

Tagging a payment as recurring reduces the possibility that it will be confused for a fraudulent payment by the gateway or processor you are using.

What are the cons?

Available only with certain gateways

All things considered?

Implement if your gateway supports it.

What is it?

What do your customers see when they look up charges that you've made on their cards or bank accounts? If it's difficult for a customer to associate the charge on a bank statement with your company, it could result in a chargeback. Here's Basecamp's story of how they reduced chargebacks by 30% by adding an explanatory URL to their customers' bank statements.

How easy is it to implement?

Easy. Configure what you'd like your customers to see when they pull up a charge made in your company's name with your payment gateway.

All things considered?

People usually don't check bank statements everyday. This makes it especially important that they can identify the charges you've made on their cards or accounts when reviewing their statements.

What is it?

With an astounding failure rate of only 0.5%, Direct Debit payments are by far the most efficient way to collect recurring payments.

How easy is it to implement?

Difficult. Both from the perspective of getting the back-end off the ground and from the perspective of pushing your customers to make the shift.

What are the pros?

• The direct line between the issuing bank and the receiving bank that direct debit transfers afford eliminates a host of problems that might befall a transaction and cause it to fail (bank accounts can't be lost or stolen, for example).
• Planning for failures becomes easier because the scope of what could go wrong and what actually does reduces so much.
• Direct Debit greatly reduces admin time because payments are automatically taken and tracked each month.

What are the cons?

• Doesn't make sense for small businesses as interacting with the ACH and SEPA networks require developer time.
• Direct Debit payments typically take more time than card/online wallet payments. While card payments land in your merchant account almost immediately, direct debit payments can take between 3 and 10 days, depending on the network.

All things considered?

If your business is growing, you should definitely think about implementing direct debit as a payment method. The delay is worth the tiny rate of failures.

There are certain preparatory measures that you definitely have to implement (if you can) including an accurate MCC, flagging a payment as recurring, and backup payment processors or gateways.

Beyond these tactics, it's up to you to decide what approach you'd like to take with your customers when it comes to updating payment details. You could take the pre-dunning email approach (that goes along with an optimal card update page) or you could use a card/account updater and in-app/website notifications to non-intrusively make sure that expired cards don't get in the way of your revenue.

Nothing like reducing your payment failure rate to zero, though, and direct debit is the closest that you can get to that. It's worth it, especially if you're growing and processing more transactions and bigger ticket amounts, to suggest making the move to direct debit to your customers.

The harsh reality, though, all tactics considered, is that some payments will fail anyway. Despite all the planning.

What is it?

Prepaid cards and gift cards have to be continually recharged, are usually valid for a short period of time, and are not directly linked to a particular bank account - this means they are constantly flagged by fraud detection systems, and associated with a high failure rate. Blacklist certain cards that you would like to avoid processing and an error message will pop up every time a customer tries it.

How easy is it to implement?

Moderately difficult. The first six digits on a card are its BIN or Bank Identification Number. You can compile a list of BINs that you don't want to accept and compare the cards that your customers are using against the list to avoid payment failures at sign up and at future renewals.

What are the pros?

Catch high-risk cards before they are used. Forcing your customers to use cards that sit well with gateway fraud detection systems and receiving banks can go a long way towards slashing those payment failure rates.

What are the cons?

You could potentially miss out on valuable customers by blacklisting prepaid cards.

All things considered?

Implementing a BIN blacklist might stop some customers from signing up if they don't have an alternative means of payment. Weigh this against the advantage of lowering your payment failure rate by accepting only low-risk cards (like credit cards and debit cards).

What is it?

Set up backup payment methods for each of your customers to immediately fall back on when the first payment method fails.

How easy is it to implement?

Difficult. This means either collecting two payment methods from each customer on sign up or giving your customers the means to add new payment information months into their subscriptions (which can be a little inconvenient).

What are the pros?

• Catch payment failure as it's happening and avoid the dunning process.
• Nearly foolproof tactic to combat payment failure - it's almost unheard of for two different payment methods to fail at the same time.

What are the cons?

• Requires customer effort
• Might be costly to implement

All things considered?

This is a definitely a nice-to-have tactic if you can afford the effort to set it up.

Granted, there are only two tactics you can implement to combat the first charge on a payment method failing - one difficult to implement and the other that could cost you valuable customers. Businesses that can't afford the resources to implement backup payment methods or want to attract all the customers they can are best served skipping over this section and focusing on the other stages of the life cycle.

A good indicator of what kind of decline you're dealing with is the error message you receive from your gateway when a payment fails. If the error message is vague or generic, the associated error code will tell you (at the very least) whether the problem was with your gateway, the network, the processor, or your customer's bank so you can set an appropriate retry cycle in place to deal with it.

The hard declines typically need more time to fix. If you can pinpoint a payment failure to a soft decline, on the other hand, data from Adyen suggests that the best tactic is to retry it immediately (even for B2B businesses).

If you're using Stripe, you can set up three retries over two weeks - a good tactic for B2C companies that are dealing with small ticket sizes and customers who can respond to problems quickly. A B2B business, on the other hand, or a business dealing with large ticket sizes might find it valuable to account for internal payment approval cycles and other business-specific processes with a retry cycle that lasts a month, with a retry every five days (avoiding the weekends).

Pick up data from your gateway to find out what time during the day might be best for a retry.

Adyen, for example, has compiled interesting insights around timing your retries. (Navigate to the bottom of Adyen's post to download the insights)

Roelant Prins, from Adyen writes, 'In the U.S., for example, refusal rates peak toward the end of the month just before people are paid. And we have found that nighttime hours have a lower success rate by 2%, due to issuing banks tightening their risk systems'.

Group your customer base into dunning personas based on their ticket sizes, where they're located (relative to where you are), and what kind of payment process you have in place for them (invoice based payments vs. automated card and online wallet payments). This will give you an idea of the professional vs domestic need you are serving and will allow you to tailor your retry cycles to suit both.

Of course, retries are only one side of the coin after a payment has failed. The other is communicating the failure, communicating the retries, and pushing your customers towards action.

Don't let your retry decide when you send a dunning email out. Instead, let knowledge of your customers.

Here's Andrew Culver, the founder of Churn Buster, giving us an example of what this means, 'don't email customers at 3 AM in the morning because that's when the payment processor failed the payment, but email them at 2 PM on a business day because that's what MailChimp tells you your most successful time of day for reaching customers is'.

As an extension, align your dunning communication to the dunning personas you might have set up for your retry cycles.

One of your business customers, for example, with a retry cycle that stretches 28 days will not need as many email reminders as an individual customer with a retry cycle of 14. Retry cycles are not an indicator of how you should structure your dunning communication.

Turn your dunning email into marketing opportunities to build value around your product. Here is Chris Hexton: 'every single one of these emails is an opportunity to engage your leads'.

Reconsider canceling a subscription when your retries are over and you haven't recovered that failed payment. Canceling a customer's subscription means putting in the effort to get him back on board again. Not to mention that the delay might actually be an obstinate problem that's difficult for a customer to get around. It's always better for you to err on the side of caution where LTV or the lifetime value of the customer in question is concerned.

You could put the subscription on hold until he gets back to you or deactivate it instead of canceling. In essence, make it as easy as you can to get this customer back if he wants to.

Pro-tip: Let the ticket size be your compass here. Keep your big customers on, even if they happen to default on a payment, and cancel smaller subscriptions after your dunning cycle is complete.

Revisit your billing cycles. Price Intelligently shows that SaaS companies can use both monthly and annual subscriptions to boost MRR and can guide you through getting a pricing model that works best for you off the ground. Known to considerably reduce chargebacks and churn, here is a list of the pros and the cons of the annual billing cycle.

What is it?

Selling to companies means planning for complex payment cycles - from invoice approval chains that go on for days to limits on cash flow for a particular month or quarter. Some businesses require a certain number of days after an invoice is raised to complete a payment.

Enter the payment term.

How easy is it to implement?

Moderately difficult, if you're uncomfortable with delayed payments.

What are the pros?

• Businesses are very appreciative of payment terms so implementing this will definitely result in a few enterprise smiles.

What are the cons?

• Payment terms on an invoice basically grant businesses a little leeway with their payments, changing lost revenue to late revenue. How appealing this tactic sounds is directly proportional to how comfortable you are with that.
• You have to configure reminders and follow ups after an invoice is sent out and before it is due so your customer is aware of how many days he has left to complete a payment.

All things considered?

Implement only if you have to.

What is it?

Collecting payments for a set number of terms before a subscription begins.

How easy is it to implement?

Depends on your customer.

What are the pros?

• You reduce the risk of bad debt or failed payments later down the line.
• This is a great option for businesses because it allows you to sidestep complex invoice approval cycles later down the line, charging for something when the deal is still hot.
• There are a whole bunch of reasons getting a payment up front can be beneficial to a growing saas company, according to insights squared, especially considering that you need revenue to be coming in at the critical (early) stages when you're investing in sales and marketing, laying the groundwork for customers who aren't there just yet.
• You reduce the risk of bad debt or failed payments later down the line. If it's a make-or-break feature that will seal the sales deal for a customer, invoicing before a subscription term begins is a good way to collect the resources you need to deliver on your promise of getting the feature up and recovering the revenue that you might have lost had the sale fallen through.

What are the cons?

Not all your customers will be sold on the idea of advance invoices.

All things considered?

If your customers are up for advance invoices, definitely implement them.

That's revenue recovery to fight involuntary churn, in a nutshell. Planning so that there's never (or there's rarely, at the very least) a situation where someone who wants to pay you can't. The planning must ideally be proactive (and come before the payment is made) and reactive (because payments are going to fail no matter how proactive you are).

Of the twenty odd tactics here, a different permutation and combination will suit every business.

A B2B business, for example, would do well to implement advance invoices and payment terms, but switch out pre-dunning emails and credit card updaters for direct debit payments via ACH or SEPA.

A B2C business that accepts cards and PayPal, for example, with Authorize.Net as their preferred gateway and small ticket sizes, would do better with pre-dunning emails and short retry cycles, completely eliminating the invoice stage and the first try failure stage of the life cycle.

A B2C business with higher ticket sizes, on the other hand, would be best suited to have Stripe or Braintree as a payment gateway so that cards are automatically updated along with in-app notifications to catch customers that the updater doesn't and custom messages on their bank statements.

The medley is mind-numbing.

In every case, however, seeing the life cycle as a whole is integral to implementing tactics that complement each other as a payment moves through every stage.

These tactics should ideally work like a multi-layered sieve, together, with some catching payments that the others failed to. How good your sieve is fundamentally depends on how you structure these tactics together - factoring in the cost of each, the kind of payments each can recover, and the amount of effort you'll need from your team and your customers to implement them.

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