Founder @ NowSourcing. Contributor @ Hackernoon, Advisor @GoogleSmallBiz, Podcaster, infographics
(Hint: it’s all about customer loyalty.)
In the U.S. alone, customer churn costs businesses an average of $136 billion every year – 34% of which coming from involuntary churn and failed payments. The cost of failed payments is stunningly high and most businesses, even though they know how much revenue they are earning, not many know how much failed payments are costing them. Payment failure is the number one cause of involuntary churn, stemming from insufficient funds, credit card limits, or credit card changes. More than 2 out of every 3 businesses lose 17% or more of total subscription profits to churn alone.
Auto-renew increases risk of failed payments – 35% of subscriptions automatically renew, and these renewing payments account for 62% of all subscription revenue but 47% of businesses lose auto renewing payment due to changes or errors in payment data. These failed payments can have bigger repercussions than losing one customer – failed payments can raise other costs too. 48% of businesses say that chargeback rates cut into forecasted revenue, on top of losing the customer and 43% of businesses say that increased customer service contacts from failed payments make holding onto a customer much more expensive.
Customer loyalty is an amazing way to keep involuntary churning at bay. Improving customer retention also saves on marketing costs, increases overall profits, and can even help to improve service quality. 65% of a company’s business comes from pre-existing customers. Involuntary churn can hurt this relationship, as some customers may only learn that their payment failed when their service stops, and payment declines and fees create customer frustration.
Poor customer service experiences discourages a customer to renew manually after a failed payment. Having just one bad experience with a business causes 32% of people to stop business entirely with that company. But keeping customers happy and improving customer loyalty can improve profits in a number of ways. Decreasing churn by just 5% can lead up to a 125% increase in profits, and 80% of customers are willing to pay more for a better customer experience.
Learn more about how customer loyalty can improve your business and how to prevent failed payments here.