Episode 149: Retention, Dunning and Revenue Recovery with Kristen Vandendriessche of Newfold Digital and Kevin Salerno of Optimized Payments
In the world of subscription businesses, understanding and managing customer churn is crucial. Kevin Salerno, Billing and Payments Architect at Newfold Digital, and Kristen Vandendriessche, Senior Payments Consultant at Optimized Payments, shed light on this topic when they join hosts Nick Fredrick and Josh Mathers in the recent episode of the “Subscriptions: Scaled” podcast. Their insights offer valuable strategies for those seeking to refine their skills in subscription billing and customer retention.
Churn Management: A Key to Subscription Success
On this episode, Kevin opens the conversation by emphasizing the importance of effective subscription billing. He states that successful payment collection is pivotal. “We're in the business of payments, trying to optimize those payments and bring in the most revenue possible.” He pinpoints churn as a key challenge, where the focus isn't just on recurring revenue but also on reducing customer turnover.
Voluntary vs. Involuntary Churn: Understanding the Difference
Kristen emphasizes the importance of distinguishing between voluntary and involuntary churn, advocating for prioritizing the latter. “There's so much that we can do within our own world, our own ecosystems that impact the retention rate,” she explains. By addressing involuntary churn, businesses can significantly improve their retention rates and positively impact their bottom line. She suggests creating a positive cancellation experience to potentially encourage customers to return. She also stresses the importance of a customer-centric approach even in voluntary churn cases.
Delving into the technical side, Kevin discusses involuntary churn and its resolution. He emphasizes the significance of data when making decisions to enhance collection rates and handle payment failures. He suggests that challenges like insufficient funds or expired cards are common involuntary churn causes that can be efficiently managed through technological solutions.
Customer-Centric Strategies in Churn Management
Kristen states, “Retention is key, especially when we're talking about subscription-based billing.” A statement that underlines the need for a focus on customer retention, suggesting that losing customers over payment issues is a preventable scenario. The in-depth conversation showcases the need for balancing technical solutions with customer-focused strategies when managing churn. Kevin's focus on leveraging technology and data-driven solutions is complemented by Kristen's emphasis on understanding and improving the customer experience. This balanced approach is crucial for those who are looking to effectively manage churn in subscription models.
Decoding Involuntary Churn: Insights From Experts
Kevin explains that involuntary churn often boils down to a lack of payment, citing reasons such as insufficient funds or expired cards. He emphasizes the need for data-driven decisions in improving collection rates. Kristen adds that understanding the reasons behind payment declines is crucial, with certain decline codes being more prevalent than others. “The biggest driver of involuntary churn I've seen over my career is always going to be lack of payment or just that the card will not authorize,” she remarks. She also talks about the balance needed in managing different aspects of involuntary churn. A key strategy she highlights is making customer communication as simple as possible, especially in dunning processes. “Make it so simple and easy for them once they open that email message... it’s a one-click thing,” Kristen notes, underscoring the importance of ease and efficiency in customer interactions. This approach significantly increases the likelihood of customers updating their payment methods, thus reducing churn.
Understanding the Nuances of Dunning and Recycling
Kristen explains the concepts of dunning and recycling in detail, highlighting their importance in subscription billing. She describes how dunning involves communicating with customers about potential or actual payment issues, while recycling is the process of reattempting payments after initial failures. A successful recycling strategy can significantly enhance revenue recovery.
The Role of Account Updater in Payment Collection
Account updater services play a critical role in managing involuntary churn. This is a collaboration with card issuers to obtain updated payment information, which can be crucial in ensuring successful transactions. Kevin points out the proactive and reactive approaches in using account updaters, depending on the payment processor used. These strategies can significantly affect the management of dunning and collections processes.
The importance of utilizing multiple payment processors is a key point of discussion in this episode. Kristen stresses the necessity of this approach, especially for larger businesses. “Having multiple payment processors is just a critical and very important thing to do,” she states. This strategy not only provides redundancy but also increases the chances of successful payment authorization, particularly when dealing with different card issuers.
Kevin also addresses the issue of international payment processing. He states that having multiple processors is beneficial, especially for cross-border transactions. This approach can improve authorization rates and help overcome challenges such as transactions being marked as fraudulent in certain regions. Kevin’s experiences highlight the value of a multiprocessor and acquirer strategy in global business operations.
Innovative Approaches to Payment Recovery
Kristen also shares insights on recovery strategies, like using the next best card on file. This approach requires careful consideration of legal and compliance aspects but can be highly effective. “That’s brought tons of money to the table in the past for us as a company,” she reveals. This strategy, while complex, can be a potent tool in recovering revenues that might otherwise be lost.
Exploring New Technologies and Tactics
Both guests describe experimenting with various technologies and tactics to enhance their churn management strategies. Kevin discusses the normalization of payment attempts to local times to avoid bank downtimes and rolling expiration dates forward. He conveys the dynamic nature of these strategies and the need for continuous evaluation and adaptation.
Data-Driven Decision-Making in Churn Management
A recurring theme in the conversation is the critical role of data in driving decision-making. Kristen stresses the importance of understanding where money is being lost and the potential for recovery. "There's no two ways to shake a stick at it. We just absolutely have to understand where the money sits within your organization." This data-driven approach enables targeted and effective strategies for managing involuntary churn. "The data doesn't lie... it really does tell you a lot about your customers' inability to pay you," Kevin states. Both guests agree that analyzing data is the first step in addressing involuntary churn. Data is key in helping identify key areas where improvements can be made.
Effective Strategies for Customer Retention
Kristen highlights the value of attending industry conferences and networking events to stay informed about the latest trends and regulations in payment processing. She shares her experience of managing billing and payments as a one-person team, stressing the importance of these resources in navigating the complexities of the field. "You can learn more and be aware of more that's going to come into play over the next six or eight or nine months than you would if you're just trying to manage your day-to-day job," she explains.
Kristen also underlines the importance of building networks within the industry. Collaborating with peers and tapping into the collective knowledge of the payment space can be incredibly valuable. She suggests reaching out to others in similar roles to share challenges and solutions. “If you can keep each other informed, that's another great way to do it,” Kristen advises.
Navigating Compliance and Technological Changes
Kevin discusses the challenges of keeping up with compliance rules and regulations. These can come from various sources, including government and card scheme regulations. He emphasizes the need for a dedicated team to focus on these ever-changing requirements. This should not be overlooked as changes can impact technology and payment processing strategies.
To conclude, both guests reiterate the importance of starting with data analysis to address involuntary churn. They suggest focusing on the most significant areas of revenue loss and understanding the factors contributing to these losses. "Small change could bring big reward," Kevin remarks, highlighting that even minor adjustments in payment strategies can lead to substantial improvements in revenue collection.
For tech CEOs tasked with reducing churn and maximizing collections, this episode of “Subscriptions: Scaled” offers valuable guidance. By focusing on data-driven strategies, leveraging industry networks, and staying informed about compliance and technological changes, leaders can effectively tackle the challenges of involuntary churn. A proactive approach can ensure a strong foundation for customer retention and revenue growth in the competitive world of subscription services.
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