Episode 151: Subscription Analytics and Reporting with Melanie Stout of Optimized Payments, Jay Matthews of Yahoo and Melissa Shields of Dotdash Meredith

Understanding the nuances of payment data is not just a necessity but a strategy for unlocking hidden revenue in the subscription business. 

On the latest episode of "Subscription Fundamentals," hosted by Nick Fredrick and Josh Mathers, three industry experts — Melissa Shields*, Executive Director at Dotdash Meredith; Jay Matthews, Director of Global Payments and Subscriptions/Retention at Yahoo; and Melanie Stout, Head of Recurring Services at Optimized Payments — discuss analytics and reporting in subscription billing and payments.

The Value of Data in Subscription Businesses

Melissa Shields explains that data drives everything from billing and subscription reporting to forecasting, which is crucial for publications that need to meet audit requirements for advertisers. "Data is everything in our world in terms of managing our subscriptions," Melissa says, and she underscores the importance of accuracy in forecasting to avoid sourcing expensive alternatives to meet rate-base requirements.

Melissa also discusses churn analysis, distinguishing between explicit and implicit churn. Explicit churn, when customers directly request cancellation, provides valuable insights into potential product enhancements. Implicit churn, on the other hand, relates to payment failures and fulfillment issues, which can significantly impact a company's profitability and lifetime value. A detailed understanding of churn types is essential for subscription businesses to address and reduce overall churn rates effectively.

The Evolution of Payment Data

Jay Matthews highlights the evolving nature of payment data and stresses the importance of understanding billing failure codes, merchant advice codes and issuer codes to manage billing churn effectively. He points out that though challenging, it’s important to make this complex data comprehensible to executives to enable strategic decision-making.

Melanie Stout reinforces the idea that payment data is not merely a back-office function but a critical revenue driver for subscription businesses. She argues that this data can inform marketing strategies, enhance customer retention and ultimately drive profitability. "Payments is how everyone makes the money," Melanie says, stressing the direct impact of successful payment processes on a company's bottom line.

The guests also touch on the role of technology and collaboration in leveraging payment data. Understanding the technology stack and how order flows affect payment success rates is vital. Melissa works with teams like Melanie's at Optimized Payments to navigate the complexities of payment technology. This collaboration is crucial for identifying and implementing strategies that enhance payment success and customer retention. Melissa emphasizes the multifaceted nature of their role, from explaining cash flows to the treasury to working closely with marketing and fulfillment departments. This comprehensive approach to payment data is crucial for identifying opportunities that might be overlooked in more narrowly focused strategies. "Payments are ingrained into a broader ecosystem than people assume," Melissa explains, highlighting the necessity for a diversified understanding of how payments impact the entire business.

Identifying and Leveraging Key Performance Indicators

Jay and Melissa delve into the critical KPIs essential for any subscription business, starting from initial billing success rates to more nuanced metrics like churn reasons and renewal rates. They underline the importance of detailed analysis, including the examination of conversion performance by payment method and channel, as well as the strategic segmentation of churn reasons and timing. This granular approach enables businesses to tailor their strategies more effectively to reduce churn and optimize billing processes.

Melanie brings to light the challenges and opportunities in sourcing and interpreting payment data. She points out that while the processor is typically the primary source of data, the path to obtaining clear and actionable insights can be obscured by multiple layers within the payment process. "The raw, truest data is really with the issuer," Melanie says, suggesting that getting down to the issuer response codes can significantly enhance the quality of data analysis. This depth of data is pivotal for developing a detailed understanding of decline reasons and payment method mix, which are foundational for any recovery strategy.

Making Data-Driven Decisions

The trio discusses the decision-making processes informed by this wealth of data. From internal sources capturing demographics and conversion data to processor-derived billing-related metrics, the synthesis of this information enables targeted strategies for improving billing success rates and customer retention. Jay's experience highlights the necessity of learning tools like SQL and SAS to build analytics. He recognizes that things are changing and that there is a need for continuous learning and adaptation to navigate the evolving payments landscape.

"Understanding the nuances of what code is going to come back from a VSPS service from Visa versus something was wrong with the way you sent the transaction, is really critical," Melissa says, emphasizing the importance of a deep dive into payments data for operational excellence.

She also emphasizes the challenges of aligning various data sources, especially when dealing with multiple payment processors. The intricacies become evident when considering platforms like PayPal and Apple Pay, which may not always integrate seamlessly with processor data. “There are hundreds of reports with different data fields,” Melissa explains. This complexity necessitates a methodical approach to align data across various processors and third-party billing platforms.

The Importance of High-Level Data Analysis

For subscription businesses, having a high-level view of payment data is crucial. Melissa emphasizes the importance of having a baseline for high-level data, which helps in identifying the source of truth in complex data environments. This approach aids in understanding transaction patterns and the impact on interchange fees, providing a foundation for deeper analysis. Melissa’s journey into the payments realm started from a curiosity about transaction costs, eventually leading her to handle auto-renewals and payments. She underscores the significance of collaborating with external business intelligence teams for data mapping and normalization, especially when the internal team’s resources are limited. “Often we end up building models by hand and then evolving them into larger-scale programs,” Melissa says.

Another critical piece of advice from Melissa is to actively engage with payment processors to uncover additional data sources. This proactive approach can uncover hidden reports and data that are not readily available unless specifically requested.

Curiosity and Tenacity: Key Attributes for Success

Melanie underscores the importance of curiosity in her role. “If you see an anomaly in the data, you can’t just dismiss it. You have to dig in and figure out why,” she says. This relentless pursuit of answers is crucial in understanding and managing complex payment data. Having the skill to identify discrepancies is not enough — you need to have the tenacity to resolve them.

Building Strong Partner Relationships

Jay emphasizes the importance of strong partner relationships, particularly with third parties like acquirers. He says that understanding and managing payment data requires a combination of strong analytics skills and solid partnerships. 

This episode also brings to light the value of networking and continuous learning in the field. The exchange of ideas and experiences at conferences and meetings can lead to breakthroughs in understanding and solving complex data challenges. All three guests have found that discussions with other merchants at various events have been instrumental in enhancing their data management strategies.

Conclusion: Embracing the Challenge

This episode of "Subscription Fundamentals" with Melissa Shields, Jay Matthews and Melanie Stout offers a wealth of knowledge for those who are looking to excel in payment data management. Their experiences and insights provide a clear message: embrace the complexities, be curious, tenacious and ready to dive deep into the data. The path to mastering payment data in subscription businesses is not straightforward, but with the right approach, it is certainly navigable.

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*Since recording the interview, Melissa Shields has moved to Starbucks where she is Director of Payments Strategy and Operations