A lot of small businesses rely on repeat customers to stay afloat, and many of those repeat customers have accounts that require monthly billing. Unfortunately there are a lot of factors that can lead to those customers having failed payments, from insufficient funds to moving to changing banks.
Life gets in the way and oftentimes people just don’t remember all the places they need to contact when there is a change in their payment status. Unfortunately small businesses rely on those payments to stay in business, and it costs five times more to attract a new customer than it goes to retain the old ones. What can be done to address customer churn due to failed payments?
Every year in the United States, customer churn costs businesses $136 billion per year, and 34% of that is due to failed payments and involuntary churn. Two thirds of businesses lose at least 17% of their profits to customer churn, and payment failure is the leading cause of involuntary churn. Of those customers who are lost to involuntary churn:
- 53% have insufficient funds
- 42% have reached credit card limits
- 40% have a new card
Subscriptions are a great way to keep customers coming back, but auto-renewing subscriptions can be tricky. 35% of subscriptions renew automatically, generating 62% of subscription revenue. Unfortunately because of the various reasons listed above, 47% of businesses lose out of customers because of failed auto-renewals.
Failed payments raise costs and threaten businesses. Nearly half of businesses say these kinds of failed payments cut into forecasted revenue, and attracting new customers to fill those gaps is more costly than tracking down the customers whose failed payments were involuntary.
Customer loyalty is often referred to as a forgotten funnel. Improving customer retention saves businesses a lot of money on things like marketing costs while increasing profitability and improving the quality of customer service. For a typical business, 65% of business comes from repeat customers.
In the case of subscription-based services, customers may only realize there is a problem with payments once their service stops. This can lead to frustration, and regular customer service representatives are ill-equipped to handle these types of problems. Allowing specialists in customer retention to recoup this type of lost business not only salvages a company’s bottom line, it also increases customer satisfaction.
Customer loyalty is what keeps business moving. Learn more about preventing involuntary churn from the infographic below.
Should You Focus on Repeat Business or New Customers?
Improve customer retention with these simple strategies
5 Ways to Improve Customer Loyalty