On the 17th century, merchants began dunning their customers to collect outstanding debts. Investopedia.com defines “dunning” as making insistent demands for the payment of debt.

One can only imagine the forms of communication — and insistent demands — used with customers back then.

Today, dunning and dunning management denote collections process tools utilized by businesses around the world.

Ecommerce merchants using a subscription-based business model rely on good dunning management practices to minimize losses caused by involuntary churn. Thereby helping to maximize business revenues.

Done the right way, dunning messages support the marketing and customer service objectives of the business too. Let’s review key tips.

Dunning Management and Recurring Merchants

Subscription (recurring payment) business models accommodate nearly every type of product and service imaginable in today’s rapidly growing subscription economy. From financial newsletters to music and movies, subscription merchants thrive.

Gartner predicts that by 2020, more than 80% of software providers will have shifted to subscription-based models known as SaaS (software as a service)… and Accenture Consulting calls it a major shift in the fundamental business model of the (technology) industry.”

Benefits that online subscription merchants of all sorts enjoy include:

• Stable and predictable revenue projections
• Large economies of scale owing to relatively small fixed costs
• Data-driven insights from direct consumer relationships

No longer do merchants focus only on one-time billing for each order and new customer acquisition. In fact, smart merchants and marketers maximize customer retention and the average customer lifetime value (ACLV)… but only if customers stick around.

That’s why dunning management moves into the spotlight. Merchants focus on retaining customers and minimizing involuntary churn that occurs when subscription cancellations happen without the customer taking explicit action.

For example, when a subscription charge pushed the customer’s card balance over her credit limit, which cancelled the payment transaction. Or if a customer forgot to update payment information with a merchant when she received a card with a new expiration date.

As happened to many consumers early in the U.S. transition to EMV cards, when issuance of new chip cards led to havoc for subscription-based businesses. New account numbers and expiration dates didn’t match subscription records, causing payment transactions to fail.

Dunning Messages Help Retain Customers

By developing rapport with customers and providing extra value, businesses can significantly reduce churn rates. Happy results include minimized impact of declined transactions and increased profitability.

Recurring billing solutions include dunning management capabilities to help merchants manage payment card declines. When a recurring subscription payment transaction returns a decline, the billing software automatically sends a notification email to the customer.

eCommerce merchants’ marketing and customer service plans should address dunning management. The goal is to retain customers by keeping their subscriptions current.

Dunning management tips include:

• Utilize Account Updater services (from major card companies, banks and third parties) that enable ongoing review of — and automatic payment information updates — for credit and debit card data prior to the renewal date.
• Better communication with customers. Alert them to an upcoming recurring payment, and ask them to check their payment information. Sweeten the deal by including a discount offer or useful information as a give-away in the message.
• Consider automatically extending subscription expiration dates at renewal time, for customers whose card has expired. Combine this with friendly “dunning notices” to the customers telling them of the temporary extension, and asking them to update their account information.
• Better overall customer communication focused on improving customer loyalty — which pays off in many ways. Ask your customer service team if the dunning cycle is long enough between the reminder and the payment due date. Maybe they’ve heard from customers who intended to re-up subscriptions but needed more time.

And of course merchants should confirm that the dunning management emails adhere to good communication standards:

• Clear “from” address
• Subject line that identifies the required action

Make it easy for customers to do what you’re asking, by including links to their account information/management page.

Solve Your Decline Problem: Let Consultants Crunch the Numbers to Help You Figure Out How

Like many ecommerce merchants you may not be comfortable taking an in-depth look at reams of transaction data, yet you still want to know what’s going on. Why are subscription customers suddenly dropping off, and what steps should you take going forward?

Here’s a suggestion: work with a payments industry expert processor and consultant who loves to crunch the numbers — because she understands them. Benefit from robust sales reporting data provided by your eCommerce payment solution.

Ask your consultant to take these steps:

• Benchmark recurring transaction data against industry standards for similar eCommerce businesses.
• Analyze decline reason codes to identify trends that point to recommended actions.
• Help you understand the rationale behind recommendations.

Understanding the issues causing transaction declines helps ensure your dunning management process meets your business needs.

Conclusion

If you’re in search of the eCommerce solution that will save your money and give you peace of mind — including excellent recurring payments capabilities — look no further than PayArc.

We’ve got your subscription business covered with our account updater tool, so you never lose a customer. We offer robust sales reporting, love crunching numbers — and want to be your payments advisor and consultant, not only your processor.

PayArc eCommerce solutions provide merchants with an all-in-one solution including dozens of shopping cart integrations to choose from. Fraud and risk tools, and PCI-DSS protection help take the headache out of credit card processing — so you can process with confidence.

You have a business to run. Our business is to help you run it better.

Give us a shout today.

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