A ubiquitous problem plagues subscription commerce: transaction declines. Say a customer signs up and pays $25 for a monthly subscription box on February 15. The transaction is approved, the customer receives the box a few days later, and all is well. Then on March 15, when it’s time to rebill the customer for the next box, the payment fails even though the customer’s payment information is unchanged from February.
Trying to charge the customer’s credit card again is the obvious move, but the provider incurs a fee for every rebill attempt. So subscription merchants should rebill when there’s the greatest possibility of transaction approval. But how can merchants pinpoint the ideal time to rebill a customer?
Rebilling each declined transaction manually may have a high success rate, but it’s too much work for any business that processes more than a few transactions each day. Creating broad rebill rules may get a decent chunk of transactions approved, but some customers will always slip through the cracks.
Smart Dunning combines the best traits of manual and automated rebilling to provide custom, data-backed rebill strategies for each declined transaction — and it does so with less effort on your part. Subscription companies that want to thrive need tools like Smart Dunning to reduce customer churn and protect monthly revenue.
Multiple factors affect whether a payment retry succeeds or fails, and Smart Dunning tracks each one.
The team at sticky.io developed machine learning algorithms to predict the best time for a rebill attempt. These algorithms look at over 500 individual predictors of rebill success. For example, one algorithm reveals the probability of rebill success by day for every single transaction that’s declined in our platform. Another shows the best hour to retry a transaction.
We feed this data into numerous different models to uncover patterns in the data. The vast amount of information we process is far beyond what any individual or even dedicated team would be able to interpret over the same period. Our models can also examine all possible connections between various data points, including those that human methods of data analysis likely wouldn’t be able to isolate.
All of this happens behind the scenes to return the answer to the question: When will a rebill request have the best chance of getting approved? Our recent release has improved the speed of the process, so merchants don’t miss the optimal rebill window.
Smart Dunning tools automatically attempt to rebill declined transactions at optimal times. These times are based on customers’ historical behavior and other factors — increasing the chance of a successful rebill. Most dunning strategies go no further than retrying all transactions on the day that gets the most approvals overall. Some “complex” strategies may categorize transactions using one or two data points, then choose a day or time to rebill based on that. Smart Dunning looks at every data point in context to build a strategy.
Considering all of the data is extremely beneficial because certain banks and geolocations have a higher probability of declining a transaction during specific times, like between midnight and 6 a.m. These factors are likely to get overlooked in traditional dunning. Individuals and dunning tools that aren’t driven by AI don’t have the bandwidth to consider these smaller details alongside other important information like payment method and decline code. Smart Dunning can improve rebill rates simply by having the capacity (and capability) to take every data point into consideration.
Smart Dunning has one more benefit: The payment recovery process becomes more successful over time because the system is constantly analyzing and optimizing new data. Machine learning tools like ours can run tests to learn what makes certain retries unsuccessful and react to what they find without needing any guidance from you.
Smart Dunning isn’t just good for your business; it’s also good for your customers. At a high level, the method helps subscription brands reduce involuntary churn. With smart retries, merchants have a smaller chance of losing a customer because of insufficient funds, the customer’s location, expiration of the credit card or a myriad of other issues unrelated to the customer’s overall satisfaction.
Smart Dunning also improves the following areas:
Payment failures inevitably lead to customer disappointment. Even when they’re not your fault, late or skipped transactions decrease customers’ brand satisfaction. It’s in your best interest to fix declined transactions quickly, so the subscription cadence is not interrupted.
Visa and Mastercard allow 15 attempts to process a charge within 30 days of the initial transaction. Exceeding these limits could break compliance regulations and jeopardize a merchant’s standing with the credit card company.
Smart Dunning helps you get more approvals with fewer attempts. This means more transactions are approved overall, and transactions are successfully processed within fewer days of the original attempt. Consumers don’t get bothered by dunning emails or have to spend time thinking about subscription management. And you don’t have to worry about losing them because of one failed payment.
Smart Dunning removes uncertainty from the rebilling process, helping you avoid fees and potential disruptions. Smart Dunning can help you:
Avoid rebill charges — Retrying a declined order at arbitrary times can significantly increase costs. For example, if it takes six retry attempts because the merchant isn’t using Smart Dunning to pinpoint an optimal retry time and each attempt costs $1, a merchant is spending $6 just to collect a payment. That can significantly diminish profits, especially if the merchant is only charging $20 a month.
Protect MID health — Trying to rebill a customer after several failed attempts (think 10 to 15 times) can negatively impact the relationship between a merchant and a payment processor. The payment processor might even shut down a merchant ID (MID) if there are excessive rebill attempts.
Maintain monthly revenue levels — When a transaction doesn’t go through, your company doesn’t get paid. Losing a month’s worth of revenue from every customer whose card doesn’t process the first time is a big hit to your bottom line. sticky.io customers using Smart Dunning recover approximately 20% or more revenue compared to traditional recovery methods.
Overall customer lifetime value — Smart Dunning mitigates disruption for subscription customers, which can enhance the overall brand experience and extend customer lifetime value. Most customers don’t even realize their payment was originally declined. Keep them focused on your brand experience and let Smart Dunning monitor and manage declines.
Smart Dunning is a practice that pays for itself over and over again. Right away, merchants increase revenue by converting denied transactions into approvals. Over time, subscription continuity improves and, with it, customer satisfaction and retention. There’s a third benefit, too: The time and capital you save can be reinvested into your company.
Subscription businesses live or die on customer relationships. The more resources you can put toward maintaining your customers’ goodwill, the lower your churn rate will be.