Failed Subscription Payments Do Damage but Are Fixable – PYMNTS.com

If customer churn is an inevitable reality within the subscription industry, than involuntary churn is, perhaps, its unavoidable and unwanted cousin.
Often the result of easily fixable failed payments, involuntary churn angers consumers who experience service interruptions because a streaming service or retail subscription merchant let the account falter and lapse without first taking steps to refresh the account and retain that subscriber.
The topic is covered extensively in “The State Of Subscription Business: Best Practices And Business Performance Drivers,” a PYMNTS and FlexPay collaboration, based on surveys of 200 executive decision-makers at companies that offer subscription-based services and products in retail, health and fitness, media and publishing, home security and online gaming.
Looking at the metrics tracked by subscription merchants the study notes, “Subscription providers that track and optimize customer LTV [lifetime value] are five times more likely to be top performers — defined as those that minimize revenue loss due to failed payments. Moreover, our research finds that only 2 in 5 subscription firms even recognize the connection between failed payments and LTV.”
Failed payments are damaging to customer LTV, a metric that provides keen insights into retention, but we found 91% of subscription merchants don’t measure customer LTV, and that there is no industry standard for how to define and track it.

Looking specifically at the impact of failed payments on subscriber retention, the study found that “companies in the subscription industry lose, on average, 9% of revenues due to failed payments, totaling an estimated $278 billion over the past 12 months across the five industry sectors included in the study.”
Top-performing subscription companies reduce lost revenue loss from failed payments “by adopting a multifaceted approach that includes tracking multiple metrics, implementing specialized payment recovery solutions, and having a thorough understanding of the factors that lead to customer churn.”
Additionally, we found that top-performing subscription brands are also 12 times more likely to use third-party payment recovery solutions than bottom-performing companies (47% versus 3.8%), with top performers recovering 13% more failed payments this way.
Get the study: The State Of Subscription Business: Best Practices And Business Performance Drivers
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