What is dunning, and why does it matter for keeping SaaS customers?
In a business model based on recurring payments and subscriptions, failed payments and transactions can cause customers to leave and cause the business to lose money. A simple thing like a credit card that has expired can slow down the payment process and cost you a customer.
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What is Dunning?
Dunning is the process of getting a customer to make up a missed credit card payment or more than one payment. Dunning is an important business process for chasing down late payments and increasing the chances of getting the money back. It is also sometimes called “collection management.”
Businesses often find that the dunning process is a bad way to deal with customers as they try to figure out the best way to get paid. Customers, on the other hand, might think that dunning is a scary way to collect a debt, especially when it’s done badly.
If you care about your customers, you can send them a series of personalized emails that tell them when their accounts are late and how they can make a payment or change their payment information.
How to use Dunning in a SaaS business?
Dunning is a way for SaaS businesses to keep their customers from leaving. Churn is a metric that shows how many customers a business loses over a certain time period compared to how many customers it had at the beginning of that time period.
It is the opposite of customer retention, which tells you what percentage of customers renew their subscriptions over a certain time period. The more customers you keep, the less customers you lose, which means you make more money.
On the other hand, when your churn rate is high, you lose customers and make less money. This makes reducing churn a top priority for SaaS companies that want to make as much money as possible.
Dunning is a simple and effective way to cut down on customer turnover. A small but important part of churn comes from customers who wanted to renew their subscriptions and keep making payments on a regular basis but couldn’t because of billing problems.
This is what is called “involuntary churn.” If you reach out to these customers instead of just canceling their subscriptions, you might be able to get back money that you would have lost. This is easy to do if you have the right procedures and technology.
This makes SaaS subscription dunning one of the easiest and most effective ways to make more money.
What to include in your Dunning message?
Dunning management strategies usually use a number of methods and tools to keep people from paying late and to keep recurring subscriptions going. Some common methods of SaaS dunning are:
- Emailing customers ahead of time about upcoming bills
- Customers’ credit card information needs to be updated before their subscription ends, or you can use a credit card updater service to do it automatically.
- Retrying failed payments automatically after a set amount of time.
- Sending customers reminders of their unpaid bills because their credit cards were turned down.
Conclusion
SaaS dunning is one of the easiest ways to make more money by reducing customer churn through strategic communication with customers.
To get the most out of dunning, you should combine best practices for dunning management, like automated credit card updaters and email reminders, with a subscription management software solution that is made to work with them.
