Dunning Best Practices
What is Dunning
When an invoice fails to collect payment, it enters a ‘dunning’ period. During this time the subscription remains active while Recurly automations take over to collect funds. First, there are overdue invoice email notifications and second, there are additional credit card attempts. Because much of this can be adjusted and optimized by the merchant, Recurly offers some best practices.
Separating Dunning From Retries
Some billing tools use the same schedule when processing retries and sending email communication - called “static retries”, but Recurly knows that isn’t the most effective approach to revenue recovery. Over the last 10 years, Recurly has processed over a billion transactions, building a database of useful metrics. Each transaction is a data point driving our retry logic so that Recurly can then try the credit card at the most optimal time for a successful transaction.
If you’re on our Core plan, and are interested in moving to Pro or Elite to take advantage of this retry logic, please reach out to us here.
While Recurly is attempting transaction retries, it still allows merchants control over their email timeline and cadence. This allows you to determine the length of dunning, how many emails are sent and what kind of language is used.
Length of Dunning
The first aspect to consider with dunning is whether your product offering is B2B or B2C. B2B typically has a higher cost of goods, so keeping a subscription active after invoice failure can become expensive. B2C usually holds less overhead. It’s also very much dependent on your industry. OTT subscriptions have high overhead, while SaaS do not. Therefore SaaS can afford a longer dunning cycle.
- Consider whether you’re B2B or B2C, as well as your overhead for keeping a subscription active. SaaS typically lower cost, so keeping an account in dunning is worth the possible recovery.
- Communication schedule should go no longer than 28 days for monthly subscriptions. This avoids ‘looping’ where a new invoice is issued before the last one can be collected.
- Consider your CAC when terminating a subscription.
Benchmark data on dunning lengths and invoice recovery
Best Practices - Email Communication
Emails are sent during dunning with the intention of getting the customer to update card information on their own. When drafting emails remember to tailor language and style to your brand.
- Focus on tone and urgency when drafting emails
- Each email should contain different language. This keeps outreach fresh, and appears that you’re providing a new voice each attempt.
- Address urgency as the dunning process enters its final phases. The customer should be aware that their subscription may ‘cancel TOMORROW’ or that their ‘services will be deactivated tomorrow’.
- Include in app CTA in all dunning emails. This removes friction from the update process, incentivizing an update.
- If you’re using Recurly hosted pages, you can link directly to the hosted account management page without additional dev work.
- Consider an option to pause the subscription, rather than cancel. This allows you to maintain billing information, while providing the customer a short break.
- Be sure that the reply-to address is something personal, like firstname.lastname@example.org, or email@example.com. Personalizing this is more welcoming than a generic email, or worse, a firstname.lastname@example.org. Plus, you’ll be able to acquire additional contact information.
- In general, emails should send no more than 3-4 days apart for B2C and no more than 7 days apart for B2B.
- These efforts can be measured via your Recurly dashboard > Dunning Effectiveness. Recurly provides a timeline displaying dunning versions and effectiveness. Continually test and always look for ways to improve.
When the dunning cycle completes
- Cancel the subscription
- Typical for SaaS and many products in the B2C landscape. This process simply cancels the subscription. Customers will always have the opportunity to come back. Many B2B entities prefer the opposite, to keep the subscription active. It’s an act of good faith, and allows your company to engage sales to get a pulse on the contact.
- Leave the invoice open
- Allows customers to pay the invoice at a later date. Benefits of this may be a one time invoice you still want to collect one. Or, it may be a customer you know will come back. This isn’t a good idea if your overhead is high, as your customer may still have access for free.
- Consider enabling the ‘Credit Card Expired’ email template. Provide your customers with notification that payment will fail any number of days before renewal. Find Credit Card Expired in your Email Templates > Subscription Renewal.
- By default, this template is not enabled. The reason being that the Account Updater is already requesting the most up to date card information for Visa and Mastercard.
- Offer the ability to pause subscriptions. Rather than cancel, pausing is a great way to hold on to subscribers, including their billing info, while providing them with a short break.
For more information, please visit our docs here.
The reality of any subscription based business is that a certain percentage of payments fail. Best practices help you recover this lost revenue, reducing your involuntary churn. As you’ve learned, there are many elements to dunning that you have control over. Continuously test your dunning strategy paying close attention to what’s working and what isn’t. Please feel free to ask any questions here!
Thanks for reading!