Customer Lifetime Value (LTV) as the Company’s North Star
Recurring billing issues were leading to involuntary churn for an e-Learning provider.
The company's Co-founder and President, brings extensive experience in managing subscription-based companies that serve families. They prefer the subscription model because of its reliable revenue potential. They explain that while subscriptions require an upfront investment to acquire new customers, profitability hinges on customer retention. They emphasize that extending customer relationships and maximizing subscriber Lifetime Value (LTV) are essential for long-term success. “At our company, everyone is well-versed in the LTV of each product and channel, thanks to our CRM,” they note.
A Commitment to Continuous Improvement through Technology
The company developed its in-house CRM through years of experimentation, optimizing it for easy integration with third-party solutions where specialized expertise is required. To address payment failures, the company initially built an internal system to recover failed payments, achieving a recovery rate of 14%. However, like many subscription businesses, the company faced challenges with outdated payment systems that could result in 15%-25% of legitimate payments failing each month. Determined to reduce involuntary churn, they sought to improve these rates further.
Initially, they opted to send only those transactions that their internal system couldn’t recover, after retrying the payments up to 10 times. They assumed that these harder-to-recover payments reflected customers who no longer wanted the service. However, they were surprised when the solution recovered an additional 10%, and these customers displayed similar LTV to those with no payment issues.
A key takeaway from the results was that these weren’t customers looking to cancel. In reality, they were satisfied with their subscription but faced payment issues that led to avoidable churn.
Maximizing Customer Recovery Potential
Around 8 months into their partnership with our team, they identified a significant opportunity to enhance revenue and retention by handing over declined transactions earlier in the process. The company began sending failed payments after just two internal retry attempts, hoping to see better recovery rates and a strong return on investment. Based on the company’s analysis, they determined that an 18% recovery rate would be needed to break even, once recovery fees were factored in.
After just one month of this new approach, the results were clear. By sending failed payments soon after the initial decline, the company saw a 45% improvement in recovery rates over their in-house system. The AI-Powered Solution's performance exceeded their break-even target by 150%, proving the value of early intervention.
The team has been a key partner in the effort to improve subscription profitability. The customers successfully reactivated keep coming back month after month.
Feedback from the Co-Founder and President of the e-Learning company
About the e-Learning company
The company is a leading e-learning provider, offering parents tools to help their children develop reading, writing, and math skills. Their educational materials include age-appropriate books, activities, and interactive apps. With a 35-year history, the company has helped over 5 million children learn to read.
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