Transforming Revenue and Profitability with a New Approach to Customer Experience (CX) and Retention
In the subscription business landscape, where retention directly influences revenue and profitability, maintaining high levels of customer satisfaction is paramount. CX and retention leaders recognize that a subscriber’s overall experience determines their continued loyalty. Yet, one critical factor often goes unnoticed: the payments experience. When the payments process is flawed, it can lead to unnecessary customer churn, but many businesses mistakenly treat it as a purely operational concern, missing its crucial impact on customer satisfaction.
If this concept is new to you, the first questions typically asked are:
This article explores the significance of the payments experience in reducing churn and outlines a strategy for CX and retention leaders to take ownership of this aspect, ensuring it becomes a seamless part of the customer journey.
Understanding the Subscription Payments Challenge
Subscription-based businesses face unique hurdles, particularly in managing declined payments. While in-person transactions see a mere 1% decline rate, recurring payments for subscription services experience a staggering 20% decline rate. These declines often aren’t due to fraud or insufficient funds but rather result from false positives or incorrect decisions during the payment process. Unaddressed, these failed payments can significantly contribute to customer churn. Research indicates that 25% of subscribers who become aware of a failed payment opt to cancel their subscription, highlighting the payments experience as a primary churn driver.
For CX leaders tasked with improving retention, failed payments present a critical moment of decision for customers. When forced to resolve a payment issue, customers may reconsider their commitment, leading to potential churn.
The Organizational Challenge
A common organizational barrier in addressing payment-related churn is the division of responsibilities. Typically, finance and operations teams oversee payment processes, limiting the involvement of CX and retention leaders in designing the payments experience. However, seamless payments are a fundamental customer expectation, and CX leaders should be at the forefront of solving payment issues. They are best positioned to design experiences that not only resolve payment failures but also enhance customer satisfaction and lifetime value (LTV).
The Emotional Impact of Payment Failures
When customers choose your subscription service, they expect it to fulfill a specific need. A failed payment disrupts this expectation, leaving them dissatisfied and emotionally distressed. Customers anticipate their credit card transactions to proceed smoothly, and when they don’t, it can evoke feelings of frustration, anger, or even embarrassment. This emotional response can create a negative association with your brand.
How your business handles a failed payment can be the difference between losing a customer and fostering loyalty. Addressing the issue in a way that reassures and supports the customer can turn a potentially negative experience into an opportunity to strengthen the relationship.
Crafting the Ideal Payments Experience Strategy
The ideal CX strategy for payments is one where customers are blissfully unaware of any issues. Payment failures should be resolved seamlessly within the system, ensuring uninterrupted service delivery. When this isn’t possible, engaging the customer in a thoughtful, positive manner is essential. Effective recovery strategies can actually enhance customer satisfaction, as they demonstrate empathy and a commitment to resolving the issue.
CX Recovery Blueprint
- Prioritize retention to balance customer acquisition costs and maximize LTV.
- Treat payment recovery as a CX challenge, managing the customer’s emotional journey.
- Focus on satisfaction, using recovery strategies that keep customers content.
- Employ invisible recovery methods whenever possible to minimize churn risk.
- When customer involvement is necessary, make the experience as positive and supportive as possible.
When customers subscribe to a service, they expect their payments to be processed without a hitch. Payment declines are a critical juncture that can jeopardize the customer relationship. By integrating technology recovery solutions into your CX design, you can ensure that payment issues are handled smoothly, keeping customer satisfaction and retention high.
Our team offers a two-pronged approach: an AI-driven system that resolves technical payment failures behind the scenes, and behavioral science to create positive, engaging experiences when customer action is required. This combination ensures that payment issues are addressed without disrupting the customer experience, allowing the relationship to continue unhindered.
Conclusion
Failed payments are a significant source of churn, directly impacting the metrics CX leaders strive to improve. By adopting a proactive approach that combines seamless technology with empathetic customer engagement, businesses can enhance the customer experience, reduce churn, and boost retention.
Is your business experiencing failed recurring payments? Contact us today to explore solutions that will recover up to 80% of your failed recurring payments, increasing your cash flow and profitability.