Four years ago we set out on a mission to help SaaS companies with their monetization. We didn’t just inherently know that was a problem though. Instead, as we sifted through the data we discovered that not only are SaaS operators just really bad at pricing strategy, they had no idea that their monetization has the biggest impact on their bottom line.
While we’re solving that problem through our Price Intelligently pricing strategy software, we quickly found another insanely under-optimized portion of your business: delinquent churn.
After sifting through the largest churn data set out there through all of our ProfitWell accounts (our free SaaS financial metrics tool), we discovered that 20-40% of your churn is actually absolutely needless, stemming from failed, expired, and delinquent credit cards.
Let me put that data in perspective for you. If your churn rate is currently 5%, then one to two percentage points of that churn exists for an absolutely needless reason. You’re pointlessly losing a lot of money every month.
To solve this key problem, we’re officially launching ProfitWell Retain, our comprehensive solution for involuntary churn that has the highest recovery rate in the industry. You simply hook ProfitWell Retain up to your Braintree, Zuora, or Stripe account and we do the rest of the work. Let’s walk through exactly what that means by first expanding on the problem, and then walking through exactly what ProfitWell does for you to reduce your churn effortlessly.
The problem we’re all facing: Churn Baby Churn
Churn is basically the bane of any subscription company’s existence. After you do so much work acquiring a customer and attempting to monetize them at an appropriate level, all of that energy is lost in one fell swoop to your customer leaving you.
While there are a multitude of reasons for churn, they fall into two main categories: active cancellations and delinquencies. Active cancellations occur whenever someone actively chooses to leave your product, whether it’s because they didn’t see the value, get their support ticket answered, or simply just don’t need the product.
While active cancellations are explainable and controllable in some manner for the most part, delinquencies are a bit trickier. While a good number of delinquencies occur because of expirations or credit card limit failures, the vast majority occur for much more obscure reasons. Hiccups in the credit card processor, new security protocols, and even false positive charge denials can all trigger a failure.
While we chatted above about the impact on your overall churn rate being 20-40% made up of these delinquencies, the real issue is how this revenue compounds. The double edged sword of the compounding nature of the subscription revenue model is that you’re likely not losing out on one month of a customer’s revenue, you’re missing out on almost the entire lifetime value of the customer.
Our solution: ProfitWell Retain for Braintree, Zuora, and Stripe
To plug up the leaky bucket that is delinquent churn, we’ve put together a comprehensive solution that combines not only technology, but also our expertise - all with zero work needed from you beyond initial setup.
What is it? Complete involuntary churn management
In simplest terms, we get these customers back by doing something called “dunning”, which is a jargony industry term for reaching back out to these customers and getting them to update their payment information as quickly as humanly possible. Sounds easy right? Well, it’s a bit more complicated than just sending them an email.
We’re able to maintain our industry leading recovery rate, because we combine a litany of tools and expertise to fight for every inch of churn we can get, including:
Pre and post dunning: Retain targets customers through the entire involuntary churn cycle, reaching out to customers who are on the verge of expiring before they go delinquent and after failures occur.
Emails and In-app notifications: Emails target customers right in their inbox and in-app notifications target customers right in their workflow to eliminate as much friction as possible to updating their credit card information.
White labeled landing pages and forms that don’t require a user to login to update their credit card: You don’t spend much time on your billing settings page or your credit card forms, so we don’t want to send your customers to them. Instead we’ve created gorgeous landing pages and forms that don’t require your customers to login and send the data right to your billing system. Best part is they’re completely white labeled.
Constant optimization and complete management: We do all the work leveraging the millions of data points we’re sitting on, running multivariate tests and utilizing machine learning to mine your data for key findings. Through constant optimization and our algorithms, your recovery rate continually improves, because we treat your delinquent customers as their own marketing channel.
One of the best parts about all this is that you don’t have to do a thing beyond initial setup (which takes no time at all - we timed it). We do all the work, leveraging our data, expertise, and technology.
Doesn’t that exist elsewhere? Sure, but not at this level
The worst part about delinquent churn management is people think they have this problem covered. Over the past six months since our soft launch, I’ve heard, “well we send emails” or “doesn’t Braintree/Stripe/Zuora already do something.” Well, there’s a difference between doing something and doing something right.
As the data below indicates we’re fortunately doing the latter, as we’re doing nearly 2-3x better than your in-house emails and our competitors. Anyone can ship off some emails or push some Intercom notifications, but it takes real expertise to make sure you’re fighting for every customer and focusing on this problem as it deserves to be focused on - comprehensively.
How much does it cost? Completely value based, guaranteeing 100% ROI
The best part about all this is that we’re doing completely value based pricing (not sure if you’d expect anything less), meaning if we don’t make you more money, you don’t pay for anything. The way we do that is we price in bands based on recovered revenue (customized for each customer based on LTV), defining a customer as “recovered” when they’ve stuck around for two months or more.
For instance, if we recover someone on January 15th for $20 and they churn before February 15th for any reason, we don’t count them as recovered. Technically you did make $20 off our work, but we want to put our money where our mouth is and only take credit when we’ve truly recovered someone. This allows us to guarantee at least 100% ROI. Most of our current customers are getting 2-5k% ROI currently (not a typo).
We also give away pre-dunning (getting someone to update their credit card before they’re expired completely for free. Data indicates we could likely charge for pre-dunning in some fashion, but we like charging based on recovered revenue, and it’s a bit difficult to know if that user was going to truly go delinquent.
Questions? Curiosities? Schedule a demo
As I’m sure you’ve gleaned from our blog, we’re here to help. If you’re on Braintree, Zuora, or Stripe and want some help solving this problem, we’d love to chat. Simply fill out this form or contact me at [email protected] and we’ll get you all squared away.
For the rest of the folks who made it this far, there’s plenty of data coming down the pipe to walk through churn, delinquent churn, and more SaaS finances as we continue to explore how to get your SaaS economics in order to grow your business.