In the e-business world losing existing customers to involuntary churn is the quiet culprit of profit loss, since it costs two times more to acquire a new subscriber than to keep an existing one. Recurring payment failure is the primary cause of involuntary churn, driven by insufficient funds, credit card limits, credit card expiration or replacement, or technical failure of the payment processor.
A new study by Forrester Consulting on behalf of Digital River finds businesses can no longer afford to focus on customer acquisition at the expense of retention. That means, at a minimum, providing a seamless payment experience from the beginning of the customer relationship throughout the entire customer lifecycle.
Other Noteworthy Findings:
• Companies surveyed reported that on average 62% of their subscription revenue comes from renewals, underscoring the importance of strong payment renewal processes.
• Organizations lost, on average, more than one-third of their subscribers to churn.
• Sixty-eight percent of respondents said replacing customers lost to churn is “very” or “extremely” challenging.
• Those companies with revenue loss directly attributable to churn reported losing an average of 17% of their annual subscription revenue or profit.
• More than one-third of respondents blamed churn for their reluctance to spearhead new subscription pricing and packaging models, putting them at a competitive disadvantage in a rapidly evolving industry.
• Ninety-one percent of respondents cited automated credit card account updates as a way to prevent monthly declines and combat involuntary churn.
The Digital River and Forrester Study Recommends:
• Don’t accept that involuntary churn is a cost of doing business.
• Combine customer and payments data for better decision making and communications.
• Consider using a full-service, integrated payments solution.
• Use resource savings to invest in innovation.