Your most loyal customers are the ones you already have. Let’s explore how failed payments affect revenue and look at ways that companies can improve and increase customer retention. In the United States, customer churn costs $136 billion, of which 34% is due to involuntary churn and failed payments.
Failed payments cut into forecasted revenue with 48% of businesses saying chargeback rates cut into their earnings and 43% saying that increased customer service contacts because of failed payments are more costly. The leading causes of failed payments occur because of insufficient funds, credit card limits, and credit card changes. While convenient, auto-renew also increases the risk of failed payments with 47% of businesses losing auto-renewals due to payment data changes.
It’s imperative that customers are satisfied because 32% of people will stop doing business with a company after a single bad experience. While technology has made communication easier, automatic emails are ineffective in maintaining customer satisfaction. The majority of consumers want companies to show they value their time and consistent customer service, but automatic emails lack empathy and can’t aid the consumer well. Plus, just 15% of customers respond to emails that prompt them to change payment information, showing that automatic emails are ineffective in promoting action.
It’s in a company’s best interest to retain existing customers because it costs 5 times more money to attract new customers, and 65% of business comes from existing customers. Improving customer retention can have a lot of benefits, namely saving on marketing costs, increasing profits, and improving the service quality. Making small changes in customer retention can have a large impact on profits; a 5% decrease in churn can potentially lead to a 25-125% increase in profits.
Looking at who your best customers are, why customers leave, and offering multichannel customer service can all improve customer retention, which, in turn, will generate more revenue. Direct debit, digital wallets, and payment processors that accept a wide variety of card brands reduce card decline can bring payment failure rates to as low as .5% (a 70% reduction in involuntary churn). Additionally, preventing failed payments can be done by automated card updates, which require no customer action. Making these changes in a business can make all the difference in company success, turning an average company into a legendary one.