How to Tap Into Payment Failures to Increase Retention for Your B2B SaaS

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About 60% of organizations have lost customers due to failed payments.

Here’s the sadder part.

Fewer than half of the organizations are actively making changes to their payment process despite experiencing frustrations from high failure rates.

Churn is one of the major problems almost every B2B SaaS faces. It’s unavoidable. Some clients will always voluntarily cancel their subscriptions after some time. And there isn’t much you can do about it.

But when it comes to involuntary churn caused by payment failures, there’s plenty you can do to reduce it.

We’ll look at how you should treat the client after a payment failure without losing them and the steps you can take to prevent payment failures.

Step 1: Inform Your Client and Provide a Grace Period

Once a payment failure occurs, don’t rush to blame the client for the problem. Showing a little empathy in your dunning process will go a long way in retaining and turning them into loyal subscribers.

Use a friendly but persuasive tone to communicate about the failed payment. Then give them enough time to find out where the problem is and resolve it, without suspending access to your services.

How do you communicate with them effectively? Here are two tips.

Keep it Simple

Don’t send a complicated message or beat around the bush. Tell them exactly what has happened and be clear on the next steps.

You can advise them to use a different mode of payment or contact their bank to see why the payment has been declined.

Mention Your Value Proposition

Telling your clients about the failed payment reminds them that there’s a charge coming their way. They could start debating whether it’s an expense they should continue incurring, leading to cancellation.

Remind them why they still need you.

For instance, if you’re selling e-commerce tools for businesses, remind them how your solutions have simplified their business operations and helped them enhance customer experience.

Pro tip: Be sure to make the payment update process easy and smooth. Your clients shouldn’t have to log in to update payment information. Make it easy for them by providing a link that takes them to their update page.

Step 2: Have a Rigorous Post-Failure Follow Up

The grace period may lapse without a response from some of your clients.

Again, don’t delete their account immediately. There could be some other reason they haven’t addressed the failed payment.

You can deactivate or downgrade the account to a free version. Then reach out to these clients in an email that’s authentic and personable.

Let them know it’s a human being on the other end who wants to know if they benefited from your service.

To automate this process you can leverage the right types of CRM tools. It will help you to manage and send automated follow ups messages to enquire why they failed to pay and check if there’s anything you can do to make their experience better.

Getting their feedback makes it possible to:

  • Identify why they failed to pay and provide solutions that’ll retain them
  • Get insights that’ll help you improve your services and retain more customers

Step 3: Put Measures to Prevent Payment Failures

Following up on failed payments and providing a grace period are reactive approaches to the problem. Here are some measures you can take to proactively avoid payment failures.

Work with the Right Subscription Billing Software

As per Younium, subscription billing is used to generate recurring payments. But this also means there’s a risk of payment failures in the process. The right software can prevent payment failures by notifying clients of upcoming payments. Timely notification of any upcoming payments gives them time to prepare for the transaction.

The software should support automatic retrials. Sometimes, payments simply fail. A retrial can lead to a successful transaction.

The right subscription billing software will also support a multi-currency payment option. This is important because some banks stop transactions that they perceive as fraudulent in a bid to protect their account holders.

Most of these banks regard transactions from across borders as suspicious. For this reason, currency conversion can cause the bank to flag and decline a transaction.

A subscription billing software that helps you sell to customers in their local currency can help prevent these fraud triggers and increase authorization rates.

Pro tip: Mismatched and insufficient information can also prevent transaction completion. Always provide as much transaction data as possible to help banks verify the legitimacy of transactions.

Encourage Annual Subscriptions

Make annual subscriptions available and make this option irresistible. This post by Attrock provides tips your sales team can use to create an effective sales strategy.

Charging your clients per month creates room for payment failures. But annual subscriptions help your clients get your services without having to worry about making funds available every month for renewal.

Besides, annual subscriptions give you an entire year to provide real value to your clients and prove how your service can benefit their business over time. It makes the decision to renew the subscription easier for them.

Key Takeaway

There are plenty of reasons behind payment failures for B2B SaaS clients, such as closed bank accounts and insufficient funds.

But this doesn’t mean you should lose the involved client.

Start by providing them with ample time to fix the problem before canceling their account.

If they take the payment failure as a chance to cease your services, get feedback on areas you can improve to prevent the loss of more clients.

Most importantly, prevent payment failures by investing in a subscription billing solution that supports multi-currency payments, notifies clients of upcoming payments, and supports annual subscriptions.

About Carson Derrow

My name is Carson Derrow I'm an entrepreneur, professional blogger, and marketer from Arkansas. I've been writing for startups and small businesses since 2012. I share the latest business news, tools, resources, and marketing tips to help startups and small businesses to grow their business.