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What Is Delinquent Churn and How to Reduce It

Updated: May 9

Credit cards are convenient for buying things online, yet there are a surprising number of ways they can fail. A card can reach its limit, expire, or get frozen after a theft or loss. The card processor can make errors.

Delinquent Churn

SaaS companies that keep customers’ cards on file to charge periodically are affected by such failures often, resulting in delinquent churn. According to Lighter Capital partner Chargebee, in fact, an average of 20-40% of a SaaS company’s overall churn is due to delinquent credit cards.

The really problematic part is that only 5% of customers whose service is terminated due to card failure return to the fold. The vast majority of those you lose due to credit card problems are gone forever. So, what is delinquent churn and how can you reduce it? Read on below.

What is Delinquent Churn

Delinquent churn is the loss of customers due to payment problems, usually delinquent credit cards on file. Only a small fraction of those whose service is discontinued when their cards are canceled, maxed out, expired, or frozen decide to remain customers using a different payment method. Most of them are lost as customers, making up what is called “delinquent churn.”

How to Reduce Delinquent Churn

How to reduce delinquent churn

A key strategy to reduce delinquent churn is to track customers’ credit card expiration dates and find ways to make sure those dates are updated. There are various methods for reducing delinquent churn, including:

1. Dunning communications

Dunning emails are direct and to the point: “Your credit card on file will expire in 60, 30, 15 days, etc. Please update it.” These missives will ideally include a link to the customer’s payment page with pre-filled fields and an indication of what needs to be updated.

However, be aware that these are not a very effective way to get customers to stick with you; in fact, they might actually drive customers away.

2. Renewal emails focused on features and benefits

These emails are softer and more inspiring than straightforward dunning letters. You’ll remind customers of the various features of the product that have been helping them and preview new features they could use. Your request that they update their credit card information will be part of this larger, more customer-friendly and motivating communication.

3. In-app notifications

Since many SaaS companies’ products are or involve apps, notifying customers inside your app can be a good strategy for unobtrusively reminding them to update credit card information. You should send out notifications both before the credit card expires and afterwards as well if it still isn’t updated. Continue to communicate so you can win as many customers back as possible.

4. Card updaters

Credit card companies offer “card updater” services that provide vendors with updated expiration date information for their customers’ cards without the customers’ involvement. This can seem like a perfect solution, but be aware that some customers will find this invasive – remember that you need customers’ explicit consent to debit them, so make sure you include details about your automatic card updating in your service agreement.

5. Recovery services

There are services available to assist you in managing the delinquent churn intervention process. ProfitWell’s Retain, for example, uses data and algorithms to find the best ways to reduce churn and retain customers.

Speak to the Right Audience

Understanding Delinquent Churn

As you reach out to your customers to ask for a valid form of payment, remember that you’re mostly talking to those who want to stay with your service. This is why it’s continuously important to always be thinking about your product-market fit, product feature add-ons and SaaS pricing strategy, among other key metrics for scaling your startup.

You can certainly remind doubtful subscribers of the reason they signed up in the first place and hope that they’re newly motivated to stick around. But your appeals are chiefly targeting at those who are dedicated to your product and simply didn’t realize their card was about to expire.

Thinking in those terms will make it easier for you to frame your communication in a friendly, non-antagonistic way – and help you reduce delinquent churn. Be human; be understanding. Life is busy. Tracking logistics is tricky. Customers who see that you get that will be all the more enthusiastic about staying in your orbit.


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