169: Failed Payments? How to Recover Revenue Without Losing Customers

Hey there. Welcome back to the Professional Creative Podcast. I'm Bonnie Christine and today we're going to be talking about something that you are going to love and that is how to keep more of the money that you've already made. What do you think we're talking about? I'm going to walk you through our payment recovery process. Okay. This is a huge kind of issue that anyone with an online business product or education has and it's how to recover fail payments in your business. We've been doing this for many years. We've outsourced it and worked with different people. Now for the last probably two years, we've brought it back in house and handle it on our team for some very specific reasons that we'll cover. So today we're going to dive into how to recover failed payments in your business.

I'm Bonnie Christine and this is where all things creativity, design, business and marketing unite. I'm a mama living in a tiny town tucked right inside the Smoky Mountains, running a multi seven figure business, doing the most creative and impactful work of my life. But when I first set out to become an entrepreneur, I was struggling to make ends meet and wrestling with how to accomplish my biggest dream of becoming a fabric designer. Fast forward to today. I'm not only licensing my artwork all over the world, but also teaching others how to design their creative life and experience the same success. I'm here to help you spend your life doing something that lights you up. I'll help you build a creative business that also creates an impact, changes people's lives, gives you all of the freedom you want, and is wildly profitable. Welcome to the Professional Creative Podcast.

First, let's talk about some stats. Right, so an average of 10 to 12% of all credit card transactions fail. And then subscription providers, if you have a membership or a subscription box, they typically lose on average 9% of their annual revenue due to failed payments that they didn't attempt to recover. Subscription businesses that track and analyze failed payments lose 37% less revenue than those who don't. So if you track and analyze and try to recover failed payments, you're looking at earning 37% more revenue than those who don't. If you have a subscription business, basically you earned it, and so it is very important to try to keep it. Now, there are two different types of churn. And churn is what we'll talk about when we talk about payments that have failed due to a failed credit card payment. Okay, so there's involuntary and voluntary churn. So involuntary churn is Something like insufficient funds in the account, maybe a lost or stolen card, right, that gets canceled, an expired card that just needs to be updated, a charge that was mistakenly blocked by a bank that needs to be fixed, or maybe an international limit on charges. So that is typically the majority. Now, voluntary churns, right, are when people intentionally cancel a service. And those we handle entirely differently. So that could be, you know, a change in their life circumstance. They don't need the service anymore. Maybe it's something that you could have done better. Like maybe they have unmet expectations or they might have incorrect expectations, but for whatever reason, they are canceling their recurring payment. And that's a bit of a different story. So the industry average recovery rate for elearning, so we'll talk about education services here, is 49%. Okay? So that's average recovery rate for the industry. Our average recovery rate on team Bonnie is 88%. That's incredible. And so I'm going to teach you how what we do in order to do that today, that means that year to date, we like last year that added $127,000 to our bottom line and it was only due to recovering failed payments. So we brought it back in house for really three reasons. The first one was control. So as I mentioned before, we had outsourced this to a third party and decided to bring it back. And that's because we at Team Bonnie, we really run like a high touch company. We treat every customer as the individual that they are. We approach every situation with our hearts and we want to be able to offer maybe options for people who are struggling to make a payment or maybe need to just change a payment date or something like that. And we want the power to do that at our own discretion. The next one is consistency. So we were experiencing like high turnover of people who managing our account. And honestly, we have quite an intricate business, right? We have different pricing structures, we have different payment plans, we have different payment processors like PayPal and Stripe. And so we just never felt quite confident that someone outside of our business could really understand and wrap their minds around all the different things that we have going on. And then the other was capacity. At the time that we outsourced, our team really just needed extra bandwidth. And so I needed to hire. Hire is basically where we were at. We were all kind of redlining and we thought this is a great thing to kind of outsource, get off of our plates and loosen up some of our own bandwidth. But then I did hire and the team capacity just grew. And so at this point, when we brought it back in house, our team was just large enough to take it on. So I have two people who kind of tag team recovering failed payments on the team. And on average this costs me for the time. Specifically the time that they address failed payments is around $270 a month. Now we do use a software that also helps us. The software is called churnbuster. I'll put a link to that over on the show. Notes for you. And we have something called the Pro Plan. And so at the time of this recording, the pro plan is 3.49amonth. We honestly would not want to do this without Churn Buster. We love this, this software. So that brings our cost to recovering failed payment to $619 a year. Now to put that into perspective, where we were outsourcing, it was much more expensive. So it was over $2,600 a month to outsource our failed payment recovery. And so bringing it back in house saved us $24,000 in a year. So it's been one of our favorite things. We have three guidelines that we use when we really manage and contact people about failed payments. First is kindness. Everyone has been in this situation before where their payment failed and everyone gets grace and kindness from us because we've all been there and we really believe in what we offer to our customers and we believe that they see the value as well, meaning we never enter that situation feeling like they don't want the service. We believe in the value of what we offer and we believe that they do as well. Then of course, tact. We use tact and straightforward language and communication. And we also try to add a little humor when it's appropriate. If you can imagine, like sometimes people may have feelings about a failed payment. They could be embarrassed, they could be struggling, which is something that we would want to be able to help with. But we just try to be a little lighthearted about it. Definitely not like pointing our finger or giving them a hard time. Just kindness with lots of tact and looking to help them. And then we also just treat everyone as the individual that they are. We're sensitive to individual struggles. We're sensitive to concerns that they have, we're sensitive to maybe family issues that they have. And we have a lot of built in things that can help. So this is what our process looks like. Number one, the payment fails. Okay, so we use stripe for the vast majority of the majority of our payments. And stripe in itself actually has some really robust built in payment recovery processes. And so we rely on Stripe's payment retries at the beginning. So Stripe will try to redo a payment four times over the course of two weeks. Now if we've not been successful, then it gets moved to Turnbuster and that's all automated. It's in the back end of your Stripe settings and your Churnbuster settings. So in Churnbuster at the two week mark, we send six emails over the course of four weeks. And so that's six weeks of failed payment recovery. Kind of trying. And so we were able to write this sequence of six emails ourselves. We make it super easy for someone to get back online. It's just a click of a button. If we are unsuccessful, then we end the campaign and we cancel the student at the end of the six week period. Period. So let me talk about what I think makes a really successful email campaign. Number one, we do want to create some urgency. We want them to know that we want to get them, we need to get them back online as soon as possible. Second, I mentioned this is just to make it really easy. So include a link to update or pay their account off right there in the email so it's really super easy. And then contact information in case they have any questions or concerns. Our tone is really important. Again, it's kind, it is straightforward and it's highly empathetic. And then we also act immediately when a payment fails. Meaning we don't do this, you know, once every quarter or anything like that. We act immediately so that we can get the person back online as quickly as possible. 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Now I want to talk a little bit about how retention applies to failed payments. So retention is keeping people in your programs right now that kind of is related to voluntary churn. So someone leaving because they've had a change in their life situation, someone leaving because they might have had unmet expectations, or someone leaving because they had maybe the incorrect expectations. So accurate expectations are really important. If you have people leaving, that's reducing your retention rate, right? If you have people leaving due to inaccurate expectations, that's a sign that you need to update your messaging. So take a look. Make sure your messaging is really clear, that there's a through line between what you offer for free and what you offer for paid content, and that you're surprising and delighting your customers every chance you have. The next one would be to really find ways to improve. So we use an exit survey to collect information from our customers who are leaving now. This is not mandatory, but it's an invitation to give us feedback upon your departure so that we can improve. So what could we have done better to meet your expectations? And it's been a really incredible way for us to improve our programs. And then failed payment. Making it easy for them to stay or go keeps them actually coming back. So we've all probably been the recipient of a subscription service that was nearly impossible to cancel. You wanted to pull your hair out and throw your computer out the window, right? Maybe you had to call and sit on hold for forever. Or maybe it was like an endless amount of clicks and links and rabbit holes that you had to go through to just get something canceled. So we Believe that it is so important to make it easy to stay and to go if you want to go. I'm not trying to trick you into keeping your money, Right. If you truly do not want our service, we truly do not want to keep taking your money. Right. And so that actually keeps them coming back, because maybe they do need a break, but because we made it easy for them to leave, they're more likely to come back when they're ready to join again. So this is what our cancellation process looks like. First, the customer goes to the page where we have instructions on how to cancel. And that page leads them to what we call internally as an exit survey. The survey collects information and offers them the option to pause. So I want to talk about that a bit. But the survey, again, is not, not mandatory. All that is mandatory is that you tell us your name and email so that we can cancel your account. Everything else in the survey is only if you are open to giving us feedback. And so we ask about, you know, why they're leaving, what we could have done better, and then we give them the option to pause rather than cancel. So if they want to cancel, we cancel it as soon as they fill out the cancellation request form. Super easy. Once we cancel it, we also revoke access to the product and the community, and then we send them a confirmation email to just let them know that it's all been taken care of. Sometimes, though, students will choose to pause instead. And so we offer a 60 and 90 day pause option and that is where we track it ourselves. And their access is resumed at the end of end of the pause. So I'll go over that as well. Then at the end of every month, we kind of process the exit surveys, we calculate our metrics, and then we come together as a team to talk about the different ways that we could improve based on the feedback that we got. Now, one thing that AI has made so much easier is this. And so we can kind of upload the entirety of this kind of spreadsheet response forms and have Chat GPT quantify the results for us. And so then ChatGPT GPT will give us themes that were relevant ways to improve, suggestions on improving based on the feedback from our students. How many people were leaving due to finances, how many people were leaving due to overwhelm, how many people were leaving due to not having enough time. So it's one of our favorite ways to use something like ChatGPT to help us kind of summarize and quantify. Not only summarize and quantify results like that, but also make action steps really clear. So we love that. So let's go back to the pause, because I'm guessing that this is one of the things that not many of you are doing. 30% of our survey respondents choose to pause. So 30% of people who were going to cancel choose to pause instead. And then I think this is an important metric. At the end of the pause, 63% of the customers stayed. Okay. 30% of the people who were going to cancel asked to pause instead. And then at the end of the pause, 63% of them did indeed stay. So that is really incredible. Super worth it to have that pause integrated. Now, from a backend perspective, we're using Kajabi, so it's a little bit manual. We manually pause their account, and then we track everyone who's requested a pause using a Trello board. And so Trello is a project project management software, and we are taking care of these on a weekly basis. So, in summary, the first thing I want you to do is look at your settings for all of the payment processors that you have. Use what you have in place already. If it's Kajabi or Stripe or PayPal, they all have ways to track failed payments. And some of them, Stripe does the best job, allows you to update your settings to retry cards and email reminders for expiring cards for your customers as well. Well, then write an email sequence. You can think of this almost as a nurture sequence, but a customer with a failed payment might not even know that they have the failed payment. It's not a reflection on you or what you're offering. They likely. Well, we always assume that they want to be online because they know the value of what we offer. And so the email sequence is really there to help us help them get back online, get their credit card back working, and then the exit process. Decide what really makes sense for you and your business. And then create a process to help students or customers leave if they want and also gain information as they do, if that makes sense for you. And then a process to quantify data for improving your business based on why people are leaving. Okay, I hope this got your gears turning. I want you to keep more of the money that you already made. And again, we're going to link up everything that I mentioned here, especially the software churnbuster that we love. I'll put that over on the show notes for Today's episode. That's professionalcreative.com my friends. Create the beauty that you want to see come alive in the world. And remember, there's room for you.