In the world of subscriptions, there are two types of churn: active and passive (aka dunning). Active churn is when customers voluntarily cancel their subscription with you, whereas passive churn is when they leave for reasons out of their direct control. If you’ve been working on increasing the customer LTV on your store, you’ve most likely delved into the world of active churn. Some questions you may have asked yourself during this time is:
- Why are customers cancelling their subscriptions? – You can gain a lot of insight into this question by looking at your cancellation reasons.
- What incentives can we offer customers to keep their subscriptions alive? – It’s known that offering alternatives to cancelling such as swapping and skipping can greatly reduce churn.
What is passive churn?
What may get missed in this investigation is why customers are passively churning. You may have heard of this mentioned as a “dunned subscription”, but they both mean the same thing. dunning is when a subscription gets cancelled without the customer taking an action to do so.
This might happen if a customer’s credit card expires, or if a customer’s credit card gets declined enough times during their renewal period. After the maximum amount of charge attempts have been reached, the subscription would be considered cancelled, and your customer will have officially churned.
It can be difficult to tackle each instance of dunning because it can come out of the blue and the customer may not even be aware. There are ways to mitigate dunning in your Recharge instance by ensuring that your Recharge settings are set up to handle this without you needing to manually intervene. With this, you can save time and reduce your churn.
Is my store experiencing dunning?
More than likely, the quick answer is a resounding yes. Every store deals with some level of dunning. But why? Well…life happens. Credit cards expire, get cancelled, and get declined for many reasons. For many customers, they have multiple subscriptions going at any given time, often associated with different credit cards. With so much going on in their world of subscriptions, it’s easy to miss when one doesn’t show up or gets cancelled.
What’s important here is having your customers understand that they are dunning and to help them fix that if it’s indeed a mistake and unintentional. But before we jump into how to tackle this, it’s important to know that the best way to tackle dunning is the same way to tackle Active churn: Give your customers transparency and the flexibility to modify their own subscriptions.
The first order of business in tackling dunning is to have some system to alert customers that there has been an issue with their payment for their subscriptions. This allows you to help them take the right action to try their charge again, or change their credit card on file.
The good news is that Recharge has this capability built in and ready to use. To mitigate dunning, you can set your Recharge settings to automatically retry orders at an interval of your choosing. Furthermore, our system will automatically email your customer if your store has failed to successfully charge your customer’s card on file. These emails can be customized in your notification settings to match your store’s branding and voice. You can also utilize transactional SMS via RechargeSMS to send a text message to your customers if a charge attempt fails.
Passive churn due to store issues
Note that there are certain scenarios where passive churn may take place that are outside of your customers’ payment isses. The two most common versions of this are if your product no longer has stock or if the product they’re subscribed to had its variants removed. In order to eliminate the potential of this occurring in your store frequently, you can review your charge errors so that you can see what the most common causes of passive churn are in your store and work to clean them up quickly.
Additionally, working with a 3rd party integration to assist with churn prevention can help you optimize your active and passive churn scenarios with your customers. Our partners at Churn Buster allow you to take this even further as they optimize failed payment recovery with a mix of charge reattempts, email campaigns, SMS, and other scheduled actions.
How to measure your success with dunning
What good is tackling passive churn if you aren’t able to measure the success of your actions? This is why Recharge’s enhanced analytics allows you to measure your overall churn rate. You can also check the customer cohort dashboard, where you can see the number of subscriptions that are currently in dunning or that have dunned.
Churn is the most important metric to review, and dunning should be closely monitored
Being that active churn is the most straightforward and easily tackled version of churn, passive churn can often go overlooked. By utilizing solutions that help you review, analyze, and mitigate both types of churn, you focus on growing your subscriber base and your business overall.