How to Create an Email Sequence for Effective Dunning Management

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The subscription business model sounds like it should be so simple. Build a product, sign some customers, set up a payment gateway, and watch the recurring revenue start to roll in.

But in practice, of course, it’s never that straightforward.

You’ll inevitably encounter some customers that miss a payment or two and need follow-up. Some will realize the mistake and pay immediately, while others may be more difficult.

Without the right tools, dunning management can be an extremely inefficient process. But when you use a modern, powerful subscription billing software, you can automate many dunning tasks to ultimately streamline your entire workflow.

Dunning communications are one of the big components your billing system can take off your plate. But setting up the right message to send at the right time to prompt your customer to take the right action might feel like, well… a bit of an art form.

Let’s take a look at the why and the how of automated dunning notifications.

Preventing Involuntary Churn with Automated Dunning Communications

When a subscription customer churns out due to missed or declined payments or other types of payment failure—most often due to an expired payment method—it’s classified as involuntary churn. And many SaaS business leaders would agree this is perhaps the most frustrating reason to lose a customer. After all, the customer wasn’t necessarily dissatisfied with your product or service; if the payment had simply gone through, the customer would still be growing with your business.

On average, a subscription business loses around 9% of its monthly recurring revenue (MRR) to involuntary churn.

If the manual-heaviness of your dunning management process is preventing you from effectively following up to recover failed payments from those delinquent customers, it’s time to change things up. Most businesses just can’t afford to lose that kind of revenue.

Software development and backend as a service (BaaS) business bitHeads was leaking revenue as it scaled, due to its inefficient dunning process. But since switching to agile recurring billing software and automating its dunning process, the business has been able to recover an impressive 5-10% of its recurring revenue each month.

How to Craft The Perfect Dunning Email

Delinquent payments could cause your subscription business to lose a lot of recurring revenue. So it’s important to take your messaging seriously when a payment fails—it’s not enough to send just one email and hope for the best.

You can think of these delinquent customers as their own marketing channel, requiring specific and targeted outreach. In fact, you may even want to consider collaborating with your marketing team when creating these communications.

A Clickable Subject Line

The first hurdle is to get your customer to open your email, and the way to do that is through a compelling subject line.

  • Include your company name. This makes the email much more recognizable to the customer amid a sea of other unread emails.
  • Let them know they need to act before they even open the email. Make your subject line stand out by using a phrase like ‘action required’.
  • Use emotional words. Words and phrases such as ‘payment failed’ or ‘subscription terminated’ will catch your customer’s eye and make them feel something, compelling them to act.
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Be Polite, Yet Urgent

Next comes the body of the email. This is where you’ll include what went wrong and how to fix it. Here are the elements of effective email body copy.

  • Keep it brief. Include any and all relevant details, but ask yourself if anything beyond that is really necessary. People are busy and don’t always like to read. In fact, survey results show 76% of people dislike emails longer than three paragraphs, while 20% won’t read emails longer than one paragraph.
  • Let them know what may have gone wrong. Include a list of common reasons for failed transactions: an expired card, insufficient funds, incorrect billing information, etc. This may help them realize the reason for the payment failure so they can quickly correct the issue.
  • Be friendly. Remember, these aren’t all bad customers—many probably have no idea their payment is outstanding. While you should let them know they risk losing access to their subscription, give your customers the benefit of the doubt and keep your tone friendly and positive.
  • Let them know how to contact you. Sometimes the issue requires a more complicated fix than simply updating billing details. Provide a link to support documentation or contact info for your customer service team in case your customer needs a bit of assistance.

Make it Easy to Take Action

The real point of sending these dunning emails is to get your customer to act, so make sure it’s as straightforward as possible for them to do so!

Include a big, colorful button or bolded link with a clear call to action. The link should lead to the customer's account in the self-service portal where they can update their payment details, or directly to their invoice so they can easily make a payment.

Timing is Everything

Simply put, the more emails you send, the better chance you have of recovering that revenue. So how many emails should be in your cadence, and how often should they go out?

  • Test different frequencies. We’ve already established you should send more than one dunning email to the customers who don’t take action. That’s not to say you should bombard your customer with daily emails! But since every business has a different customer demographic, what works for your peers’ businesses may not work for yours, so be open to the idea of experimentation. Start with a 30-day campaign, sending a few emails at specific milestones in that timeframe—maybe day 0, day 3, day 7, day 15, day 20, and day 30. If you’re not seeing the uptake you wanted, try a different cadence.
  • Change up the messaging in every email. If your first email wasn’t opened or actioned, your results probably won’t get any better if you send the same message repeatedly. Consider noting in the subject line the number of attempts you’ve made to contact them—i.e., ‘2nd notice: Your payment to Company X failed’—and becoming increasingly urgent in your body copy.

Emails or Text Messages?

Ideally, both. If you want to recover that involuntary churn revenue, you should be trying more than one way to get the customer’s attention.

People get a lot of emails every single day, and most don’t open all of them. It’s entirely possible the customer may not even see your dunning emails.

On the other hand, text messages have a 98% open rate.

The same principles of crafting dunning messages apply to texts—just keep in mind the 160-character limit for SMS messages. Keep the message as succinct as possible while still being friendly and including all relevant details.

Additional Dunning Management Support Tools

While the ability to automate email communications is huge, when you’re working with the right recurring billing software, you’ll have a whole suite of dunning management features available to reduce the number of payment failures your business experiences to begin with.

  • Credit card auto-updating: Most of the major credit card providers can work with merchants to make sure a customer’s on-file credit card information is always up to date. That means your customer’s access to your product is never interrupted and your recurring revenue remains consistent.
  • Automated payment retries: Simply running a failed payment again can recover up to 75% of revenue lost due to failed payments. Your billing automation software supports you here by allowing you to set up a retry schedule that takes care of this automatically.
  • Advanced AR aging reports: Regardless of how much automated dunning support is running in the background, you’ll want to keep an eye on the payment status of delinquent customers as well as how much revenue is outstanding. A holistic subscription management software solution will capture this information and provide you with easy-to-digest reports, both at a high level and in granular detail.

Optimize Your Dunning Management With Billing Automation Software

If your dunning management process is largely manual, your billing clerks are likely struggling to keep up. But an automated recurring billing platform can greatly reduce the demand.

With perfectly crafted automated dunning emails and a whole suite of other automation features to reduce the number of communications that need to be sent in the first place, your business is all set up to get it ‘dun’.  

Tags: Subscription Billing SaaS Billing

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