SUBSCRIBER RETENTION
Retain subscribers in any economy by taming electronic payments and revenue leakage
As B2C companies continue to navigate an uncertain economy, retaining customers has become more important than ever. Businesses looking for ways to reduce churn rates often focus on factors such as pricing, customer experience, and analytics while overlooking another powerful tool: the number and types of payment methods available to customers.
Electronic payments are the primary way B2C companies collect revenue, and diversifying forms of payment can be a significant factor in churn and retention. The businesses best at retaining customers — called Super Retainers, or those with the lowest churn rates and the highest average revenue per customer (ARPA) — are more likely to diversify their payment strategies by increasing the number of payment methods they offer each year.
Managing different payment types, however, isn’t always easy. Expanding payments globally introduces complexity, cost, and new opportunities for revenue leakage. According to MGI Research, 42% of companies experience revenue leakage and 30% indicate that billing issues are impacting their financial results. When revenue leakage occurs in a subscription business, it can become a recurring problem each time a customer is billed.
Fortunately, B2C companies can tame the complexity of electronic payments and reduce revenue leakage with systems and processes that centralize payment management and prevent possible revenue leaks before they start.
Why payment complexity increases the risk of revenue leakage
Any strategy for global expansion must include a plan for diversifying electronic payments because different countries and regions have different preferred payment methods. For example, credit cards are popular in the United States. In China, customers prefer to pay through the messaging and payment app WeChat. And if you want to do business in Germany, you’ll need to take payments through Venmo. any, you’ll need to take payments through Venmo.
The more methods of payment you offer, however, the more payment gateways you need. Each gateway supports different payment methods, and they don’t all support every method. When companies are small, they often need only a single gateway, but as they expand into new global markets with different preferred payment methods, they need additional gateways.
New gateways not only result in additional fees, but additional payment reconciliation and fraud management challenges. Some gateways have add-on capabilities that help with these challenges, but not all — and the more gateways involved, the messier and more complicated the accounting process can become.
These complications sow the seeds of revenue leakage. Companies might miss out on new business by not offering certain payment methods, but at the same time, adding multiple payment gateways means there are more ways for payments to fail, also resulting in lost revenue.
Address revenue leakage head-on
Learning how to minimize the complexity of electronic payments is essential for B2C companies as they expand into new markets and do business globally. It’s simply not possible to grow without supporting multiple currencies, payment methods, and gateways. But that doesn’t mean companies have to accept revenue leakage as a cost of doing business. Here are six tips for addressing revenue leakage head-on.
- Scale payment operations through a central hub. If you have more than one gateway, a central hub allows you to manage all your transactions in one place while still meeting customer preferences for specific payment options, payment methods, and processing dates.
- Prevent fraud by screening transactions before processing. In a world awash with fake accounts attempting fake transactions, businesses can prevent some types of revenue leakage by using a platform that stays up-to-date on the latest fraud detection techniques.
- Create a strategy for addressing chargebacks. Sometimes fraud occurs in the form of a person signing up for a service, taking advantage of it, and then falsely claiming the subscription was a mistake so their credit card company stops payment. Proactively preventing and managing these situations is a key part of tackling revenue leakage.
- Identify and update cards marked as expired, stolen, or fraudulent. Most payment gateways have an account updater service that monitors when cards expire or card numbers change, automatically pulling new card information so payments can continue uninterrupted. This is especially important for subscription businesses because one card change can result in lost revenue for months.
- Recover failed payments with intelligent retry rules. Credit cards can be declined for different reasons such as insufficient funds, payment gateway failures, or fraudulent activity. Tracking these declines and automating rules for retrying payments on certain days or times can significantly reduce revenue leakage.
- Create dunning workflows to capture aging invoices. Customers don’t always know when their automatic payments are interrupted. Dunning is the process of methodically communicating with customers by letter, email, and phone to collect overdue payments, and it’s another effective way of reducing possible revenue leaks.
Tame the complexity of electronic payments for good
Managing electronic payments is key to growth and customer retention, but the intricacies of handling multiple payment methods, currencies, and gateways can be daunting. Fortunately, with the right systems and processes, B2C companies can consolidate payment management, identify where they could be losing money, and address revenue leakage before it even starts.
Learn how Zuora Billing can help you centralize complex billing operations and reduce manual processes on a platform designed to support enterprise growth and scale.
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