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Dunning Process: 15 Best Practices

Learn how to retry intelligently, escalate communications, send targeted emails to admins and users, proactively notify via SMS, enable one-click reactivation, offer grace periods, personalize and segment campaigns, track churn metrics, and employ five additional tactics.

Dunning is the process of communicating with customers and trying to collect payment when their automatic payments fail. The goal is to keep the service running and fix the payment issue without making customers feel bad.

Think of it as being like a helpful friend who reminds you about something important, rather than a strict teacher who scolds you for forgetting.

These are the common reasons why payments fail (source).

15 Best Practices for Dunning Campaigns

Consider implementing them in your existing tech stack or adopt a dunning management software like Churnkey for a best-in-class experience.

1. Retry Payment Attempts

Implement multiple payment retries after a failure. This could be spaced out over several days or weeks. Many payment processors allow you to set this up automatically. Churnkey's Precision Retries can silently lift ARR by 10%, and work well alongside your existing billing provider's retries.

2. Escalate Communication

Start with friendly reminders and gradually move to more urgent notifications. This might look like an email sequence that begins with a gentle nudge and escalates to a more pressing message if the payment issue isn't resolved.

Use straightforward language to explain the problem and resolution steps. Avoid jargon that may confuse customers.

If your product supports multiple seats or roles, payment recovery campaigns can get tricky. Who's the right person to contact? Should you loop in multiple people? How does that even work? With Churnkey's Billing Contacts API, we'll solve this for you.

Our new Billing Contacts API improves payment recovery performance

3. Support Alternative Payment Methods

Offer a variety of payment options like PayPal, Apple Pay, or Google Pay. This flexibility can help reduce involuntary churn by accommodating user preferences and increasing the likelihood of successful transactions. You might even want to offer prepaid methods of payment for countries like India where subscription laws are stricter.

4. Proactive Renewal Notifications

Send reminders before the subscription renewal date to ensure users update any expired or outdated payment information. Spotify has effectively used this strategy to reduce involuntary churn by communicating proactively with subscribers. Here are a few examples from Upwork and Calendly.

5. User-Friendly Payment Update Process

Simplify the process for users to update their payment information. For instance, provide a direct link in emails that takes users straight to the payment update page. Take a look at Churnkey's payment recovery suite to see what the best-in-class UX looks like.

6. In-App Notifications and SMS

Use in-app messaging and SMS to alert users about payment failures. This can be more effective than emails alone, especially if your users frequently engage with your product or when you don't have emails. Churnkey supports a Pause Wall and SMS Payment Recovery.

7. Grace Period

Offer a short grace period after a failed payment, allowing users to rectify the issue without losing access immediately. This can build goodwill and increase the chances of retaining the subscriber. You can set the duration of the grace period with our Pause Wall.

8. Leverage Data to Personalize Communication

Use customer data to tailor your communication. For instance, if a user typically engages with your product on weekends, time your reminders accordingly.

Churnkey's Live Variables unlock even more customization at scale. It gets even more powerful when you pass your own custom attributes.

9. Incentivize Payment Updates

Consider offering a small discount or bonus feature for users who update their payment information promptly after a failed attempt.

10. Track and Analyze Churn Metrics

Regularly review your churn metrics to understand the impact of your dunning process and identify areas for improvement.

You should look at:

Retention cohorts
Involuntary vs voluntary churn breakdown
Customer churn vs revenue churn
Retention cake charts

Historically, calculating these metrics required a data scientist. With Churnkey's free Churn Metrics, you can simply link your billing provider and view these metrics at a glance.

11. Optimize Payment Retry Cadence

Adjust the frequency and timing of retrying failed payments based on user behavior and card type. You can speak to our team of retention specialists to understand what frequency makes most sense for you.

12. Rotate Credit Card Processors

Rotate through different credit card processors to increase the chances of a successful payment. This can help bypass issues with specific processors.

13. Reduce Payment Restrictions:

Remove unnecessary verifications, such as zip codes, to prevent failed payments due to minor discrepancies like address changes.

14. Leverage Motivational Boosts

Use urgency and trust elements in your communication to encourage users to update their payment information promptly. For example, include deadlines, one-click discounts, or trusted endorsements in your messages. Our team can help guide the messaging but trust your intuition when it comes to creating the offers.