When it comes to SaaS and subscription businesses, revenue recovery is a vital element for success. In order to maximize your growth and increase your revenue, you have to face subscription churn head-on. Every customer you acquire for your business will eventually face a choice — whether to keep your product or cancel. And there are endless reasons why customers choose to cancel. That means, sometimes, customers may need some encouragement to stick around.
Let’s do a deep dive on revenue recovery — what it is, some revenue recovery solutions and methods, and a few modern tips for SaaS and subscription businesses.
What is revenue recovery?
In order to lower your churn rates, you have to prioritize churn management. And a big part of churn management is revenue recovery. Revenue recovery is simply the strategies that SaaS and subscription businesses put together with the goal of keeping more customers subscribed to their product. If you want to increase retention for your SaaS business, then you need to focus on revenue recovery.
Of course, in order to effectively implement revenue recovery strategies, you’ll first need to pinpoint which customers actually have recoverable revenue and then choose which revenue recovery strategies or methods will work for your specific customers. Let’s start by taking a closer look at your customers.
Where should you focus revenue recovery efforts?
The fact is, you’ll never be able to save every single customer. There are some customers that you simply can’t retain — so you don’t want to waste your precious time and resources trying. That’s why it’s so important to distinguish between avoidable churn and unavoidable churn.
Unavoidable churn can occur for a number of reasons. For instance, some businesses are seasonal, which means they’ll have to cancel your product (even just temporarily) during their off season. Your customers could churn because they’re experiencing financial difficulties. Or, some customers might churn because they simply weren’t the target audience for your product.
Avoidable churn, on the other hand, is where you’ll find customers who actually have recoverable revenue. Avoidable churn can cover everything from poor customer service and unsuccessful onboarding to payment failures. When it comes to avoidable churn, which is where we want to focus, you’ll generally find customers that fall into three different categories:
1. Customers who have involuntarily churned
There’s a huge difference between voluntary and involuntary churn. Whereas voluntary churn arises from a deliberate action on the part of the customer, involuntary churn happens without an actual cancellation from the customer — usually as the result of a failed payment. While some customers may have allowed their subscription to lapse on purpose, many times these failed payments are due to an expired card or incorrect payment information and can be recovered. All you need is a payment recovery service (more on that later).
2. Customers close to churning
While you can never know what’s going on in a customer’s head, there are certain indicators you can keep an eye out for that could identify customers who are close to churning. For instance, if you notice that a customer hasn’t adopted new or important features in your product, it could indicate that they’re not getting the value they need from the product, which can lead to churn. Other indicators include decreased usage levels, negative customer support interactions, and payment method or setting changes.
3. Customers with renewals coming up
If your customers have contracts with set renewal dates (say, quarterly or annually), you’ll want to stay on top of those dates. After all, this is the moment where they’ll either keep using your product for another year or choose to churn. Make sure you use the time leading up to renewal to guage where your customer’s at and possibly implement revenue recovery methods.
Modern tips for revenue recovery
While there are many ways to go about recovering revenue, the more traditional revenue recovery solutions may not always be the most efficient. Let’s take a look at some more modern tips for revenue recovery:
1. Leverage customer feedback
When it comes to revenue recovery, you can’t rely solely on data from a spreadsheet. You need qualitative insights directly from the source that matters most: the customer. That’s why it’s vital to gather customer feedback wherever you can and hold on to it. Adding a feedback button or form within your product is one of the best ways to accomplish this. A feature like this gives you direct access to your customers and makes it easy for your customers to provide feedback in real time at any point in their customer journey.
You can even look back at previous customer support chats or other forms of customer feedback in order to aid your revenue recovery efforts. If you notice a trend consistent across lots of customer feedback, this may indicate that there are overarching problems that you need to address within your product. You can also look back at the feedback of individual customers (specifically ones who fall into the aforementioned categories of “upcoming renewal dates” or “at risk of churning”) and reach out to them personally addressing any issues you could help them solve.
If you’re looking at customers whose renewal dates are coming up, keep in mind that it’s always best to reach out sooner rather than later. Contacting them a month before their renewal date versus three days prior can mean the difference between that customer churning vs. staying.
2. Assist at-risk customers
Earlier we mentioned the category of customers that includes ones close to churning. Once you’ve identified those customers, you’ve also immediately pinpointed a perfect opportunity for revenue recovery. By figuring out the pain points of at-risk customers, you have the chance to stop churn before it happens and recover revenue.
In order to assist at-risk customers, you’ll want to focus mainly on two points: education and value. Ideally, your customers all receive proper education during onboarding. But if that didn’t happen (or didn’t happen effectively), then now is the time. If you find that your at-risk customers were inadequately onboarded, take the opportunity now to introduce them to educational materials and tools that can help them fully embrace your product for the first time.
You also want to ensure that at-risk customers haven’t lost sight of the value proposition that likely drew them to your product in the first place. Try to use email campaigns or in-app prompts to remind them of the value of your product — what makes it stand out, what pain points it solves, etc.
3. Send reactivation emails
Even if a customer has already churned, that doesn’t mean you have to stop using revenue recovery strategies. Reactivation emails (or winback campaigns) can help you re-engage churned customers and recover lost revenue.
The key to a successful winback campaign is personalization and timing. Here are a few tips to keep in mind…
- Don’t start sending reactivation emails immediately after they’ve cancelled. In general, it’s typically a good idea to send win-back emails after customers have been inactive for 30, 60, or 90 days.
- Make sure you understand the specific reasons why that customer cancelled their subscription. Once you pinpoint the cause of churn, you can segment your customers and customize your winback campaigns for each segment to address their specific concerns or needs.
- Use your reactivation emails to offer targeted, personalized discounts that can incentivize lapsed customers to re-subscribe.
- Don’t use generic messaging. Craft a winback campaign that addresses the customer's pain points, reminds them of the value your service provides, and offers an enticing incentive to return.
4. Institute payment recovery
We’ve covered modern revenue recovery strategies that are tailored for two of the customer categories mentioned earlier. But what about customers who have churned involuntarily? That’s where payment recovery comes in. Also known as dunning management, payment recovery is key for the success of your SaaS or subscription business. Did you know that almost half of all subscription churn is caused by failed payments? That’s a huge amount of involuntary churn.
And, while you can handle payment recovery manually, it will become increasingly difficult to keep track of failed, late, and missing payments as your company’s customer base grows. Without a dunning management process in place to manage and reduce the chance of payment fails, you risk losing a large percentage of your hard-earned revenue to involuntary churn. That’s why one of the most effective modern strategies for revenue recovery is simply to set up a payment recovery platform… like Churnkey.
Want to enhance your revenue recovery?
Here at Churnkey, we help our customers recover failed payments automatically with done-for-you dunning management. We know you can’t afford to lose revenue from customers who actually want to pay you. We also know you don’t want to become a payment recovery expert. And you don’t have to — just leave it to us.
Our modern payment recovery service leverages machine learning and our churn expertise in order to recover up to 89% of failed payments. Schedule a demo or sign up for a free trial to see how Churnkey is helping SaaS and subscription businesses like yours fight churn and recover more revenue.