Dunning Emails 101 — The complete guide to dunning and involuntary churn

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Here’s the sad truth for every subscription company when it comes to dunning emails. When your customers have billing issues or failed payments that counts toward your churn rate. Ouch.

The good news is, with the right strategy there’s a handful of ways to combat that type of involuntary churn.

What are dunning emails?

Dunning emails can offer an effective way to notify your customers of payment issues. With a thoughtful approach, you can send a series of transactional type emails to let your customers know their accounts are behind and how to bring their account current.

On the flip side, dunning emails can be tricky. You may want to let the sleeping dogs lie. You also don’t want to convey the wrong message or tone to your customers with your emails. If you’re not careful you could come across as a pest or be too aggressive and leave a bad taste in your customer’s mouth.

You want to strike the right balance between resolving their billing issues but also refreshing their minds about why they use your product and the value it brings to them.

Why the name dunning? What is it?

In general, to “dun” is to make repeated, persistent demands of someone.

Ugh, sounds pretty bad when you put it that way.

In business, “dunning” is a slang term which refers to the process of collecting an outstanding invoice or bill from customers who have failed to make their payments on time. Dunning is a particularly relevant concept within the world of SaaS. When maintaining a service that requires a monthly or yearly subscription of recurring payments.

In other words, when your customers fail to make their payment on their renewal date they’re at risk to churn. By kicking off a series of dunning emails you can increase your chances of collecting failed payments or avoiding failed payments altogether.

Why Dunning Emails Are Important

Effective dunning strategies are necessary in order to reduce payment-related churn, which can be a nightmare for any business. Churn, a word used to broadly define revenue loss from a company due to lost accounts or missed payments, can massively inhibit a company’s growth at even small percentages.

For example, as little as 2% net revenue churn per month is a high number. If you’re seeing a figure like this in calculations for your own company, there’s probably something wrong with your business. If maintained for a full year, 2% monthly revenue churn will lead to a 22% total loss from annual revenue.

Finding a Balance with Dunning Emails

Dunning is tricky because overdue payments and the concept of debt are touchy subjects. While dunning is a necessary way of life for businesses who accrue revenue from a number of their customers, it is critical to remember that payment processing failure can occur due to a variety of reasons. Just because a customer hasn’t paid you on time doesn’t necessarily mean that the client has malicious intent or that they’re negligent.

In some cases, the reason that a recurring payment failed to process is simple. A few pesky causes of failed payments could include:

  • Credit card associated with the account has expired.
  • Payment information was inadvertently entered incorrectly.
  • The credit card company has suspended the card due to suspected fraud or another reason. (This is more common than you think.)
  • Your client lives in a country different from your service’s location.

In most cases, declined payments can be solved with an easy retry. In fact, with the advancements by major credit card companies, they’ll solve the issue before you can even send a dunning email. It’s not even necessary to contact your customer—just try again. This saves you the hassle of communication and prevents the client from feeling embarrassed or accused.

If, however, it is necessary to get in touch with a client about a failed payment, never contact them with an accusatory tone. Instead, focus on maintaining a positive customer relationship. Work with your customers, not against them, when dunning.

Timing is Everything When sending dunning emails

There will be times when you realize in advance that some payments will be declined on the next processing day. For example, if you notice that a credit card on file has an upcoming expiration date, it’s a smart idea to reach out to the affected customer prior to the first month a payment may not process.

By keeping your clients actively engaged with the status of their payment information and encouraging them to provide accurate, updated information throughout the duration of their subscription, you can avoid a massive amount of churn and wasted dunning efforts before the problem even occurs.

Just be sure to space your emails appropriately. It’s necessary to find a balance between being annoying and yet persistent enough that you’ll accomplish your goal of recovering funds.

With Weav, we’ve built a sophisticated dunning system that takes all the hassle out of it for you. From when retries fire, when dunning starts, the content of the emails to when the emails fire. Weav literally takes all the guesswork out of it for you.

Try Weav for FREE.

Avoiding the Spam Folder

There is one caveat to this “pre-dunning process”—reminder emails always run the risk of irritating clients or mimicking spam-like debt collectors. In order to reduce this possibility, construct your dunning emails carefully. Use your subject line to clarify the problem, be clear and concise in the body of the email, include a call-to-action so that the customer can easily perform the necessary steps, and always provide an opportunity for questions.

Sending dunning emails from a “do-not-reply” address offers the client no chance to ask questions, if necessary, and makes it more difficult for them to comply.

Make Dunning Emails Easier

Whether your company is relatively new on the market or if you’re serving thousands of customers, dunning can become a time-consuming pain. Luckily, this is exactly why we built Weav to help you reduce the workload and optimize your payment-related churn rates.

Dunning management software does all the work for you. From analytics to automatic messaging (just remember to follow the guidelines we mentioned for a good dunning email) to document handling, our services can help your business save time and money with the appropriate amount of automation.

Once your dunning strategies are the best they can be, all you’ll have to do is sit back, relax, and watch your revenue churn disappear.

About the author

Weav Team

Hi, I'm Ollie, the octopus! The leader of the Weav team (obviously). I spend my days dreaming about how I can help brands become more human with their customers. When I'm not doing that, I like to see how long I can hold my breath and brag about how I have 3 hearts (it's true).

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By Weav Team