Dunning Management: How to Deal with Failed Payments?

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Failed Payments

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Rebilling, dunning management, failed payments. If you are a business owner, these words probably send cold chills down your spine. Apart from a potential money loss, dealing with failed payments means monitoring them regularly and sending reminders to each customer. They’re not pleasing to a customer’s ear, either.

Unfortunately, dunning is an inevitable aspect of doing business and you cannot escape from it. So, the question is – how to get your customers to pay you and, at the same time, nurture strong relationships with them?

Resolve the problem at the very source

There are numerous reasons why your customers’ payments fail. It could be:

  • The problems with a payment gate
  • Their credit card has expired
  • Insufficient funds on the card
  • Incorrect account details
  • They changed their credit card and forgot to update their information

Obviously, credit cards are one of the major causes of involuntary churn. If you want to minimize it, you should consider providing simpler and more flexible payment options. For example, you could invest in an online payment solution that allows direct debit services; including credit card and bank debit transactions.. Apart from maximizing your collection rates and user experience, these solutions can also do lots of manual work for you. They can handle failed payments and rebill automatically, and even notify your customers of their failed payments so they can be rectified on the spot.

Know when to reach out

If implemented strategically, sending dunning emails may be one of the most effective ways to handle failed payments. You need to send your emails strategically, according to the schedule you’ve built in advance. Here is when to send your dunning emails:

#1 email: a month before expiry, as this is when a customer enters the delinquency phase.

#2 email: a week before expiry.

#3 email: on the day of expiry.

#4 email: a few days after expiry. This is when a customer decides whether to update their information or deactivate the account.

Experiment with different communication formats, too. The multichannel approach, including push notifications, in-app messages, emails, and SMS may work for you perfectly.  

Personalize your approach to grab your customers’ attention

The main aim of a dunning email is to grab your customer’s attention, inspire them to open it, and get them to the billing page. Precisely because of that, you need to keep your customers’ expectations in mind and tailor your emails to them. Here are a few steps you should take when crafting a perfect dunning email:

  • Write a concise and informative subject line that gives a full insight into who’s writing, why, and what is expected from the recipient.
  • Remind your target audience why they love you. Spice things up by taking a highly personalized, emotional approach. Let them remember why they chose you over your competition in the first place and give them a good reason to reactivate their account.
  • Evoke urgency. Start your email with a catchy phrase that clearly indicates that a customer needs to take a certain action, such as Netlify’s “We need your help!” Then, inform a customer of their failed payment and give them a reasonable deadline to resolve the problem.
  • Offer real-time support. When faced with payment problems, some of your customers will need your guidance. Adding your email address to the footer of your message and reminding your customers to feel free to connect with you if they need assistance will boost their user experience and get them to solve the problem faster.
  • Craft a strong call to action. Your CTA should be concise and yet informative enough, as in “Reactivate now” or “Update your credit card data now”. It should lead your customer to the right page, where they can update their credit card information instantly.

Make your page user-friendly

Now that you’ve sent a dunning email, it doesn’t mean you should kick back and relax. Once your customer hits your CTA and lands on your card update page, they want a seamless user experience. What does this mean? Well, for starters, we live in the mobile-first era. This is why you need to invest in the responsive website design and make sure your page is optimized for mobile and desktop users. Make sure your navigation menu is simple, the clickable elements are easy to tap, there is a lot of white space, and the overall design, colors, and fonts are pleasing to the eye. Finally, don’t forget to keep your customers’ data safe. By investing in HTTPS and being PCI compliant, you will ensure that their personally identifiable information is out of hackers’ reach.   

Track your progress

To identify the weakness of your dunning campaigns and improve them strategically, you need to track your them regularly. Here are a few things you need to track when setting up a solid dunning system:

  • If a customer decides to update their account, how and when did that happen?
  • Are your emails getting opened or end up in spam?
  • Are any of your highest paying customers at risk of churning right now?
  • How responsive are your credit update pages?
  • Which dunning emails open better? Of course, this means that you need to A/B test several forms of emails.
  • How much money have you managed to recover this way?

Over to you

Even though they usually start small, they can quickly become a problem for your company and hurt your bottom line. That’s why you need to take immediate steps to prevent them or at least minimize their effect on your bottom line.

Hope these strategies help!

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