Article

Robert Quint
Robert Quint 7 November 2016

How to Stop Direct Debit Failures Killing Your Business

Failed direct debits are a serious threat to subscription and membership based businesses. They are a key churn trigger as customers re-evaluate your service when deciding whether to set up a new direct debit. If you’re business’ lifeblood is subscription or membership services, you need to have your failed direct debit process nailed! Make sure you tick these 3 boxes:

1. Automate a friendly notification from your CRM.

Manual processes will cost you. The objective here has to be to minimise the amount of time from the payment failure to the customer notification being sent.

Depending on the industry, failed direct debits can be a trigger for customer churn in up to 50% of instances.  Gym memberships are a prime example. Between 25% and 50% won’t be renewed after a direct debit fail; and this number rises with every day that passes after the declined payment.

We’ve seen automation of payment failure comms - using exactly the same copy and delivery method - reduce churn by up to 18%.

2. Link to a digital payment method.

Understand most customers don’t want to talk to you. Don’t take it personally, just accept it. If you make them talk to you to set up a new direct debit you are simply putting another barrier in their way. Expect fewer customers getting in touch and higher churn.

You need to link to a landing page in your failed payment notification.  Here, your customers can enter their updated banking or credit card information.

Beyond the customer experience and churn impacts, there are your internal admin costs. Manual over-the-phone direct debit set-up is error prone and costs business significantly.

A 2014 UK survey found:

  • Over 40% of finance departments spend longer than four hours a month fixing direct debit mistakes.
  • The cost of rectifying failed direct debit and credit payments is high, with 60% of 200 businesses questioned believing the cost to be at least £50 each time.

3. Waive failed payment charges for a first offence.

Charging customers for direct debit failures is standard practice (and likely a necessary evil to cover bank charges).

BUT, you should let your customers off the hook for a first offence.

Any direct debit failure has your customers re-evaluating your service with fresh perspective. Essentially they are asking themselves whether they should buy your service again. The last thing you want to do is give them an obvious reason to pull the pin.  Even if your bank or payment merchant stings you for a failed direct debit, grimace and wear it. It will pay for itself in reduced churn.

What does your customer journey look like for a direct debit failure? If you haven’t checked off these 3 must-do’s, it's very likely you are driving incremental customer churn. 

Please login or register to add a comment.

Contribute Now!

Loving our articles? Do you have an insightful post that you want to shout about? Well, you've come to the right place! We are always looking for fresh Doughnuts to be a part of our community.

Popular Articles

See all
Digital Marketing Vs. Traditional Marketing: Which One Is Better?

Digital Marketing Vs. Traditional Marketing: Which One Is Better?

What's the difference between digital marketing and traditional marketing, and why does it matter? The answers may surprise you.

Julie Cave
Julie Cave 14 July 2016
Read more
The Difference Between AI and Machine Learning

The Difference Between AI and Machine Learning

Artificial Intelligence (AI) and Machine Learning used to be heard when the topic was Big Data Analytics – and maybe in some sci-fi movies- before; but now it is impossible to ignore them with the self-driving cars, knowledge navigators...

Asena Atilla Saunders
Asena Atilla Saunders 15 June 2017
Read more
4 Important Digital Marketing Channels You Should Know About

4 Important Digital Marketing Channels You Should Know About

It goes without saying that a company can't do without digital marketing in today's world.

Digital Doughnut Contributor
Digital Doughnut Contributor 5 November 2014
Read more
How To Write Content That’s Easy To Localize

How To Write Content That’s Easy To Localize

Do you want to know how to reduce costs and get to market faster? Write content that's easy to localize!

David Ost
David Ost 15 June 2017
Read more
How To Master Localized SEO

How To Master Localized SEO

When you’re rolling out different language versions of your website, ignore localized SEO at your peril. Failing to consider local keywords, backlinks and social media could cost you valuable site visitors. You’re investing a lot of marketing budget in reaching out to new clients. But fail to get eyes on your website and your efforts will be in vain.

David Ost
David Ost 14 June 2017
Read more