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
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
Get Your Emails Opened with These 7 Expert Subject Line Tricks

Get Your Emails Opened with These 7 Expert Subject Line Tricks

The funny thing is, subject lines aren't rocket science—your subject line should describe the content inside of your email. Plain and simple, right? The best subject lines give your readers a glimpse of what they can look forward to when they open your emails.

Shelby McGuigan
Shelby McGuigan 21 July 2017
Read more
Predictions for the Future of SEO

Predictions for the Future of SEO

Unless you’re a search engine optimization expert, odds are you’re not familiar with what awaits the SEO strategy in the future. Media marketing is constantly changing and therefore marketing strategies have to conform and adapt in order to stay on track.

Tony Solomon
Tony Solomon 18 July 2017
Read more
Eight Key Criteria To Help You Choose The Right CMS

Eight Key Criteria To Help You Choose The Right CMS

In this post, we flag up eight of the most important criteria you should be using to assess a CMS, and to compare different software providers.

Linus Gregoriadis
Linus Gregoriadis 18 July 2017
Read more