Reducing passive subscriber churn
Managing churn is a constant battle for subscription publishers. The ability to attract and convert new subscribers is undermined if a large portion consistently fails to renew. While subscriber churn isn’t always something to be feared, understanding and managing it is a fundamental requirement for any sustainable subscription publishing business.
Not all churn is alike. It’s essential subscription publishers delineate between passive churn and active churn, and that they institute effective strategies to address each.
What is passive subscriber churn?
Churn can be broken out into two distinct categories:
- Passive churn (or involuntary churn) refers to instances where a person’s subscription lapses without them taking action, typically because a publisher cannot successfully charge the subscriber’s card or payment method, or because of other technical failures outside of the subscriber’s control.
- Active churn (or voluntary churn) refers to cases where a subscriber takes specific action to cancel a subscription or disable auto-renewal, or intentionally lets a subscription lapse.
This guide focuses on tactics for mitigating passive (or involuntary) subscriber churn.
Causes of passive subscriber churn
Passive subscriber churn is most often caused by a publisher’s inability to successfully charge the credit card or payment method that has been provided by the subscriber. Reasons for payment failure can include:
- Expired credit cards.
- Canceled credit cards.
- Changes of address.
- Insufficient funds or credit limit reached.
- Credit card issuers declining payment for security reasons.
- Subscription management software or other technology failing to initiate transactions correctly.
How to reduce passive subscriber churn
For subscription publishers, ignoring passive churn is not an option. All credit cards expire, and eventually, a publisher’s entire subscriber base will churn passively without a mitigation strategy in place.
The following tactics and best practices can be used to reduce passive subscriber churn:
Auto-update card information
Historically, it was recommended to reach out to subscribers whose credit cards were set to expire — typically via email — and prompt them to update their credit card information ready for renewal charges. This was commonly referred to as “pre-dunning.” (See below for more on dunning.)
The advent of auto-updater technology now offered by major payment platforms such as Stripe and Braintree has arguably rendered this tactic unnecessary, however. Auto-update or account update features now have the ability to communicate with card issuers and automatically refresh card numbers, expiry dates, address changes and more.
Auto-updaters often come with fees associated, but typically offer great value for money given the impact they can have in reducing revenue lost to passive churn. Their efficacy can vary based on geography, card issuer and other variables, but — according to some estimates — can often help automatically update up to 70% of new expiry dates.
Re-attempt charges and use grace periods
Publishers should ensure they have systems in place to re-attempt charges multiple times after an initial payment failure, because failed payments often prove successful on the second, third or fourth attempt.
For optimal performance, re-attempted payments should typically be spaced five days apart and attempted at least three times in total. During this period prominent causes of declined cards — such as insufficient funds or temporary security holds — are often resolved, and payments are processed successfully as a result.
Re-attempted payments should typically take place within a grace period, during which a subscriber’s account remains active while charges on their payment method(s) are re-attempted. In most instances, subscribers need not be notified that their payment has failed until after a second or third attempt to charge their card.
30-day grace periods allow for six retries with each spaced five days apart, and are often used most effectively for annual terms. In all cases, a grace period of at least 15 days and three payment retries is advisable, even for monthly subscription terms. (See the passive churn schedule template below for an example of how grace periods might be implemented alongside other tactics.)
Rather than taking a one-size-fits-all approach to retry schedules, however, some subscription management technology providers say they use machine learning and artificial intelligence to automatically tailor retry approaches to individual subscribers based on historical data. Providers claim this dynamic approach can result in more successful payments than static retry schedules.
Dunning communications
“Dunning” refers to the practice of communicating with subscribers to let them know that their payment did not process successfully and that an updated payment method is required to maintain access to the product or service they’re subscribed to.
For subscription publishers, email is typically an effective dunning communication tool, but depending on the communication channels available to them other tactics might be leveraged as well, including on-site or in-app notifications, messaging capabilities, and even phone or mail communications.
A dunning process is the series of steps and communications that users are put through to encourage them to update their payment details and/or make a payment to continue their subscription(s). Not all dunning emails must refer directly to making a payment, however. It’s often advisable to communicate and demonstrate value prior to asking for payment to ensure that the product is top of mind and to signal to subscribers what they’ll be losing.
For subscription publishers, the following dunning communications often prove effective:
Pre-renewal notification
It’s always best practice (and often a legal requirement) to notify customers when a subscription is approaching renewal, and such notifications can double as a way to ensure payment methods are up to date.
Depending on the length of the subscription term, pre-renewal emails should typically be sent days or weeks in advance of a renewal payment. (Sending pre-renewal notifications too close to renewal dates can inadvertently prompt cancellations, since subscribers may feel they’ve extracted near-maximum value from their subscription term.)
A pre-renewal notification should notify the subscriber that their subscription will renew on a specific date, but can also make reference to ensuring their payment information is up to date — if necessary — to continue their service uninterrupted. Such emails should be kept succinct unless they also include content or other value.
Hi, [subscriber name]
Your subscription to [product] will renew automatically in [X weeks]. No action is required at this time unless your payment information has changed or your credit card on file has expired, in which case you can update your payment details at [link] to ensure your access is uninterrupted.
Renewal day notification (if payment fails)
The day a user’s subscription expires — i.e. after their renewal payment has failed — it’s advisable that publishers do not immediately ask for payment, but rather focus squarely on communicating the value of the product.
The reasons for this are two-fold: it buys time for charges to be re-attempted in the background, but more importantly, it ensures that the value subscribers are receiving from a product is top of mind when, later in the dunning management process, they’re asked more directly for payment.
An emailed expiry day notification is often effective and can showcase recent high-value content and/or a recap of a product’s features and benefits. For sophisticated publishers, such emails might include content tailored to a specific user’s tastes and behaviors, or content that’s most applicable to whatever audience or interest segment a subscriber may have been placed in.
Failed payment notifications
The chances of re-attempted charges being processed successfully diminish with each attempt. Depending on the grace period and payment re-attempt schedule in place, subscribers should eventually be clearly notified that their payment method has failed, and asked directly to update it to ensure their access is not revoked.
Such notifications should ideally be placed within the grace period, and specify that access to the product will be lost if a successful payment is not received within a certain number of days or by a specific date.
Multiple notifications are typically more effective, especially if sent via email. Subscribers should not be bombarded relentlessly, but it’s highly possible that they may miss a notification if it’s sent once or twice. Notifying subscribers 3-4 times that they will lose access to their subscription — ideally spread over a long grace period — typically proves most effective at prompting them to take action (assuming they still require or want access and aren’t intentionally letting their subscription lapse.)
Hi, [subscriber name]
We’ve been unable to process payment for your subscription to [product]. Please update your payment details at [link] to ensure your access is uninterrupted.
“Losing access” communication
If multiple failed payment notifications have proved unsuccessful, eventually a publisher must revoke access to a subscription entirely. Before doing so, however, it’s advisable to send one last value-focused communication — typically via email — highlighting the content and features a subscriber is about to lose access to.
Such emails should request payment by a specific point in time to avoid uninterrupted access, but should focus squarely on why losing access is a bad thing, and on highlighting the value the subscriber will be giving up and missing out on.
Hi, [subscriber name]
We’ve been unable to process payment for your subscription to [product]. Please update your payment details immediately at [link] to ensure your access to the following content and features is uninterrupted:
[Details of content and features, tailored to user interests if possible.]
Make updating payment information easy
In cases where it’s necessary to ask subscribers to manually update their own payment details and/or methods — such as within dunning communications — publishers should ensure that the process is as seamless and easy as possible. Publishers should not expect users to jump through hoops in order to ensure their access is uninterrupted.
Where possible, publishers should:
- Link subscribers directly to payment update pages, rather than providing instructions and expecting subscribers to navigate there by themselves.
- Ensure payment update features are mobile-friendly. Assume that subscribers will largely be updating their payment details from mobile devices and optimize experiences accordingly, especially if they’re clicking through from a dunning email or communication. Users often carry out more menial tasks — such as updating payment methods — from their mobile devices when they have time to kill, rather than opening a laptop.
- Skip the login step. Removing the need to log in removes unnecessary friction, and helps avoid instances where subscribers may be required to reset their passwords or recover usernames simply to make a payment.
Manual outreach
Manual outreach for passive churn mitigation can be time and labor-intensive, and few publishers realistically have the resources to dedicate to it. However, if automated attempts and processes fail to push subscribers to update their payment information, manual outreach is often the most effective way to keep subscribers onboard.
Asking users directly to update their payment details — either through personal emails, messages, or even phone calls from customer service representatives — frequently yields strong results. Sometimes they need help updating their card details or payment information, sometimes, they’d prefer to give card details over the phone, and sometimes they’re simply not aware that their subscription is expiring because they missed communications and emails, accidentally flagged items as junk, or have simply been offline for a period of time.
Manual outreach can also be used to collect both qualitative and quantitative data on why subscribers are churning, and to identify technical, product or process issues that may need to be fixed or improved upon.
Win-back campaigns
In instances where subscribers fail to update payment information — even after grace periods, retries, dunning communications and manual outreach — win-back campaigns can be used to tempt back recently-churned customers.
Subscribers who have churned passively are far easier to win back than those who have actively or intentionally churned since their reason for churning is less likely to be directly related to the product itself.
Win-back campaigns can pick up where dunning communications and manual outreach efforts end. In some cases — even after those efforts — users remain unaware that their access has been revoked, or only realize they still require or want access to content or features after it’s been removed.
Passive churn win-back campaigns can be broken into two categories: short-term, and long term.
- Short-term “reactivation” campaigns: The goal of reactivation campaigns is to bring churned subscribers back on board within a period or a few days or weeks after their subscription ends. Such campaigns should typically stress to subscribers the value they’ve lost and the features they no longer have access to. Reactivation campaigns can also be paired with discounts, and many publishers see success in tempting churned subscribers back by offering a discount for those who redeem within a specified timeframe – usually a period of a few days. Other publishers have seen success in pairing reactivation campaigns and/or discounts with paid media efforts designed to lure churned subscribers back. These initiatives can prove effective, but it’s essential to keep track of the acquisition costs associated with them. Keeping subscribers onboard is essential, but only at the right price. Retaining subscribers at a loss is rarely a worthwhile or sustainable tactic.
- Long-term win-back campaigns: These journeys and marketing efforts will more closely resemble marketing efforts designed to track new subscribers, but should be tweaked to ensure they reflect the fact that a user was previously subscribed. If a user saw enough value to subscribe once, it’s highly possible they will again. Communicating with them in the same way as users who have never subscribed is a missed opportunity to highlight the relationship that already exists (or existed) between the publisher and the former subscriber.
Consider additional payment methods
Some paywall technology providers recommend pushing subscribers to check out using PayPal, if available, as a method of reducing passive churn. PayPal accounts do not expire, and users often keep multiple funding sources in their accounts which can be accessed automatically if a primary funding source fails, thereby minimizing the likelihood of failed payments.
While PayPal can absolutely help avoid failed payments, publishers should note, however, that the payment platform is increasingly being used by consumers as a tool to monitor and manage the subscriptions they’re paying for. Users can easily cancel subscriptions directly within PayPal’s interface, and many users have payment notifications from PayPal enabled in order to actively notify them of charges to their accounts.
As a result, publishers with active churn concerns — i.e. large numbers of subscribers voluntarily choosing not to renew — should tread carefully with third-party payment methods that inevitably give them less control over how charges are being presented to end customers.
Example passive churn mitigation schedule
Passive churn can be reduced most effectively by combining many or all of the tactics outlined above. Piecing each of these tactics together, a broad churn mitigation initiative and timeline might look something like the below for an annual subscription term:
| 2-3 weeks prior to renewal | – Pre-renewal notification |
| Renewal date (if payment fails) | – Renewal day notification |
| 5 days after payment failure | – 1st re-attempted payment |
| 10 days after payment failure | – 2nd re-attempted payment – Failed payment notification sent |
| 15 days after payment failure | – 3rd re-attempted payment – Failed payment notification sent |
| 20 days after payment failure | – 4th re-attempted payment – Failed payment notification sent |
| 25 days after payment failure | – 5th re-attempted payment – “Losing access” notification sent |
| 26 – 29 days after payment failure | – Manual outreach |
| 30 days after payment failire | – Subscriber access revoked – Win-back initiatives and campaigns begin |
| 60 days after payment failure | – Subscriber moved into long-term winback process/segment |
