Failed payments are an unfortunate reality for most SaaS and subscription-based businesses, causing them to lose around 9% of their monthly recurring revenue on average. Luckily, most failed payments occur unintentionally, without the customer even realizing what happened until they receive a dunning email. Though it might be a rather frustrating experience for your team and your customers, you can efficiently use well-written dunning emails to prevent involuntary churn and recover lost revenue. Below are some key points to remember when composing and sending dunning emails to your customers, along with some ready-to-use effective dunning email templates based on real-life examples.
Dunning emails are the type of transactional emails (usually a series of emails) sent by SaaS and subscription-based businesses to notify customers about payment issues such as failed subscription payments, expired credit cards, or overdue payments. These emails typically update users about the status of their accounts and provide the option to update their billing information and make a payment to continue using the product or service. Dunning emails are an effective way to reduce customer churn and increase retention.
Even if your dunning emails are entirely automated, having them sent from a real person makes them feel more human and trustworthy and helps your emails get noticed. Research revealed that using an individual’s name instead of a general email address or a company name can increase your open rate by up to 35%.
Ensure you send your dunning emails from an email address your customers can respond to if they face any issues or want to ask further questions. ‘Do not reply’ addresses might only contribute to more customer frustration because you haven’t made it easy for them to get back to you if they wish to do so.
Instead of simply informing customers that their payment didn’t go through and asking them to update their credit card detail information, you can add some sense of urgency. Remind them what exactly they will lose if they don’t take the required action (such as losing access to their account and historical data, service interruption, etc.).
A clear call-to-action is one of the most critical parts of dunning emails. Add a direct link that will take customers to update their billing information without opening another window, logging in, or clicking around. Ensure to let them know how long they have before their account will be deactivated unless a payment goes through.
Based on your pricing model, you can offer customers an alternative to canceling their account, such as a downgrading to a free plan until they update their billing information or offering a special discount to continue using your service. This alternative could be beneficial if the payment failed due to insufficient funds.
Design your own dunning emails
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Many business owners feel uncomfortable when they have to send out dunning emails to their customers. However, since most failed payments typically happen by accident (e.g., due to credit card expiry), dunning emails can genuinely be efficient in helping businesses recover failed payments and reduce involuntary churn.
As transactional emails can often get overlooked, sending a single dunning email is one of the biggest mistakes you can make. If you want to recover more revenue from failed payments, consider sending out a series of emails instead of a single message. It’s recommended to send at least three follow-up emails for a month, each with a slightly different text.
Since technologies like credit card retries have come into use, many failed payments can be automatically handled without your team ever needing to bother your customers with pre-dunning messages. In that case, pre-dunning emails are not only providing zero-value but can also be irritating for your customers and, therefore, should be avoided.
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