retaining recurring payments
Cross-border Payments

Deep Dive: How Payment Experiences Help B2C Companies Recruit And Retain Subscribers

Subscriptions represent an increasingly powerful method of offering services to consumers. The sales model can appeal to users by providing access to offerings for a desired period of time without the commitment of purchasing, as with car subscriptions, or to personalized content, as is the case with eLearning services. They can also facilitate convenient replenishment of necessities like electric toothbrush heads and other hygiene products, among myriad other applications. Consumers may even seek out subscriptions to receive curated selections like monthly book boxes and access to wide arrays of streaming media.

Businesses benefit from being able to establish ongoing customer relationships that build loyalty as well as increase the predictability of their cash flows. The sector is growing, too: with Asia-Pacific, Europe and North America-based subscription companies experiencing more than 300 percent growth in subscription sales from 2012 to 2019.

B2C businesses rely on attaining high volumes of low-value transactions and thus need tools to help them quickly onboard new customers and retain existing ones. Subscriber signup and churn are thus important challenges to tackle, both for established subscription companies and retailers looking to enter the subscription space or increase their share of subscribers.

 This month’s Deep Dive examines how improved recurring payment approaches can help global subscription providers recruit and retain customers.

Smoothing signup to recruit customers

Consumers who become interested in an offering may nonetheless decline to purchase it if the onboarding experience is too time consuming or inconvenient. A 2019 study reports that B2B and B2C customers who believed that the onboarding experience for software products was positive or very positive were 12 percent to 21 percent more willing to pay for that product than the median customer, while those who said the experience was negative or very negative were 3 percent to 9 percent less likely to purchase.

Customers expect to be provided with convenient, familiar payment methods. They may not wish to acquire new payment instruments — such as credit cards or online payment service accounts — just to be able to pay for a subscription service, after all. Merchants must tailor their payment options to the recurring payment preferences of their target audience’s geographies, providing Alipay acceptance in China, QIWI in Russia and credit cards in North America, for example. Streamlined initial sign-on experiences are key to ensuring customers complete registration for a subscription service rather than turn to a competitor.

Fighting churn to retain customers

Companies must focus on both customer retention and acquisition, but the former can often be more cost-effective. Companies are then working to continue to serve those who are interested rather than aiming to win over a more general public.

There are two key types of subscriber loss: voluntary and involuntary churn. The former refers to shoppers who actively decide to discontinue a service — those who no longer need the service or discovered that subscriptions led them to spend more than they planned. The latter concern is what 53 percent of respondents in a 2019 study cited when surveyed about subscription drawbacks.

Businesses can respond to such issues by modifying their pricings and offerings or refocusing their customer outreach on those more likely to be receptive. B2C companies also tend to see more churn than their B2B counterparts largely because business clients tend to have to go through more prolonged purchasing processes and procedures, making them likely to only subscribe to offerings that are highly desired.

Providers may be less aware of involuntary churn, however, which sees consumers who would otherwise like to continue using services stop due to unintentional issues with their payments. Merchants that do not take efforts to minimize such problems will lose otherwise receptive customers. Customers with recurring payments may elect to manually make one-off payments at each installment point, but many enjoy the convenience of being automatically charged each time. This set-it-and-forget-it approach can work smoothly unless an issue happens with payment credentials. Merchants need to provide convenient, desired payment offerings while working to reduce chances of payment failure turning into customer loss.

Merchants that accept credit card payments must be aware that their customers’ cards could become lost, stolen or expired, at which point the payments would be declined. Customers may also not remember to update the service with the details of their reissued credit cards. Credit cards have a reported 13 percent churn rate on average, accordingly. Businesses discontinue providing goods when card payments fail and either drop the customer or reach out to ask them to renew. Some observers in the space warn that asking customers to take action to continue their services may prompt them to reconsider their interest in the offering or provider.

Some merchants work with payment card networks and use their card updater services to automatically refresh customer account details. Businesses may also seek to encourage customers to use direct debit, in which banks directly draw from the customer bank accounts. This method does not carry the same level of risk that information will fail to be accurate, as customers tend to change credit card numbers more frequently than they change bank accounts. Direct debit does introduce its own risks that charges could be denied if insufficient funds are in customers’ accounts, however. Debit charges may be most effective if billing cycles are timed so that payments hit on what is commonly a payday in the customers’ regions and the payment reattempted within a few days — giving time for payroll to settle — should it fail on the first try.

B2C companies must ensure a complementary payment experience is in place as they work to cater to the increasingly popular subscription sales model. Customer payment signup must be convenient and businesses must be vigilant to detect, respond to and reduce chances of involuntary subscriber churn.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.