🥗 Your Payment Has Been Declined

Hey there,

Welcome back for another bite to chew on.

Today, let's go over an often overlooked part of subscription management:

Dunning. 

It might not be the most sexy topic in the world, but it's essential for maintaining healthy subscriptions and maximizing customer LTV.

Before we get to the best practices for dunning,

We’ve started a new podcast series powered by Stay Ai all about subscription and retention:

EP. 1 is now live all about the foundation of Stay Ai and tactics to help brands achieve real results like reducing churn.

Let’s get into the basics of dunning.

What Exactly is Dunning? 

Dunning is a set of rules that kick in when a customer's payment fails. 

Maybe their card expired, or they’ve hit their spending limit. 

Dunning settings determine what happens next, like:

• How often you retry charging the card

• How many attempts to make

• What to do if it still doesn't work

If you don't handle it right, it can mess up your data, annoy your customers, and even get you flagged by payment processors. 

Why Is It So Important?

Data Integrity

Inaccurate subscription data can inflate your active subscriber numbers, leading to bad forecasting and inventory planning. 

For example, if you don't cancel inactive subscriptions after multiple failed payments, your system will count those subscribers as "active," even if they haven't paid in months. 

This can lead to overestimating demand and ordering too much inventory.

Customer Experience

Annoying your customers with excessive retry attempts or unclear communication about why their payment failed can result in a poor customer experience. 

They may feel frustrated, confused, or even suspicious, potentially leading to higher churn rates.

Payment Processor Penalties

Excessive failed payment attempts can raise red flags with payment processors like Stripe or PayPal, resulting in penalties, increased fees, or even account suspension. 

The last thing you want is for your payment processor to think you're up to something sketchy.

Here's a closer look at how to make dunning work for you:

6, the Magic Number

Finding the right balance with payment retries is tricky. 

Too few attempts and you might lose customers who simply forgot to update their card. 

Too many, and your payment processor could penalize you for excessive failures.

We've found that retrying every six days strikes the right balance. 

It's enough to remind the customer to update their payment method without overwhelming them with constant emails.

If the payment hasn’t gone through by then, it’s best to pause or cancel their subscription to avoid penalties from your payment processor. 

Quick Poll

Personal, Honest, and Open Communication

The way you communicate with customers about failed payments makes all the difference. Here's what we've learned works best:

Make It Personal

• Use their name and mention their favorite product

• Be upfront about the payment issue, explaining why the payment failed (expired card, insufficient funds, etc.)

• Acknowledge why they subscribed in the first place and how staying consistent benefits them.

• A personalized reminder like, "Hey [Customer Name], your favorite [Product Name] is ready to ship! Update your payment method to keep those gains coming," can be all they need to take action.

Share Testimonials & Transformations

• People love hearing success stories, so share customer testimonials and before-and-after transformations to remind them why they need your product.

• Example: "Your next shipment of [Product Name] is almost ready! Update your payment method to keep your progress going strong like [Customer Name], who transformed [Result] in just 3 months."

Clean Up Your Subscription Data

One big mistake you want to avoid is not canceling inactive subscriptions after multiple payment failures. 

It’s tough to let go of potential revenue, but accurate data is key for long-term growth.

If you need help with your subscriptions, you’re not alone.

We were losing $22,000 a month due to order skips,

Here’s how Stay Ai helped us reduce those skips and cancellations on a second order by 85%

Tweak Your Email Triggers

Once your dunning settings are in place, adjust your email triggers accordingly.

Here's what to keep in mind:

Auto-Trigger Emails

Send automatic emails with a direct link to update their payment method. 

Make sure it’s a quick action so subscribers can handle it without too many clicks.

Stock Alerts

Let customers know when a product is out of stock and offer alternatives to keep them subscribed. 

For example, "We're out of your favorite vanilla flavor, but our chocolate blend is available now. Want to swap?"

Consider Payday Schedules

Analyzing specific error codes can give you clues on the best retry strategy. 

For instance, immediate retries might work for expired cards, but for declined payments due to insufficient funds, it's smart to retry around typical payday schedules to increase the chances of successful payment.

For example - let’s say your customer gets paid every other Friday. 

If the payment fails due to insufficient funds on a Wednesday, retrying on Thursday probably won’t change anything. 

But if you retry on the Saturday after payday, the customer is more likely to have enough money in their account, and the payment will go through.

Adjusting your retry schedule based on common payday patterns like this can significantly increase your chances of successful payments.

Tool of the Week

So, you've got your dunning settings sorted and your subscription data clean, but do you have the same systematic approach to scaling your paid media campaigns efficiently?

When we first got on a call with Alex, the CEO of Proxima, we were skeptical of what he was offering. 

Alex promised a best-in-class paid media strategy that could outperform Meta’s targeting, but it sounded too good to be true. 

But what if he was telling the truth?

We gave it a shot and ran an A/B test with Proxima's AI Audiences.

The result?

Proxima now fuels over 60% of Obvi’s Meta ad spend, delivering +31% higher ROAS and -26% lower CPAs compared to broad targeting.

If you’re spending over $100-$200k+ per month and looking to scale efficiently, try Proxima’s AI Audiences. 

They’re offering a free 30-day trial so you can see for yourself.

Thanks for Reading Along

Failed payments and dunning settings are no joke. 

Here’s what to remember:

1. Retry every six days

2. Limit retries to six times

3. Cancel after six failed attempts

But most importantly, keep communication clear, personal, and focused on customer success. 

If you've got any questions or need a hand optimizing your dunning settings, hit us up on Twitter — Ask Ron or Ask Ash

We’re always happy to help.

All the best,

Ron & Ash