A company’s payment strategy plays a key role in their ability to reduce the proportion of customers they lose during a certain time frame, according to a new report from The Subscribed Institute at Zuora and GoCardless.
The findings of the report, How Customers Pay Impacts How Long they Stay, reveals the annual customer churn rate for subscribers who pay via bank debit, is just 4%. In contrast, the rate for those who pay via credit cards is over three times greater at 14%, and 16% for those using a digital wallet.
Churn has a huge impact on a business’ bottom line, and the report has found that 20% to 40% of subscriber churn happens because of payment failure, and every quarter, subscription businesses needlessly lose between 1% and 6% of their customers.
For a business with 100,000 transactions a month with an average transaction value of $15, that could mean a loss of up to $36.7 million in cumulative revenue over five years.
“These findings indicate that businesses are suffering from preventable churn, resulting in losses that can run into millions of dollars. It doesn’t have to be this way,” GoCardless chief product and chief growth officer, Duncan Barrigan said.
“Shifting from card to bank payments will result in immediate and material benefits, not only in terms of reducing churn but also helping companies cater for changing consumer preferences, such as the desire to decrease their reliance on credit cards and debt. Making the transition is a win-win for both businesses and their payers.”
The Subscribed Institute at Zuora founder and vice president, Amy Konary added, “The growth of the subscription economy has put digital transformation firmly at the top of the agenda for many businesses. We’ve seen even more companies understand that subscriptions help create better experiences through ongoing customer relationships.
“While customer acquisition is a focus of all businesses, retention and expansion of these relationships is also a key to growth. That’s why the insights from this churn report are so important: small tweaks to a company’s payment strategy can bring about big returns.”
In 2014, Zuora partnered with GoCardless, making it easy to collect both recurring and one-off payments directly from customers’ bank accounts. GoCardless processes more than $30 billion in transactions a year for over 70,000 businesses worldwide.