Have you ever heard of payment recovery?
Maybe not. But I bet you are very aware of the problem that payment recovery tries to solve.
If you have a subscription-based business, or if you process any amount of credit card transactions then you know that these transactions can and will fail. In fact, on average 12% of all the credit card transactions you will run in your business will not be successful. That is the national average, and it is an unfortunate reality for any business owner. And the number climbs higher if you have a monthly payment system in place. The bottom line, the amount of lost revenue that accrues as the result of payment failures can be debilitating for a company.
When the lost revenue from failed payments reaches 5 or 6 figures it gets your attention as the business owner as a significant problem for the business. We have talked to business owners and have experienced this first hand. Here are 3 myths that most business owners fall for when trying to tackle the problem.
Payment Recovery Myth #1: Get More Customers
You know how to sell. You know how to market. Most businesses do, or else they would not be in business. This feels comfortable, and in the wheelhouse of most business owners. So when they stumble upon the unsettling realization that they are missing out on revenue do to lost payments, the typical reaction is to think, “Well, we just need to sell more to offset the lost revenue.” Which only compounds the problem, because as you know, more sales will only lead to more failed payments. This approach is a catch-22 and will put your company on the hamster wheel of failed payments.
Payment Recovery Myth #2: Sell Additional Products
Similar to the first trap. This is an attempt to offset lost revenue by simply creating more revenue. So you offer more products to expand your market share or to extend your customers lifetime value. And while both of those things are great for your business, they really do nothing to help with the problem of payment failure. You will experience the same amount of credit card declines regardless of the type of product or services you offer. It’s an unfortunate reality, but as consistent as the rising sun.
Payment Recovery Myth #3: Increase The Price Of Your Product
This will only make your payment failure issue larger. The more per transaction value you have the more money you lose per transaction. I’m sure you’re starting to see the point. The only way to really address the issue of payment recovery is to tackle it head-on.
So how do you do that? Well, there are a few ways. One way is to invest in automation. There are multiple dunning software platforms (Stunning, Recurly) that will generate automated emails, and fix the most common credit card failure issues. You can expect a 9-12% recovery rate with services like these. Not bad, if you are currently doing nothing to shore up the back end of your business. But there is a way to recover as much as 80% of this lost revenue.
It requires you to have what we have come to call a ‘Full-Time Focus.’ In short this means hiring someone to your staff whose only job is to help recover these failed payments and make it as easy on your customer as possible. Now this is not a cheap option, but it is really effective. With the right systems, templates, and approach a full-time employee can far surpass the 9-12% recovery rate of most software.
At Gravy this is what we do. We do this all day, everyday. Check out this blog post to see how we got started. We know how to recover failed payments. We have discovered what we call the ‘secret sauce’ to payment recovery. Which is nothing more than just a decades worth of trial and error and learning how to do this effectively. We’d love to help you solve this problem, and I promise you it will be worth it! And if you don’t think it is, we’ll give you your money back!