WTF is dunning?

By Kayleigh Barber

In a subscription business, recurring monthly or annual payments are key to maintaining — and growing — revenue. Therefore reducing the churn of paying readers canceling their subscriptions is the name of the game.

Publishers have been on a crucial hunt for strategies to reduce churn in recent months, particularly as readers’ propensity to pay for subscriptions have begun to waver. But what happens when up to half of churn occurs unintentionally because of an expired credit card or someone reaching their credit limit ahead of payment?

That’s when a process called “dunning” comes into play.

Dunning is a 17th century term that means “to make persistent demands upon for payment,” according to the Merriam-Webster Dictionary.

In a modern media context, it is the process of reminding a paying subscriber whose payment has already lapsed to update their account with new payment information to keep their subscription active. The dunning process kicks off the moment the first payment fails and you try the card again.

Canceling subscriptions due to lapsed payments — or basically any sort of cancelation that occurs without the customer intentionally reaching out to stop their subscription on their own accord — is also known as passive churn or inactive churn, according to Justin Eisenband, a managing director in FTI Consulting’s telecom, media & technology industry group.

Why is dunning important?

On average, passive churn accounts for anywhere from 20-60% of a publisher’s total churn base in any given period, Eisenband said, but it’s also significantly easier for a publisher to recover this cohort of drop-off.

“In terms of the share of churn, it’s really one of the most controllable levers you have as a publisher” unlike combatting active churn, where someone is purposefully trying to leave your ecosystem, Eisenband said. With passive churn, odds are that the subscriber either doesn’t realize their card is going to expire or remember that this specific payment to the publisher will lapse as a result of getting a new card or reaching their credit card limit.

And it’s also an incredibly important area for publishers to focus on “because getting your [passive] churn down from 50 to 20% often results in a 20 to 30% improvement in your [overall] churn rate,” he added.

Can a publisher prevent this from happening to begin with?

Yes. According to Eisenband, there is a “pre-dunning” process that can be done by publishers’ third-party billing service providers and credit card payment platforms like Stripe and Braintree.

These billing services often have credit card updating capabilities where they use their relationships with banks and financial institutions to preemptively update new expiration information after identifying an expired credit card but before actually charging the old card.

This can solve a good chunk of passive churn right out of the gate, Eisenband said, and it’s also the best user experience because “you don’t want to bother your subscribers to say a credit card isn’t working before you try to charge …read more

Source:: Digiday