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How do payment failures affect the lifetime value of a customer?

By Puja Sharma

May 22, 2024

  • digital payment
  • Digital Subscription
  • Embedded Subscription
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Split Payments, Bill Payments, Digital Payments, FinTech, UK

With 65% of companies conceding that payment failures decrease customer lifetime value, the study emphasises the need for sophisticated monetisation strategies and an enterprise-grade subscription management platform that prioritises flexibility and scalability to accelerate growth.

Payment failures significantly impact customer lifetime value, with 65% of companies acknowledging this issue. To address these challenges, businesses must implement sophisticated monetization strategies and utilize enterprise-grade subscription management platforms that offer flexibility and scalability.

The study also highlights the negative effects of payment issues on revenue, customer relationships, and brand perception, emphasizing the need for a mature billing and payments partner. The findings are based on responses from senior management in US and UK direct-to-consumer companies, showcasing the industry’s potential for growth through a strategic focus on the payment experience.

Recurly, a subscription management and recurring billing solution announced the release of a commissioned study conducted by Forrester Consulting on behalf of Recurly. Titled “The Payment Experience Is Critical To Subscriber Growth And Retention,” the study sounds the alarm on pervasive payment challenges flatlining consumer subscription growth, with a staggering 100% of surveyed businesses acknowledging the detrimental impact of failed payments.

Data reveals that the payment experience is critical for business growth—-

“We know the moment of payment is emotionally charged, but it’s not about the payment itself,” said Lina Tonk, CMO of Recurly. “The most successful businesses know it’s about the consumer experience and the value being provided. Choosing a strategic and mature billing and payments partner is imperative to nurturing subscriber relationships and fortifying subscription growth.”

Payment challenges create adverse effects on customer relationships, brand perception and subscriber value. According to the Recurly study, issues with payments led to 61% of respondents reporting revenue loss, 53% observing damaged subscriber relationships, and 45% witnessing a decline in brand perception. Only a mere 7% had confidence in their capacity to deliver superior subscription billing experiences.

With 65% of companies conceding that payment failures decrease customer lifetime value, the study emphasises the need for sophisticated monetisation strategies and an enterprise-grade subscription management platform that prioritises flexibility and scalability to accelerate growth.

According to a report by IBS intelligence, a study found that Gen Z is less likely than all other demographics to pay taxes via electronic fund withdrawals from checking or savings accounts (17%). Unlike Baby Boomers, Gen Xers and even Millennials, Gen Z respondents preferred alternative payment methods (10%) and credit cards (17%).

These recommendations were informed based on the responses of more than 160 people in senior management positions at US and UK direct-to-consumer companies that participated in the study. The study highlights that while a significant percentage of subscription businesses struggle to anticipate and react to subscriber demands, the industry is poised for explosive growth when there’s an intentional focus on the payment experience.

Key highlights:

  • Prioritising both acquisition and retention to facilitate growth in subscription businesses.
  • Investing in the right technology platforms that drive efficient operations and leverage data for insights.
  • Adopting advanced churn mitigation techniques to preserve customer relationships and brand value.

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