4 ways GoCardless can improve your customer retention

No business wants to lose customers. Customer churn is a critical metric, especially for businesses collecting recurring payments, like subscriptions, SaaS or invoice-based business models.

The cost of churn reaches beyond the initial loss of payment. It negatively impacts Customer Lifetime Value (CLV). There’s the sunk cost of customer acquisition - which is 5 - 25 x the cost of retaining a customer, and the resulting poor customer experience.

GoCardless Improves rentention in four ways

Leveraging GoCardless's advanced payment solutions can significantly improve customer retention as follows: 

• First, customers avoid missed payments through its automated payments system, elevating their overall experience and loyalty. 

• Secondly, GoCardless enables businesses to provide flexible payment plans, catering to unique financial situations, thereby boosting customer satisfaction and retention. 

• Third, being regulated by the Financial Conduct Authority and ensuring secure transactions, GoCardless boosts customer trust and ongoing patronage. 

• Lastly, access to international payment collection using trusted and familiar local bank payment options, supporting multiple currencies in 30+ territories, simplifies transactions for global customers, leading to higher retention rates. 

Customer retention and managing customer churn are pivotal aspects of a successful business strategy. They directly impact a company's bottom line, driving profitability and growth. Retaining existing customers provides a solid revenue base and leverages the relationship to promote upselling, cross-selling, and referrals. 

Churn

Conversely, customer churn, the rate at which customers end subscriptions, can significantly erode profits.

High churn rates may be symptomatic of deeper customer dissatisfaction issues and can necessitate more substantial marketing investments to replace lost clientele. However, churn is often simply the result of failed payments, and this can be prevented with the right payment collection method.

Let’s look at some numbers:

• It costs five times more to get a new customer than to retain the existing one.

• Customer retention is seven times more cost-effective compared to customer acquisition.

There are four frustrations businesses face with churn and GoCardless can help you to fix all of them.

1. I want to improve my Customer Lifetime Value (CLV)

CLV is an important metric for any business and should be optimised to enable sustainable long-term growth. It’s critical because it generally costs less to keep existing customers than to acquire new ones. By keeping existing customers and improving this margin, you’ll increase revenue, make revenue more predictable and have more money to invest in other business areas.

How GoCardless can help you:

Because GoCardless utilises account-to-account payments, like Direct Debit, your customers don’t need to worry about updating card details when they expire, are lost or are stolen. This means fewer customers are unexpectedly cut-off from your products or services when a payment fails. A better customer experience makes them less likely to churn, increasing your CLV.

According to the IDC, 91% of those who purchased via bank payment with GoCardless were retained after three months. Meanwhile, only 86% of credit card users and 75% of digital wallet users stayed. It’s also clear that businesses that have been with GoCardless for a year see an average of a 13% reduction in overall churn (from 10% to 8%).

2. I’m losing customers because their payments fail

Not all customers that churn are actively choosing to leave your business. Often a customer churns because their payment fails. This is called involuntary churn and can be driven by a variety of factors, including:

• Credit cards expiring, being lost or stolen

• Insufficient funds

• Banks decline a transaction

According to Forrester, failed payments result in churn 11-15% of the time. Failed payments can interfere with the service your customers receive. Retrying these payments can be a manual and expensive process. Forrester also reported that the cost of payment recovery is usually more than 11% of the payment size.

How GoCardless can help you:

If a payment fails, there are two ways that GoCardless can recollect those payments to reduce customer churn. 

Firstly, using data from previous successful payment recollections, Success+ uses machine learning to intelligently retry payments when they’re most likely to be successful. Customers using Success+ have reduced payment failure to as little as 0.5% on the second try. 

Our Instant Bank Pay feature offers UK customers a fast one-off payment option following a failed transaction and even collecting payments in as little as one business day. Broadband provider Cuckoo has reached two-thirds of customers who experienced payment failure through open banking. 

3. I don’t know why my customers' payments are failing

Having visibility of and understanding why your customers' payments fail is essential to ensuring your customers don’t churn involuntarily. This data will enable you to make informed and automated actions that reduce the disruption to customers, provide them with a better experience, and improve payment success rates.

How GoCardless can help you:

GoCardless provides a range of automatic notifications, to both your business and your customers, on all aspects of the recurring payment collection process, including mandate setup, payment failures, payment retries and more.

In most cases, GoCardless receives payment failure reports from a payer's bank one working day following the charge date. This empowers you to action a payment failure and retry the payment quickly. The complete list of GoCardless notifications can be found here.

4. Retrying payments is too manual and I’m losing customers as a result

If your business is growing and you’re processing more transactions, scaling your payment infrastructure and processes is necessary. Manual reconciliation and retrying payments can take your payment teams a long time and even slow down the process for your customers. Meanwhile, using multiple payment solutions can make aggregating and seeing all your customers’ data challenging.

How GoCardless can help you:

With GoCardless, you can connect to over 350 partner software packages to automate payment collection and even reconciliation. SaaS subscription software platforms like Zuora, Chargebee and Recurly complement the GoCardless payment solution and offer to help customers reduce failures with built-in dunning management and account updater services.

Alternatively, you can link your existing in-house billing software to our API to automate notifications and payments and receive information about your payouts. This reduces the chance of human error and the resulting payment failure.

Key takeaways

Superior to cards: GoCardless offers lower fees, higher success rates and more automation than accepting credit and debit card payments. With higher success rates GoCardless enhances customer retention through avoiding the churn that is associated with failed payments.

Secure: Built securely from the ground up, GoCardless uses strong encryption to keep you safe and is approved by the biggest names in payments resulting in fewer fraudulent transactions.

No contracts: There are no contracts or long-term commitment required with GoCardless. Customers can sign up and set up payments for free and only pay for the funds you collect.

Ease of payment management: GoCardless allows for easy management and setup of payments, reducing customer frustration and increasing their likelihood to continue using the service.

Award-winning support: Well-known for award-winning support, GoCardless further ensures high customer retention by promptly addressing and resolving any issues or concerns you may have.

Case Study

Cuckoo Broadband, the UK’s first challenger internet service provider, partners with GoCardless to simplify billing processes, onboard customers and collect recurring payments via Direct Debit. Their common goal is to ensure simplicity and transparency, disrupting the often complex broadband industry.

As well as Direct Debit Cuckoo Broadband also uses Instant Bank Pay, a GoCardless feature, to speed up the collection of failed payments, which has improved customer experience and reduced service disruption.

Instant Bank Pay has significantly impacted payment success rates and reduced the time taken to chase and collect failed payments. As a result, customers' risk of service disruption due to failed payments has been substantially minimised.

Alexander Fitzgerald, founder & CEO, highlighted the impact of failed payments and the overall payment collection process,

Cuckoo Broadband has plans for further integration with GoCardless services, including the potential to use Instant Bank Pay during the sign-up process, and incorporate GoCardless's anti-fraud solution, Verified Mandates.

We can help

GoCardless offers an effective way to improve customer retention and reduce churn, with advanced payment solutions to automate the payment collection, enhance customer experience, and foster loyalty by preventing failed payments. 

Regulated by the Financial Conduct Authority, GoCardless guarantees secure transactions delivering peace of mind to you and your customers. With a seamless international payment collection process supporting 30+ territories, GoCardless offers subscription businesses a service that improves customer retention in multiple ways.

Frequently asked questions

What are customer retention strategies?

Customer retention strategies are designed to maintain a loyal customer base and decrease customer turnover. These strategies include providing outstanding customer service to ensure customer satisfaction and resolve any issues promptly and efficiently.

Personalising customer interactions and experiences based on their preferences and past behaviour can also increase loyalty. Implementing a customer loyalty program, offering rewards or incentives for repeat purchases or referrals, can encourage customers to return.

Offering flexible and convenient payment options, including Direct Debit and card payments in the UK context, can enhance the customer's transaction experience and make it easier for them to continue doing business with you. Regularly soliciting and acting on customer feedback shows customers that their opinions are valued and used for continual improvement.

Finally, maintaining regular, personalised communication keeps your brand top-of-mind for customers and can make them feel valued and engaged with your business. These strategies, implemented consistently, can significantly boost customer retention and contribute to sustainable business growth.

How do I increase user retention?

Increasing user retention involves a multifaceted approach that hinges on delivering a superior customer experience. First, ensure your product or service consistently meets or exceeds expectations. Regularly update and improve your offerings based on user feedback and market trends.

Second, foster strong customer relationships through excellent customer service. Be accessible, responsive, and solution-oriented when handling customer concerns. Third, personalise user experiences whenever possible, from communication to product recommendations, which can make users feel valued. Fourth, consider a loyalty or rewards program, providing incentives to encourage repeat business.

Fifth, optimise the payment process for convenience and security. To cater to various user preferences, incorporate popular UK payment methods, like Direct Debit for recurring payments and card payments for single transactions. Lastly, maintain regular, meaningful communication with users, informing them about updates, promotions, and valuable content.

By implementing these strategies, businesses can significantly enhance user retention, fostering a loyal and engaged customer base.

How can excellent customer service help retain current customers?

Excellent customer service is crucial in retaining current customers by cultivating trust, fostering loyalty, and enhancing overall customer satisfaction. When customers feel valued and know that their concerns and queries will be addressed promptly and effectively, they are likelier to continue doing business with your company. It's about showing empathy, actively listening, and providing solutions that solve immediate issues and exceed customer expectations.

Furthermore, excellent customer service can bolster your business's reputation in the age of online reviews and social media, making customers more likely to recommend your services to others. Offering flexible payment options, like Direct Debit and card payments for UK customers, and ensuring a seamless, secure transaction process are part of a superior customer service strategy, contributing to a positive customer experience and encouraging customer retention.

How do you retain customer loyalty?

Retaining customer loyalty involves a concerted effort to consistently meet and exceed customer expectations in all interactions. Begin by offering high-quality products or services that deliver on their promises, ensuring the core offering resonates with your customers' needs. Pair this with exceptional customer service that is responsive, helpful, and empathetic so customers feel heard and valued. Implementing a customer loyalty program, offering exclusive rewards or benefits to repeat customers, can also be effective.

Personalisation can further drive loyalty; tailor your communications, offers, and interactions based on individual customer preferences and behaviours. Ease and convenience are also key; a streamlined purchasing process and flexible, secure payment options, including Direct Debit and card payments for UK customers, contribute to a positive customer experience.

Finally, engage regularly with your customers through relevant, valuable content and thoughtful communication, fostering a strong, lasting relationship. Businesses can cultivate and retain customer loyalty by focusing on these elements, promoting long-term success.