It’s generally agreed that it’s far easier to sell more to an existing customer than it is to acquire a new one. And while I won’t digress into why some folks don’t mine their existing customers as much as they could, what about the idea of getting more money from your existing customers without actually get them to buy more?
Almost seems too good to be true.
Well it is possible. Totally legit. Not just the flick of a switch – not much ever is – but certainly shouldn’t take 6 months to implement.
Below are 5 ways to do so:
1. Retry billing
For those of you with multi-pay options or with continuity models, I’d suggest taking a look at your processes to see what happens when a customer’s credit card doesn’t go through. For soft declines (soft typically meaning insufficient funds, etc.; as opposed to a hard decline which can mean a lost or stolen credit card, invalid number, etc. – for hard declines, pull those out and jump to collections below. They won’t go through.) As for soft declines, are you trying again? How often are you doing so? I’ve talked to marketers who retry those declined credit cards anywhere from 3- 20 times. Certainly, it’s not free to do so – your merchant provider charges you per attempt (and then you pay your percent on a successful transaction), so you have to do testing and some math to see how many attempts you can try and still remain breakeven – just remember that breakeven is relative to incremental margin, not revenues. Too many people do this analysis relative to revenues and totally overestimate the number of attempts.
Not only should you test the number of attempts, but you should consider the frequency between attempts – every day, every few days, 1x per week? Again, I’ve seen people do all of the those. The rationale for every week is that, assuming it was a reject reason like insufficient funds, you’re banking on your re-try happening after the customer gets paid. (And if you think that’s sneaky, well, it’s also not cool for a customer to buy but not honor their agreement to pay.)
To execute this strategy, you’ll need to pull together your marketing, finance and IT teams to make sure everyone is coordinated.
2. Following up with declined credit cards
Concurrent with a retry attempt can and should be some form of communication to the customer. This can be an email or a phone call, informing them that their credit card didn’t go through. Depending on whether it’s a multi-pay instance vs. a continuity, obviously your messaging can be different – the former is about paying for what they’ve already received versus the latter is about not discontinuing the subscription, service, product, etc.
Certainly, email is cheaper than the phone, and contact rates on phone calls are never especially high, but depending on your price point, that phone call could ROI if you have a 4- or 5-figure price point.
3. Account Updater
You or someone on your team should be digging in to the reason codes for credit cards that decline. You should also work with your merchant provider to make sure you are entirely clear on what each code means, especially the one called “other”, which for many folks is over 10% – so not insignificant. But you need to know what each one means to understand what type of action you might be able to take.
One of the reasons that cards decline is that the expiration date of the card has passed. A customer might have purchased something to be paid over 3 months. The initial payment was in July, but the credit card you have on file shows an expiration date of July. The initial payment went through but presumably the following ones didn’t.
Well, it turns out that there is a service called Account Updater, whereby you can send the info for cards that have this expiration date issue to get the expiration date updated. And the beauty is that you only get charged for card numbers that actually get updated. Depending on your partner and your status, you can get charged anywhere from $0.06 to $0.18 per updated credit card. Now, no matter your price point, that shouldn’t be that hard to ROI.
There are only certain banks that participate in this service, so it won’t be 100% of the expired cards, but this has added significant dollars to the companies that use it. You should reach out to your merchant provider or gateway provider to discuss how to implement this.
You can take the above measures and you’re still not going to collect everything that customers owe you. So the next step is to employ a collection agency to pursue the funds on your behalf. Typically these agencies keep roughly 33% of the funds they collect, but this is money you were not going to collect.
I will say that I know some marketers who choose not to send anything to a collection agency because they don’t want to go to that level of interaction and relationship with their customers, even if their customers are the ones who broke their end of the promise. This is entirely a business decision you must make. There is no right or wrong answer, but at the least you want to be intentional about your action (or inaction).
5. Lower your return rate
Sure. Sounds simple enough. Just like saying that if only you increase your conversion rate on your site from 3% to 4% (just 1 percentage point increase), you’ll make a ton more money. Except that it’s actually a 33% increase to go from 3% to 4%. That’s a HUGE increase. But it doesn’t mean you don’t try to make incremental, or even step-function, improvements.
As such, one of the first things you need to do is understand the actual reasons customers are returning your product and/or asking for a refund. This really should be a joint responsibility between customer service and marketing – at least to own understanding of the reasons and metrics. And then other groups – depending on the reason codes – might be engaged to help address the issues. Clearly, just getting the data is the first step. And depending on what platform you’re on, it can be a huge step. But understanding returns and refunds goes well beyond saving any individual sale. In this day and age, unhappy customers are voicing their displeasure all over social media. (And as we all have experienced, unhappy customers are much more likely to post than a happy one. Check out this link to see some stats about what impact being satisfied or not can have on a customer and your business – http://www.helpscout.net/75-customer-service-facts-quotes-statistics/.)
Addressing unhappy customers – and more importantly the reason(s) for their displeasure – can eliminate or at least mitigate barriers to acquiring new ones. That is likely even more valuable than saving that sale.
If you don’t know or can’t easily get the answer from someone in your organization about the top 5-7 reasons for returns and refunds, it’s an investment worth making. It might be simply having someone pull a report, or it might require systems work and training with your customer care agents. Either way, it will pay itself back in spades.
There you have it. 5 (amongst a bunch more) ways you can make more from existing customers without asking for another sale. If you’re the type of person who just lives for the sale but doesn’t enjoy (or bother) with these types of operational issues, acknowledge that. And then either task someone within your org or bring someone in to do so. More on this in a coming post.
Please leave a comment below because I’d like to hear what you think.