Recovery Campaigns

Failed payments are an inevitable part of any subscription business, but with the right recovery campaign, you can get closer and closer to your recovery rate ceiling.

The recovery rate ceiling is the theoretical maximum amount of failed payments your unique business could recover over the long term. One high-churn consumer business may cap out at 40% recovery, while a low-churn service could reach a ceiling of 80% or even higher.

A well-designed recovery campaign targets failed payments using a strategic mix of communication, retries, manual oversight and adaptive technology to maximize recovery rates. Here's an in-depth look at what a recovery campaign is, how it works, and how you can optimize it to recover failed payments effectively.

What is a Recovery Campaign?

A recovery campaign is a structured process designed to recover failed payments and keep customers active on your subscription service. When a payment fails, the campaign kicks into action, using a series of targeted communication methods and payment retries to resolve the issue. The goal is to recover the payment as quickly and seamlessly as possible while minimizing customer disruption.

Key Components of a Recovery Campaign

Payment Retries: Automated payment retries are a critical component of any recovery campaign. These retries are scheduled at optimal times based on the customer's payment behavior and the specific decline reason. For example, if a payment fails due to insufficient funds, retries might be front-loaded before contacting the customer to increase the likelihood of success without service disruption. Certain retries can be timed loosely around typical payday cycles, though any kind of guesswork, including AI-driven strategies, should not get in the way of a foundational strategy optimized in 3 key areas: recency, frequency, and duration.
Email Notifications: Emails are often the first point of contact in a recovery campaign. They inform the customer of the failed payment and provide clear instructions on how to update their payment information or retry the payment. Effective emails are timely, informative, personalized, and encourage quick action without overwhelming the customer.
SMS Alerts: SMS alerts are a powerful tool for recovery campaigns, offering a direct line to the customer’s mobile device. SMS messages tend to have high open rates and can prompt immediate action, making them especially effective when combined with email notifications. They serve as a quick reminder and are particularly useful for reaching customers who may not be as responsive to email.
Escalation: Escalation strategies involve gradually increasing the urgency of communications as the recovery process progresses. If initial contact attempts fail, follow-up messages can be escalated in tone and frequency. For example, after a series of emails and an SMS alert, a more urgent message might stress the need for immediate action to avoid subscription disruption. For high-value customers, another kind of escalation is often necessary, looping in support teams to personally look into the billing issue before a customer churns.

Churn Recognition and Campaign Length

Determining how long a customer can remain past-due before being classified as passively churned is a crucial business decision that can significantly impact your recovery strategy and bottom line. For many eCommerce businesses, the real cost of continuing outreach to past-due customers is minimal. Since there’s no immediate expense tied to a delayed payment, ongoing recovery efforts can continue until a customer explicitly cancels, often extending churn recognition to 30 days or beyond. This extended timeframe allows more opportunities to recover the payment without prematurely writing off the customer.

However, there are exceptions that require a more immediate approach. For businesses where shipments need to occur within a narrow fulfillment window, payments must be recovered quickly to ensure orders are processed smoothly. In these cases, a shorter campaign duration is necessary to avoid fulfillment disruptions, and passive churn may need to be recognized sooner if payment recovery efforts are unsuccessful.

In contrast, subscription services that grant users access to paid content face a different set of challenges. Allowing past-due customers continued access can create a real or perceived cost, as users benefit from the service without paying. For these businesses, recognizing passive churn earlier—often within days of a failed payment—helps limit free access and incentivizes timely payment resolution. In these cases, locking users out of content while they are past-due is often the better option, however, it also requires that access is automatically restored when a payment succeeds. Where technical limitations make this challenging, a shorter campaign length can be most effective.

Ultimately, deciding when to classify a customer as passively churned depends on your business model, the associated costs of continued access or outreach, and the strategic value of retaining each customer. By aligning your campaign duration with these considerations, you can maximize recovery efforts without compromising operational efficiency or profitability.

Adaptive Technology in Recovery Campaigns

Modern recovery campaigns leverage adaptive technology to tailor the recovery process to each individual customer. This technology uses data-driven insights to adjust the timing, messaging, and escalation of each recovery attempt based on customer behavior and payment history.

For instance, adaptive technology can identify patterns, such as the best times to send emails or the optimal days to retry a payment. It can also personalize communication, ensuring that each message feels relevant and specific to the customer’s situation, enhancing the likelihood of recovery.

Optimizing Your Recovery Campaign

Personalize Communications: Use customer data to personalize your emails and SMS messages, making them more engaging and relevant. Addressing customers by name and referencing their subscription details can increase the effectiveness of your outreach.
Time Your Retries Wisely: Avoid any guessing games when retrying payments. Use insights about customer behavior to time retries strategically—such as why the payment was initially declined, the customer's subscription interval, and when common payday periods may occur.
Escalate with Care: Gradually increase the urgency of your communications, but avoid being overly aggressive. The goal is to motivate action without alienating the customer. Consider looping in your support team toward the end of campaigns before high-value customers churn.
Leverage Adaptive Technology: Utilize adaptive technology to continuously refine your recovery strategy. The more data you gather, the better your system can predict the best approaches for recovering each failed payment.

The Power of a Well-Executed Recovery Campaign

A well-optimized recovery campaign is more than just a series of emails and retries; it’s a dynamic, adaptive system designed to understand and respond to customer behavior. By leveraging email, SMS, payment retries, and adaptive technology, you can significantly improve your recovery rates, reduce churn, and maintain healthy customer relationships—all while minimizing manual intervention.

By understanding the key components and best practices for optimizing recovery campaigns, you can turn failed payments into opportunities for growth.