Guest Post: How Butter Payments is solving involuntary churn

At Thesis, we spend a majority of our time focusing on customer acquisition. The team at Butter Payments reached out to explain how they have been tackling involuntary churn.

At Thesis, we spend a majority of our time focusing on customer acquisition. While we do factor churn and LTV when doing things like offer testing, we typically pass the responsibility of increasing customer value off to our clients. When the Butter Payments team reached out to explain how they have been tackling what they are calling “involuntary churn”, we were shocked. So shocked, that we gave them the chance to tell you in their own words how they’re helping companies to stop leaving money on the table. As we see the cost of acquiring new customers rising, it’s becoming more important to maximize lifetime value wherever possible. 

The rest of this article is a guest post written by the team at Butter Payments.

Key Takeaways

  • By using an advanced AI and ML payments intelligence platform, a large subscription company gained $30 million in incremental annual revenue lift by dramatically decreasing lost customers due to valid payments failing.
  • They are not alone, as most subscription companies are unknowingly losing some of their best customers due to “involuntary” (accidental) churn–which occurs when legitimate payments fail because they are falsely detected as fraud, or otherwise lost in an aging payment ecosystem.
  • Solutions like Butter’s payment intelligence platform connect in minutes to existing Payment Service Providers (PSPs) and payment stacks to minimize investment and changes while delivering meaningful results.

How one company tackled involuntary churn

A subscription company–which provides access to more than a million e-books and audiobooks–knew it had a problem with involuntary churn. Internal analysis found that less than 50% of its payments were successfully going through, with particular problems in payments from outside the US. The company needed a solution that would help them keep more of their customers, while allowing them to continue their growth efforts in the US and international markets.

To address this problem, the subscription company looked to the team behind Butter Payments, a payments intelligence platform  company that specializes in using AI and ML to solve involuntary churn. While other solutions use “blunt force” approaches that involve retrying failed payments in a batch over and over again, this approach leverages cutting-edge technology for more precision on each failed payment individually.

Algorithms optimized retry schedules using a range of high-value parameters. This improved the rate of failed payment collection from 25% to 45%. By using ML at the trial sign-up stage, the company was able to recoup 30% of initial payment failures–revenue that was previously unrecoverable. Finally, the company expanded its merchant and payment entity structure to enhance cross-border transactions, which enabled new localized payment methods and led to higher payment success rates.

The results speak for themselves. Of the company’s 1.5 million transactions processed per month, there were 250,000 additional successful user transactions following the implementation. This resulted in 3 million more successful recurring payments collected per year, totaling $30 million in incremental top-line annual revenueall from existing customers. Or put another way, the additional revenue generated from greater payments success accounted for 25% of the company's overall annualized recurring revenue. Again, this was all from getting more revenue from existing customers.

What should you do about involuntary churn?

Whether you realize it or not, you’re likely falling victim to this problem and are leaving incremental ARR on the table. Just as you use apps, tools and platforms across all aspects of your business, we think it makes sense to include a payments intelligence tool in your marketing tech stack. 

To see how much involuntary churn is costing your company, Butter offers a free, no-obligation analysis that takes about 10 minutes to set up. If you’re like the company featured above, you’re likely losing many customers–and leaving a lot of money on the table.

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