There's no reason to limit your dunning to a single followup e-mail and 3 days to fix. If that goes out on a Friday, it's almost as bad as just cancelling the customer on the first billing failure.
With Improvely, I follow up and re-try the charge after 1 day, then 3 days after that, then 7 (with an e-mail each time about when the next attempt will be), which gives them almost two weeks. Enough people fix the problem after a few days that this retains a lot of subscriptions that nobody meant to cancel. Often it's just a matter of giving someone time to call their bank to tell them not to decline the charge -- with international customers especially, it's often the bank doing the blocking for fraud-prevention reasons.
Which brings up another thing -- if you can build an "inactive" flag into your app, that's 100% better for retention and recapturing past customers than deleting accounts. If someone accidentally lets their payment lapse and tries to log in to find their account no longer exists, and all the work they've put into setting up or configuring your service has to be redone, they're very likely to stay cancelled. If they log in show them a "welcome back, your account's still here, enter your payment info to reactivate immediately" screen.
As far as Patrick's advice for handling plan upgrades, I'd add one more tip: Build in some logic to never upgrade someone within X days of their billing date. Combined with the automatic warning at 80%/90% usage so they know they're getting close to needing to upgrade, making sure you never surprise them with a higher bill 2 days before their renewal goes a long way to keeping everyone happy. I've only ever had one customer reply to a mail about nearing the limits of his plan that he didn't want to upgrade and pay more, and he was completely happy after I offered a discount off the published cost.
Interesting point you bring up around international payments - to move slightly off topic for a minute - we have an issue whereby we are a UK based company yet 75% of our paying (recurring) customers are from the US. We have payment declines each day from our US customers and it is often because their payments have been declined by the "issuing bank" or at least that's what Paypal tells us. We're just about to move to Braintree payments but wanted to see whether in your experience (or anyone else for that matter) when you process payments from overseas do you see declines or is this more of a Paypal issue which should be resolved if we moved to Braintree / other payment solution ?
I bill all recurring customers through a traditional merchant account and gateway (like Braintree offers). Making this switch is not likely to solve the problem -- "card declined by issuer" is the exact reason I get for the international payments that get declined for no reason -- usually fixed as soon as the customer calls their bank.
Thanks for the reply - you're probably right. I just wonder if Paypal have extra fraud prevention measures in place which exacerbates the issue. To give you a feel we see around 20% of our cancellations per day are as a direct result of declined transactions (for this very reason "card declined by issuer").
It just "feels" too high and one that we'd have assumed would affect hundreds/thousands of other SaaS UK companies who bill the bulk of their customers from the US. But there are few (if any) reports of it online.
With Improvely, I follow up and re-try the charge after 1 day, then 3 days after that, then 7 (with an e-mail each time about when the next attempt will be), which gives them almost two weeks. Enough people fix the problem after a few days that this retains a lot of subscriptions that nobody meant to cancel. Often it's just a matter of giving someone time to call their bank to tell them not to decline the charge -- with international customers especially, it's often the bank doing the blocking for fraud-prevention reasons.
Which brings up another thing -- if you can build an "inactive" flag into your app, that's 100% better for retention and recapturing past customers than deleting accounts. If someone accidentally lets their payment lapse and tries to log in to find their account no longer exists, and all the work they've put into setting up or configuring your service has to be redone, they're very likely to stay cancelled. If they log in show them a "welcome back, your account's still here, enter your payment info to reactivate immediately" screen.
As far as Patrick's advice for handling plan upgrades, I'd add one more tip: Build in some logic to never upgrade someone within X days of their billing date. Combined with the automatic warning at 80%/90% usage so they know they're getting close to needing to upgrade, making sure you never surprise them with a higher bill 2 days before their renewal goes a long way to keeping everyone happy. I've only ever had one customer reply to a mail about nearing the limits of his plan that he didn't want to upgrade and pay more, and he was completely happy after I offered a discount off the published cost.