What is involuntary churn? Voluntary churn vs involuntary churn
Involuntary churn (also referred to as passive churn) refers to when customers unintentionally opt out of a subscription business’s products or services. Unlike voluntary churn, where a customer actively decides to end their service with a subscription business, involuntary churn occurs due to failed transactions, such as failed payments when credit cards expire, when there are insufficient funds in a bank account, or when a credit limit is maxed out. Both passive and active churn pose major challenges to the health of subscription businesses, who not only rely on recurring payments, but also long-term customer relationships and customer retention.
Optimizing payment processing to reduce involuntary churn
One strategy subscription businesses can use to reduce involuntary churn is to communicate with customers when a credit card’s expiration date approaches. Sending the subscriber an email or automatic notification reminding them to update their payment information can help prevent payment failures before they occur, thus reducing involuntary churn and increasing customer lifetime value. Businesses can also consider using a payment processor or subscription management solution with functionality like automatic retries. Here, if a payment fails, the provider will retry the transaction on a specific cadence, often resolving payment issues behind the scenes without having to get customers involved.