RECOVERY TACTICS BEYOND BASIC DUNNING

➤ WELCOME TO ISSUE #3

Hey there! Hope you had a great weekend, and Mother’s Day. If your lucky, you were able to squeeze in some decompression time.

Either way, it’s time to get back to it. Urgency is the order of the day.

Why urgency? You ask. Well, because failed credit card transactions are bleeding your revenue. Most revenue teams will discover this too late, but not you.

Today we’re covering

• How to build a multi-channel recovery matrix that captures 40% more failed payments than standard dunning emails

• The 13-day sequence timing that top subscription companies use to recover 95%+ of payment failures

• Why segmenting recovery tactics by decline type and customer value unlocks hidden revenue

• How to construct a payment recovery dashboard that turns a technical problem into a revenue-generating opportunity

➤ THINGS YOU SHOULD KNOW

• Consumers Reevaluate Subscriptions Amid Economic Strain: With the economy tightening, consumers are scrutinizing their subscriptions more closely.

• ServiceNow Projects $1B in AI-Driven Annual Contract Value by 2026: This move reflects a broader industry trend of integrating AI agents across various business functions, signaling a shift toward more intelligent and automated service offerings.

• Arizent's Strategy to Double Subscription Revenue: By focusing on enterprise subscriptions and delivering role-specific insights, the company seeks to enhance its value proposition and deepen customer engagement.

• Subscription Growth Trends to Watch in 2025: Successful subscription growth increasingly depends on retention strategies like payment flexibility (offering weekly, monthly, and annual plans) and subscription pause features rather than outright cancellation options.

➤ TODAYS FOCUS

💰 Every month, 35% or more of your recurring payments may be failing due to expired cards, insufficient funds, or processor hiccups (chargebee).

Standard dunning practices catch barely half of these.

The data shows the average subscription business is losing 9% of annual revenue to preventable payment failures (PYMNTS).

That's $900,000 lost yearly on just $10M in ARR.

📊 Beyond Basic Dunning: The Recovery Matrix

Standard dunning, sending automated "update your card" emails, is table stakes, and not a complete solution.

Companies with 95%+ recovery rates operate with a multi-channel, multi-timing recovery matrix.

In my experience, most teams handle failed payments like this:

1. Send 3-5 emails

2. Maybe try in-app notifications

3. Wait for customers to act

4. Watch revenue leak

This passive approach treats symptoms, not the system. 😔

⚙️ The Payment Recovery Operating System

Recovery requires an operating system, not a notification sequence. Let’s design your recovery stack around three core principles:

1. Pre-failure interception

• Detect cards nearing expiration 45 days out.

• Map decline patterns by card type, bank, and customer segment.

• Create targeted messaging for high-risk segments before declines happen.

The most sophisticated operators build machine learning models predicting which customers face upcoming payment issues based on historical patterns.

2. Multi-channel orchestration

Standard recovery playbooks fail because they rely exclusively on email.

You need a sequence that activates across:

• Email (timing calibrated to open patterns)

• SMS for high-value accounts

• In-app modal blocking core functionality

• Push notifications with direct update links

• Support team outreach for accounts above set value thresholds

You’ll want to test channel combinations rather than isolated touchpoints.

The recovery sequence for a $50 monthly subscription should differ from your $5,000 enterprise accounts.

3. Processor optimization

Your payment processor likely offers tools you aren't using.

• Account updater services from major processors automatically refresh stored payment credentials, but require specific implementation. Make sure you understand your systems capabilities inside and out.

• Network tokens replace static card numbers with dynamic tokens that survive card re-issuance. Ask your payment processor about these.

• Use intelligent retries that route failed payments through optimal processing paths based on failure type. Again, ask your payment processor about this.

Most teams get this wrong by treating all declines identically.

🛠️ Implementation: The 13-Day Recovery Sequence

The most effective recovery sequence extends beyond the typical 7-day windows.

• Day 0: Payment fails → Immediate email with one-click update link + SMS for accounts >$X (your larger accounts)

• Day 1: In-app modal at login (very effective)

• Day 3: Follow-up email highlighting specific benefits at risk

• Day 5: Push notification + email with social proof ("93% of customers maintain service by updating")

• Day 7: Phone call for accounts above threshold

• Day 10: Final email with executive sender

• Day 13: Service limitation begins

I’ve seen this done well. This timing framework will outperform industry standard recovery rates.

📈 Measurement: The Recovery Dashboard

Stop measuring dunning with vague "recovery rate" metrics.

Build a granular dashboard showing:

1. Recovery by decline type

• Expired card recovery rate

• Insufficient funds recovery rate

• Processor decline recovery rate

• Bank decline recovery rate

2. Recovery by customer segment

• Recovery rate by plan type

• Recovery rate by customer tenure

• Recovery rate by acquisition channel

3. Channel effectiveness

• Email recovery attribution

• SMS recovery attribution

• In-app recovery attribution

• Call recovery attribution

Without this granularity, you're flying blind on a big chunk of your recurring revenue.

⚡ Next-Level Strategy: Three Advanced Tactics

Ready to go further? Here are some advanced strategies I highly recommmend:

1. Card Testing Mechanism

Create a lightweight validation system testing cards before the official retry.

• This prevents multiple failed attempts that can trigger fraud alerts.

• Some teams implement $0 authorizations to verify card validity before attempting the full charge.

2. Alternative Payment Capture

When primary payment methods fail, present alternative payment options within the recovery flow.

• PayPal, ACH, and digital wallets often convert when cards fail.

• Prompt for alternative payment methods after the second recovery attempt.

3. Differential Timing by Failure Type

• Hard declines (lost/stolen cards) require immediate action.

• Soft declines (temporary holds) benefit from strategic retry timing.

• Design your retry logic around decline reason codes, not generic schedules.

🏆 Operational Excellence: The Team Structure

Revenue recovery transcends traditional team boundaries.

Create a cross-functional payment recovery pod with:

• 👤 Revenue operations lead

• 👤 Customer success representative

• 👤 Product manager (for in-app recovery experiences)

• 👤 Data analyst tracking recovery metrics

This team should meet weekly with clear recovery targets.

Assign direct revenue responsibility to this pod: quantify the recovered revenue that would otherwise be lost.

🎯 Implementation Roadmap

Most teams cannot overhaul their entire recovery system at once.

Start with these three high-impact actions:

1. Audit your current recovery sequence and calculate your true recovery rate by decline type

2. Implement one additional recovery channel beyond email

3. Build a basic recovery dashboard with decline-type segmentation

Measure the impact for 30 days, then expand to the next tier of recommendations.

Your payment recovery system isn't just a technical implementation, it's a direct revenue driver.

Every 5% improvement in recovery rate translates to approximately 0.25% in top-line growth.

For most subscription businesses, that represents one of your highest-ROI projects this quarter.

➤ TILL NEXT WEEK

That’s all for now…

Remember that payment failures aren't just a technical problem, they represent a strategic revenue opportunity hiding in plain sight.

The companies that treat failed payments as a system to be optimized rather than a nuisance to be managed create a compounding advantage.

Build your recovery operating system this quarter and watch yesterday's leakage transform into tomorrow's growth lever.

Cheers,

~ Rick

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