In 2018, Vindicia commissioned Forrester Consulting to conduct a study entitled The Total Economic Impact™ of Vindicia Select that examined the potential return on investment that enterprises may realize by deploying Vindicia Select. This post highlights the key findings.
The scourge of involuntary churn
Subscription-based businesses make significant investments in acquiring new customers. When successful, organizations will typically recoup these expenses over the total lifetime of the customer relationship. However, even when customers are satisfied with the subscription product or service, unexpected payment failures can result in interruptions to the recurring relationship. This involuntary churn can make it difficult to grow or even sustain a business.
Credit or debit card transactions can fail for a number of reasons, ranging from insufficient funds, to issuing of new cards, to suspicion of fraud. Most subscription service providers have procedures in place to deal with failed payments. Typically, billing and payments operations teams, which are tasked with optimizing payment success rates, employ a combination of retry algorithms and account updater services alongside customer outreach to recover billing relationships after a payment failure occurs. However, even with sophisticated procedures in place, companies lose revenues and customers are disconnected because of non-payment as a result of failed transactions.
The Forrester study
Vindicia Select a cloud-based recurring-payments solution that leverages artificial intelligence, sophisticated retry algorithms, and large data sets to reduce involuntary churn. Select leverages patented techniques to enable transactions that failed repeatedly with regular recovery processes, to complete successfully. The purpose of the study was to provide readers with a framework to evaluate the potential financial impact of using Vindicia Select on their organizations, both in terms of the immediate revenue rescued, as well as the additional revenue generated as these customers continue to subscribe to the service.
Forrester interviewed payments executives at five companies that use Vindicia Select. The interviewed companies spanned multiple industries, including services, media, and physical goods. The Forrester study then analyzed a composite $1 billion organization. They determined that over a three-year period, the composite company would experience the following results:
- Vindicia Select recovers 18% of terminally failed transactions. (“Terminally failed transactions” are transactions that still failed after the company had exhausted all retry attempts).
- Revenue from recovered payment transactions totals $6,249,477
- Select adds 2 months to the average customer lifetime value (ACLV), generating $70,412,965 additional revenue
- Total benefits are $76,662,442 over three years
The interviewed companies
Forrester interviewed payments executives at five companies that use Vindicia Select to manage their involuntary churn:
- All of the companies employ subscription-based business models
- Three sell digital services, one provides digital and print media products, and the other retails physical goods
- Three also use Vindicia’s CashBox billing platform, while the others use billing systems that they developed in-house
- Two have extensive international operations, though all companies transact globally.
Prior to deploying Vindicia Select, each organization had in place a variety of practices designed to limit failed payments. To reduce the likelihood of failed transactions, they leveraged account updater services as well as customer outreach via various channels. Once transactions did fail, they employed retry algorithms to recover billing relationships. Still, they were left with a significant number of terminally failed transactions.
Why do companies invest in Vindicia Select
The following challenges served as key drivers in the companies’ decisions to invest in Vindicia Select:
- Preventing involuntary customer churn
- Finding new ways to prevent payment failures
- Retaining customers who find value in subscription products and services
- Ensuring continuity of service for customers
Benefits customers reported
The interviews revealed these key benefits from Select:
- Recovery of a significant number of billing relationships
- Less pressure on billing teams
- Little to no impact from chargebacks
- Little to no negative impact on the customer experience
- Greater visibility into payments metrics
The study identifies the following prime benefits of Vindicia Select:
- Transaction recovery. The interviewed companies reported that Vindicia Select consistently recovered a significant portion of terminally failed payments
- No impact on customer experience. Contrary to expectations, Vindicia Select did not increase call volumes or web traffic to customer support
- Negligible impact on chargebacks. The companies’ daily monitoring of chargebacks proved that chargeback rates were only marginally affected
Get the full Forrester study
Download the full Forrester study and the view the Forrester infographic.
Attend the live Forrester webinar
To learn more, join our live webinar featuring Forrester Consultant Joe Branca on February 7, 2019 at 11:00 am PST.