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Key takeaways:
- Chargebee offers robust invoicing solutions for subscription businesses, but does not support native calculations or tracking for more advanced metrics like involuntary churn
- It’s essential to understand why Chargebee customers are churning in order to increase customer retention
- In some cases, customers may experience involuntary churn, where they lose their subscriptions due to failed credit card payments
- Tools like Baremetrics can help you calculate, track, and prevent both voluntary and involuntary churn for your Chargebee customers
Churn is the share of your customer base that has canceled over a defined period. It is usually measured per month. Churn can be calculated in two ways, namely customer churn and revenue churn, and there are good reasons to calculate both.
Churn is a needed metric because it helps you calculate your customer lifetime value (LTV), forecast your MRR, and therefore, budget how much you can safely spend on customer acquisition costs (CAC) while maintaining profitability.
When you use Chargebee, it can be hard to calculate customer churn as well as many other metrics on their limited analytics dashboard — though you may be doing some of the vital calculations manually.
How to Calculate Customer Churn
Customer churn is simply the percentage of customers that have quit your service over a set period of time:
Customer churn rate (%) = (Customers that churned over a period of time/Customers at the start of that time period) × 100
This shows you how quickly you are losing contracts month on month. For example, if you have 500 customers and lose 10 customers per month, then your customer churn is 10/500 × 100 = 2%.
Learn more about customer churn.
What Causes Customer Churn?
Customer churn can be separated into two main types: voluntary churn and involuntary churn.
Voluntary churn is a regrettable fact of life. Some customers will choose to quit your service. Cancellation Insights can help you pinpoint why a customer has chosen to leave your platform in hopes of preventing others from leaving for the same reason and winning back those customers you have lost. That said, it is unrealistic to believe that no one will ever want to leave your service.
Involuntary churn, however, is absolutely frustrating and can be stomped out with enough effort. This is a situation where a happy customer is kicked off your platform due to some payment failure.
An obvious question arises here: What causes Chargebee payment failures?
Common Reasons Chargebee Customers Have Involuntary Churn
If you are using Chargebee as your payment processor, which is a great choice by the way, then you might be wondering how your Chargebee customers churn due to failed payments. There are four main reasons that Chargebee payments fail, so let’s discuss each.
1. Expired Credit Card
While a customer may have just decided not to activate their new credit card, usually, this means they haven’t updated their credit card information on Chargebee.
Proactive is the name of the game here—you need Recover to be proactively notifying customers when their credit cards will be expiring soon so that they remember to update their info before the older information no longer works.
2. Incorrect Billing Address
People move. That’s a fact of life, and most people have left a trail of spam mail addressed to them at every home they have ever lived. It has become a part of modern life to open up your mailbox and toss random sales pitches addressed to the previous 2, 3, or 10 tenants of your home.
Unfortunately, with the rise of identity theft, fraud, and money laundering and therefore the need to strictly prevent them, failing to update your billing address for every single subscription you have will lead to failed payments.
3. Maxed Out Card Balance
It can happen to the best of us—a forgotten payment or an unexpected cost can lead to your credit card reaching its limit.
In addition to all the fraud checks mentioned above, in all the intricate handshakes among Chargebee, payment gateways, customer banks, credit card companies, and merchant accounts, whether the credit limit has been reached is confirmed. If it has been reached, then the payment will fail.
4. The Card Was Reported Stolen
If your customer reports their card as lost or stolen and then tries to use it, either because they found the card and forgot they have already reported it missing or, more likely, because the details are still stored on Chargebee, then the payment will fail.
Preventing Churn for Chargebee Customers
While Chargebee is an amazing payment processor, preventing involuntary churn requires a concerted effort. Here are some of the most effective ways to assess your involuntary churn and then work to minimize it.
1. Execute a Standard Operating Procedure
When looking at your involuntary churn, try to standardize your procedures as much as possible. This starts with automating the presentation of your customer churn information on your Baremetrics dashboard. Instituting a proper dunning process is the next step. In addition, don’t forget to make dunning emails a part of your procedure.
2. Utilize Collections
This approach should be used with caution. You don’t need to spend too much time on Reddit to read story after story complaining about companies sending customers to collections, often for minuscule sums and years after the completion of service—and sometimes due to error for bills that had already been paid!
Given the potential for bad publicity and ruined relationships, consider this a last option and only for use with clients that owe you enough to make it worth risking bad publicity and after any other reasonable efforts have failed.
3. Failed Payment Recovery Services
This is where Baremetrics comes in. Thanks to our Cancellation Insights, Baremetrics has tools to figure out why customers have chosen to leave or even to get them back when their churn is involuntary.
4. Have Consistent Invoicing Processes
Subscription management companies can automate their invoices, which can help prevent potential churn. Easy-to-read, predictable, and timely invoicing procedures help customers know what to expect and when, which may help reduce involuntary churn.
Chargebee has robust invoicing features. You can see our Chargebee reviews, or check out how it compares to direct competitors here:
Chargebee vs. Zuora
Chargebee vs. Chargify
Chargebee vs. Recurly
Calculate Financial KPIs with Baremetrics
Baremetrics is a financial analytics and reporting platform that helps SaaS and subscription businesses track essential revenue metrics.
We integrate with multiple payment processing and subscription management platforms— including Chargebee’s billing history— to help business owners accurately calculate and understand revenue performance. We can help you track the LTV and CAC of Chargebee customers— and your churn rates.
On your Baremetrics dashboard, you can learn why customers canceled; you can also correlate lost revenue with cancellation reasons. In addition, Baremetrics can capture fresh insights regarding the reason for cancellation.
With the insights you’ll gather on your dashboard, you’ll understand which missing features are driving your customers away and whether your retention efforts are working. That’s why Baremetrics is the best third-party dashboard for calculating the churn of your Chargebee customers.
Preventing churn is important to any company. Most companies even have someone solely dedicated to churn reduction. The reason for churn usually stems from the product, but there are other reasons, including involuntary churn, that businesses should be mindful of, too. Understanding what churn is happening and why is essential — and Baremetrics can help.
Tired of wasting time on spreadsheets? Get a free trial of Baremetrics today!
