The start of a new year is the perfect time to tackle lingering challenges that impact your bottom line. For subscription-based businesses, one of the most significant—and often overlooked—challenges is involuntary churn caused by failed payments. While many companies focus on acquiring new customers, it’s more profitable to retain the ones you already have.
Reducing involuntary churn is a powerful initiative that results in meaningful revenue growth and stronger customer relationships. Here’s how you can fight your involuntary churn problem and make 2025 your most profitable year yet.
Retention: the source of long-term profitability
Subscription businesses thrive on customer retention. While acquiring new customers can boost growth, these new customers come at a high cost. On average, it 5-7 billing periods to recoup the acquisition cost of the average B2C customer, while it can take 18-24 months to recoup the cost of acquisition for B2B.
Research consistently shows that retaining existing customers is far more profitable than attracting new ones. When subscribers stay longer, the revenue generated from their continued purchases compounds over time, creating steady, predictable growth.
And while retention is always a high priority, most businesses focus on fighting voluntary churn—when customers actively cancel. They use special offers, loyalty programs, and other tactics to keep people engaged. But involuntary churn is trickier because it’s unintentional. A payment fails, it isn’t recovered, and a loyal customer quietly disappears. It doesn’t have to be this way though. By treating involuntary churn with the same level of attention you give to voluntary churn, you can achieve your retention goals.
The hidden cause of subscriber churn
Failed payments are the single largest source of subscriber churn. Despite being viewed as a minor accounting issue, failed payments can quietly undermine your business. When payments fail and recovery efforts fall short, it leads to:
- Lost customers
- Declining lifetime value (LTV)
- Disrupted revenue streams
What makes this issue even more critical is that failed payments are entirely preventable. By optimizing recovery efforts, subscription businesses can dramatically reduce involuntary churn, retain more customers, and improve overall profitability.
In fact, a small increase in recovery rates can yield substantial financial gains. For instance, reducing involuntary churn by just 12.5% can generate 3.5% revenue growth in as little as 60 days—a figure that compounds over time. Impressive.
The long-term benefits of failed payment recovery
Recovered customers are not just a one-time win—they become a source of long-term revenue. When these payment failures are recovered, subscribers continue their natural lifecycle, delivering steady revenue and higher lifetime value.
Optimizing failed payment recovery delivers a ripple effect of benefits:
- Increased Revenue: Fewer failed payments mean fewer lost customers and more recurring revenue
- Improved LTV: Retained customers contribute more revenue over time, improving key profitability metrics
- Stronger Customer Relationships: A smooth recovery process builds trust and reduces frustration
Businesses that optimize their payments tech stack can achieve fantastic financial performance. By addressing failed payments, they achieve steady revenue growth while improving all core operating KPIs.
FlexPay’s failed payment recovery solution
The most effective way you can improve you failed payment recovery rate is by implementing a sophisticated recovery tool like FlexPay. FlexPay combines different approaches to offer the highest-performing failed payment solution, designed specifically for long-term subscriber retention.
Invisible Recovery™ is an AI-powered system that works directly with the payments system to address all the technical reasons why a payment can fail and determines the right recovery strategy specific to that failure reason. This approach is ideal because the customer never knows there was a problem with their payment and there is no interruption in product or service delivery: the relationship simply continues as if nothing had happened.
When Invisible Recovery can’t fix a payment problem— such as a stolen card — Engaged Recovery™ takes over to enlist the subscriber’s help in solving the problem through a series of SMS or email messages. These outreach messages are consistent in look and tone with your brand and use aspects of behavioral science to encourage the customer to resolve the payment issue. By showing your customers empathy, providing education on what has happened, and empowering them to act independently, Engaged Recovery results in greater customer satisfaction and higher retention.
Make fighting involuntary churn your Q1 priority
As we move into the new year, make reducing involuntary churn your top resolution. By prioritizing failed payment recovery, you’ll not only boost profits but also deliver a better experience for your subscribers.
Need help tackling failed payments? FlexPay can help you recover lost payments, reduce churn, and grow your revenue. Let’s make 2025 the year you finally win the fight against involuntary churn.
