Definition

Dunning is a commonly used term in SaaS businesses that follow a recurring billing setup for all of their customers. During every billing cycle, many payment transactions may fail for reasons like blocked cards, declined cards, credit card expired, network related issues, etc. SaaS customers may not notice such payment failures. With Dunning, companies can identify such transaction failures as they happen and send automatic alerts to customers with timely and accurate information.

Example

SaaS companies employ dunning management because:a. It helps in setting up retries for failed paymentsb. It sends reminders to customers about outstanding duesc. It alerts customers via gentle emails about transaction failuresd. It requests the customer to share updated credit card information to avoid the recurrence of payment failures

Why it matters

Many times, due to payment failures, companies may experience involuntary churn as they lose customers. Even a 1% rise in churn can impact a company's overall revenue. To avoid churn triggered by payment issues, companies can adopt smart dunning practices. A well-designed dunning mechanism can also help companies maintain good customer relations.

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