Archive for the ‘Data Geek’ Category

Customer Retention – the little stuff matters

Wednesday, September 8th, 2010

The three tenets of our CashBox solution are 1) to increase customer acquisition, 2) maximize customer retention, and 3) enable operational excellence for online merchants that sell digital goods & services to consumers and small business (SMB).

Acquisition is straightforward – allow consumers to choose the right product / plan at the right price in the correct language and currency, and to pay in their payment method of choice.

Operational excellence around billing and customer information is also obvious – securely store all sensitive data while managing and nurturing the overall customer relationship (PCI DSS & SOX are methods of enforcing parts of this).

Where the waters get a bit murky for some folks is customer retention…

The concept is simple. If a transaction fails, try it again, and again, and again. However, retention involves multiple moving parts, so every little detail matters and the compound effect of many small tweaks can be quite large. Some factors that make an impact on retention include:

  • Failure type
  • System availability
  • Transaction type (one-time, subscription, etc)
  • Time since last billing
  • Time between retries
  • Number of retries
  • Payment processor used
  • Transaction routing (# of stops along the way)

Many of these factors are specific to the business model used (Time between billings, transaction type) and some are the result of merchant preference (time between retries, number of retries). Yet others are system related (payment processor, transaction routing, system availability). While the first two areas can experience continual improvement with testing and optimization, the system related issues are *somewhat*out of control of the merchant. The *somewhat* refers to the fact that merchants have a choice of business partners.

Let’s take a closer look at the three system-related factors listed and how we address them.

  • System availability
    • The uptime of connections to the payment processor from the gateway, and the connection from the payment processor to the Interchange.
    • Vindicia: Part of our solution to this problem is a built-in gateway in order to eliminate uptime issues between the billing system and the payment processor. We also have hardware directly in the datacenters of certain partners with direct connections to further reduce any connectivity issues. As a final step, if the payment processor’s connection is down, we automatically queue the transactions for retry.
  • Transaction Routing
    • The number of systems involved in submitting a transaction makes a big difference. The typical flow would involve:
      • Creating a transaction in the billing system
      • Passing the transaction to a gateway
      • Submitting the transaction to a payment processor
      • Receiving information from the card network interchange
      • Capturing the transaction (or other actions, depending on processor response)
    • Vindicia: As mentioned above, we have combined the billing system and gateway (first three steps above) for more control over the transaction flow and greater payment success rates. This also gives more control over the retry logic by directly interpreting error codes from the payment processors into different retry flows. Billing companies & in-house systems that have not directly integrated to payment processors cannot compete with our results.

I’ll save descriptions of the other factors for another post. Optimizing customer retention is goal with constantly moving goalposts. When embarking down the path, merchants have a choice of either becoming experts at payment networks and card retry logic or choosing a partner that is already an established leader in the space.

Jeremy NusserTags: , , , , , , , ,
Posted by Jeremy Nusser in Best Practices, Data Geek, Marketing Fury, Payments 101.201.301 | 1 Comment »

The Hidden Benefits of Putting Up a Fight

Monday, August 30th, 2010

Online businesses often ask us about the value of fighting chargebacks.  After all, it’s a relatively small percentage of total revenue (less than one percent if you’re following the rules).  There are, however, several reasons to put up a fight that may not be readily apparent.

There’s an old joke about two guys camping.  They hear a bear outside the tent.  One guy starts panicking, while the other calmly puts on his tennis shoes.  The first guys says “what are you thinking?  You can’t outrun a bear!”  The second guy replies “I don’t have to outrun the bear.  I just have to outrun you.”

Your site doesn’t have to be bullet proof, and you don’t want to make it impossible for someone to get their money back.  However, you do want to make your site a less attractive fraud target compared to your peers.  The web is littered with blog entries and Facebook postings of people telling how to scam a particular merchant.  If you are an easy target, people share that information, and others will victimize your business.  If you take a harder line, though, the fraudsters will look for an easier target.

Analysis of your credit card traffic will also show that you may benefit from educating the banks.  Most merchants see that a handful of banks may make up a reasonable percentage of their transactions.  Our analysis shows a drop in chargebacks received from some of these particular banks as merchants fight chargebacks over time.

Over the first year of fighting chargebacks, Vindicia clients see up to a 1/3 reduction in the total chargeback volume they receive.  While some might opt to only fight specific types of chargebacks, we have repeatedly shown that our merchants benefit from aggressively fighting chargebacks across the board.

Doug SmithTags: , ,
Posted by Doug Smith in Best Practices, Client Services, Data Geek, Marketing Fury | 1 Comment »

Up & to the Right

Thursday, August 26th, 2010

On Tuesday, Inc. Magazine revealed their 4th annual list of the 5000 fastest growing private companies based on three-year sales growth. Vindicia was recognized as #1068 with a growth rate of 282% over the last three years. We are very honored to have been selected and our growth is a testament to not only the strength of our team and products, but the growing need for consumer billing around digital goods and services. We can’t wait to share the growth rate next year!

Our profile on the list can be found here and many of our neighbors and customers can be found on the San Francisco or San Jose lists.

There was some interesting data in the official press release about the overall makeup, geography & revenues of the list as well.

The Hottest Regions for Fast-Growing Companies

California continues to rule the roost by number of companies on the Inc. 500, with 92, up from 84 last year and 78 in 2008. The Golden State is followed by Texas (52), Virginia (46), New York (36), and Florida (29). These five states place in the same order as last year, and each of them has more companies on the 500 than last year. They now account for more than half of the companies on the list.

The New York City and Washington, D.C., metropolitan areas both gain companies this year, and New York has catches up with Washington, with each of them boasting 48 Inc. 500 companies. (Washington had 42 last year; New York had 36.) San Francisco moves up from fifth to third place, with 29 companies (up nine from last year) Los Angeles drops from third to fourth place, with 27 companies (down nine from last year); and Dallas joins the top five, with 23 companies. Chicago drops out of the top five.

The Inc. 500 at a Glance

Computer Hardware is by far the fastest-growing industry on this year’s Inc. 500, with a total growth rate of 7,194 percent. (That’s thanks to the fact that the category contains just two very fast-growing companies.) Logistics & Transportation is second, with a rate of 2,783 percent, and Security is third, with a rate of 2,299 percent.

In total, the companies on the Inc. 500 employ more than 45,000 people. Government Services is the top employer, with 7,011 jobs, followed by Business Products & Services  (5,289), Consumer Products & Services (4,804), IT Services (4,355), and Advertising & Marketing (3,533).

Advertising & Marketing has the most companies on this year’s Inc. 500 list, with 60, followed by Government Services (59), Business Products & Services (45), IT Services (41), and Software (36).

The top woman-run company is Lexicon Consulting (No. 4 overall), based in El Cajon, California. Lexicon creates mock Iraqi and Afghan villages used to train military personnel. The firm, founded by Jamie Arundell-Latshaw in 2005, recorded revenue of $17.9 million in 2009 and a three-year growth rate of 14,018 percent. The top minority-run company is WDFA Marketing (No. 5 overall), a San Francisco–based firm that specializes in guerrilla, grass-roots, and micro-marketing. WDFA, founded by Raj Prasad, posted revenue of $38.4 million in 2009 and a three-year growth rate of 13,350 percent.

The Inc. 500 posted aggregate revenue of $11.3 billion, down 39 percent from last year. Median three-year growth is 1,231 percent, up almost 40 percent over last year. The top five industries by total revenue are Consumer Products & Services ($1.9 billion), Government Services ($1.4 billion), Advertising & Marketing ($1 billion), Business Products & Services ($872 million), and Energy ($661 million).

Gene HoffmanTags: , , ,
Posted by Gene Hoffman in Data Geek, Industry News, Marketing Fury, Vindicia Press Release | 1 Comment »

Customer Data Ownership

Monday, August 9th, 2010

New companies are being formed every day – here in Silicon Valley, we see a lot of activity and buzz around all of the companies that are creating the next big thing. This is always exciting to follow, but for us here at Vindicia, it is doubly interesting. We take note of the business models and the target markets for these startups as we’ve built our business on meeting the needs of companies selling digital goods online to consumers. One trend we’ve been seeing lately is a sharp growth in the number of consumer-focused startups. This is great, but as many players are new to accepting direct payments from consumers, considerable thought should be given to the business strategies and how to be successful both near- and long-term.

(more…)

Jeremy NusserTags: , , , , , , , , , ,
Posted by Jeremy Nusser in Best Practices, Data Geek, Marketing Fury, Payments 101.201.301, gaming | No Comments »

Retention, More Than Meets The Eye

Tuesday, July 6th, 2010

I am often asked about how Vindicia is able to retain more paying users than other systems – internal or competing solutions. The question is fair, what secret sauce does Vindicia possess that separates us from our competitors? The answer is a bit complicated, but in short, we have internal logic and payments experts that determine the optimal frequency and number of retries for each product in a client’s catalog and reason code returned from the payment processors.

The next question is – how well does it work? That’s easier to answer. We constantly analyze the number of transactions recovered per merchant and per industry segment and we recover between 1% – 5%  of overall transactions each month for our clients. Of course, if the transactions recovered represents a saved subscribers, the true value of our retry logic is the subscription amount times the number of billing periods that would have otherwise been lost.

The savvy online merchant might then ask – what are my industry peers acheiving? The interesting takeaway is that retention numbers and retry logic success depend more on similar business models and customer demographics than they do by industry. A facebook application offering subscriptions and targeting 25-35yo professionals would probably have more in common with Symantec or Zendough than with MouseHunt.

Finally, the question comes to  – couldn’t I build my own retry logic? Absolutely, there is nothing stopping a company from building their own internal retry logic. In fact, many successful online businesses have done just that. However, when they built their internal systems, there was no SaaS billing vendor that they could turn to. For a company to build their own system, they need to be prepared to spend large amounts of money (millions) and develop internal payments experts. That’s what our founders did at eMusic.com before they started Vindicia, and that’s the situation a lot of large online businesses find themselves in today. But I would highly recommend talking to a few companies that have built their own system before embarking down that path. The answer you’re most likely to get is – what do you want to be experts in? Your product or billing and payments infrastructure?

As a final point, as you look at other billing systems, dig in deeper to find out how they handle retention. Most of the solutions that claim to increase retention are just blindly sending the same transaction through multiple times without any adjustments or understanding of the reasons for decline. This is an area where real world results count for a lot – don’t be afraid to ask for them.

Jeremy NusserTags: , , , ,
Posted by Jeremy Nusser in Best Practices, Data Geek, Marketing Fury, Payments 101.201.301 | No Comments »
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