Posts Tagged ‘customer retention’

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 »

2010, So Far

Sunday, August 15th, 2010

The first half of 2010 has been amazing for Vindicia. We are growing new customer GAAP revenue more than 250% year over year while exceeding our new bookings targets by an average of 80%. We’ve secured wins with some of the largest companies in technology, publishing, and media, and in doing so have shown that online billing is increasingly relevant across all industry segments, not just the early adopters. We look forward to telling everyone more about the world renowned companies who, over the last few months, have chosen Vindicia CashBox to replace their existing subscription system or to roll out new, industry changing offerings as those new projects come to market.

What I’m even more excited about is what we have in store for the second half of 2010.

  • Bookings have gotten off to a great start since July 1st, with wins in each of our key business segments in what had historically been a slow quarter.
  • We continue to innovate on the R&D front. We ended the tension between marketing optimization of the checkout process and responsibility for PCI compliance with our release of HOA in the first half. Going forward, look for us to support a greater set of use cases for subscription and microtransaction billing and expect even further expansion of our payment method support as our client and demographic base takes us to all parts of the world. Most importantly, we’re adding additional technology to enable our best practices that support the entire lifecycle of our clients’ online business and allow us to improve our already industry leading customer retention system.
  • With our record growth, we’re hiring and ramping the teams in all areas of the companies to keep up – if you’re interested in joining one of the fastest growing SaaS companies, please take a look at our careers page. We’ve entered that growth stage when I return from a business trip and meet brand new employees, and maybe you can be one of those new faces.

We started Vindicia because we believe that content and services can be sold online. We’re excited to see the market responding to that message and we’re proud of the new services and even categories we’re enabling. The switch to an “as-a-Service” business model across content, gaming, and software is creating vast new opportunities and unheard of cool new products. We at Vindicia get an early look at what is in store for everyone on the Internet and I can tell you that we’re feeling like kids on the night before Christmas. We’re helping build online revenue so our clients can build the online games, tools, and entertainment for the next 100 years.

Gene HoffmanTags: , , , , , , ,
Posted by Gene Hoffman in CEO Blog | No Comments »

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 »

We pay you

Wednesday, March 24th, 2010

I was chatting with Sanjay today and we were reviewing some monthly retention metrics for our clients. Just on the additional retention we create for our clients and with the simple assumption of more than $1M in annual revenues, our client’s first year on CashBox is net free or better. In the second year we’ll be paying our clients to use CashBox. That includes our client’s internal cost to implement CashBox and migrate existing subscribers. When you add in recovered chargebacks, PCI cost savings, broader payment method support, tax service savings, and no gateway charges, we’re usually paying our customers to use CashBox in the first 6 months.

And we’re not just paying our clients in dollars. We’re paying them in the currency of compound interest created by longer customer lives.

“Freemium” anyone?

Gene HoffmanTags: , , , , ,
Posted by Gene Hoffman in CEO Blog | No Comments »
  1. Pages:
  2. 1
  3. 2