claude-skills-reference/marketing-skill/churn-prevention/references/dunning-guide.md

Dunning Guide

Payment recovery strategies, retry logic, and email sequences for involuntary churn.

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Why Involuntary Churn Matters

At most SaaS companies, 20-40% of all churn comes from failed payments — not customer decisions. The customer didn't choose to leave. Their card expired, got replaced, hit a limit, or was flagged by their bank. Most of these situations are recoverable within 7-14 days.

The math:

• 1,000 active customers
• 3% monthly churn rate = 30 churned per month
• If 30% of that is involuntary = 9 customers/month from failed payments
• Recovery rate of 40% = 3.6 customers saved/month
• At $100 MRR: $360/month recovered, $4,320/year — from just fixing dunning

That's before touching voluntary churn.

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Failure Mode Taxonomy

Not all payment failures are equal. Categorize before deciding how to retry:

Failure Type	Decline Code	Recovery Approach
Insufficient funds	insufficient_funds	Retry in 3-5 days (balance usually replenishes)
Card expired	expired_card	Card updater first; email to update card
Card replaced	card_not_supported, network updated	Card updater handles this automatically
Do not honor	do_not_honor	Retry once in 3 days; email to contact bank
Fraud flagged	fraudulent	Email immediately; don't retry — let customer resolve
Card lost/stolen	lost_card, stolen_card	Email immediately; do not retry
Generic decline	generic_decline	Retry 2x over 7 days; then email

Rule: Never retry fraudulent, lost, or stolen card declines. It increases chargeback risk.

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Retry Schedule

Optimal timing based on card network research:

Day 0:  Payment fails (initial charge)
Day 3:  Retry 1 — highest recovery rate (3-7 days is the sweet spot)
Day 8:  Retry 2 — catches monthly paycycle refills
Day 13: Retry 3 — final automated attempt
Day 16: Cancel subscription (if not recovered)

Stripe-specific configuration:

In Stripe Billing settings (Dashboard > Billing > Subscriptions and emails):

Smart Retries: Enable (Stripe uses ML to pick retry timing)
   OR
Manual schedule: 3 days, 5 days, 7 days
Subscription behavior after all retries: Cancel subscription

Alternative for maximum recovery: If using Smart Retries (Stripe), disable manual schedule — they conflict. Smart Retries uses real-time card network data and typically outperforms fixed schedules.

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Card Updater Services

These services update card details automatically when banks issue new cards:

Provider	Service Name	Config Required
Stripe	Account Updater	Enabled by default. Verify in Dashboard > Settings > Card account updater
Braintree	Account Updater	Must enable in Control Panel > Processing > Account Updater
Recurly	Account Updater	Available on Professional and above
Chargebee	Smart Dunning	Bundled with Chargebee; enable in configuration

Expected impact: 15-25% of involuntary churn prevented before dunning emails are needed.

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Dunning Email Sequence

Five emails. Each one escalates slightly in urgency. No guilt, no shame — these are operational communications.

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Email 1 — Day 0: "Payment failed"

Goal: Inform, make it easy to fix.

Subject: Your [Product] payment didn't go through

Hi [Name],

We weren't able to process your [Product] subscription payment of [amount].

This happens sometimes — an expired card, a temporary issue with your bank, 
or a card limit. Easy to fix.

Update your payment details here:
[Update payment method →]

If you need help, reply to this email.

[Product] Team

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Payment amount: [amount]
Billing date: [date]
Next retry: [date + 3 days]

Notes:

• Send within 1 hour of failure
• Include specific amount and date — vague emails get ignored
• Mention the next retry date — some customers will wait for the retry to see if it clears

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Email 2 — Day 3: "Retry coming up"

Goal: Catch people before the retry so they can update the card first.

Subject: [Product] — we'll try your payment again tomorrow

Hi [Name],

We're going to attempt your [Product] payment of [amount] again tomorrow 
([specific date]).

If your card details have changed, update them now so the retry goes through:
[Update payment method →]

If the retry fails, we'll reach out again.

[Product] Team

Notes:

• Send day before the retry, not day of
• Short email — one job, one CTA
• Some payment processors let you trigger a manual retry immediately after card update — mention this if yours does

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Email 3 — Day 7: "We tried again — still failing"

Goal: Add urgency, soften tone, offer help.

Subject: [Product] payment still failing — action needed

Hi [Name],

We've attempted to process your [Product] subscription twice now, 
and the payment hasn't gone through.

Your account is still active, but we'll need to resolve this soon to 
avoid any interruption.

A few common fixes:
• Check if your card has expired and update it
• Contact your bank if the card is being declined unexpectedly
• Use a different card if this one is no longer working

Update payment details:
[Update payment method →]

Still having trouble? Reply to this email and we'll help you sort it out.

[Product] Team

Notes:

• Shift from notification to problem-solving
• List common causes — helps customers self-diagnose
• Offer human help — some people have legitimate confusion

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Email 4 — Day 12: "Final notice"

Goal: Create urgency without being threatening. Be clear about what happens.

Subject: [Product] account at risk — payment needed by [specific date]

Hi [Name],

We've made multiple attempts to process your [Product] subscription, 
and we haven't been able to reach your card.

Your account will be cancelled on [specific date] if we don't receive payment.

Here's what you'll lose access to:
• [Key feature / data point]
• [Key feature / data point]
• Your [X] months of [data/history/usage]

This is our last reminder before cancellation.

Update payment now:
[Update payment method →]

Need to talk to someone? [Book a call] or reply here.

[Product] Team

Notes:

• Use a specific date — "soon" doesn't create urgency, "March 15" does
• List what they lose — tangible is more motivating than abstract
• Offer human escalation — some churn at this stage is recoverable by a support person

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Email 5 — Day 16: "Account cancelled"

Goal: Inform, leave the door open, make reactivation easy.

Subject: Your [Product] account has been cancelled

Hi [Name],

We've cancelled your [Product] subscription as of today. Your card could 
not be charged for [amount] after multiple attempts.

Your data is saved for 90 days (until [date]).

To reactivate:
[Reactivate my account →]

You'll be able to pick up where you left off — all your data will be intact.

If you think this was an error, reply to this email and we'll sort it out.

[Product] Team

Notes:

• No blame, no guilt — this is a notification, not a scolding
• Make reactivation frictionless — one click, not a new signup flow
• Data retention timeline gives them a reason to act within 90 days

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Dunning Metrics to Track

Metric	What it measures	Target
Recovery rate	Failed payments recovered / total failed	25-40%
Recovery by email	Which email in the sequence converts most	Track per email
Recovery by retry	Which retry attempt succeeds most	Usually retry 1 (day 3)
Time to recovery	Days from first failure to payment	<10 days is good
Card updater hit rate	Cards auto-updated before manual outreach	15-25% of failures

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Third-Party Dunning Tools

For teams who want plug-and-play dunning without building it:

Tool	Best For	Pricing Model
Churnkey	Stripe users, full cancel flow + dunning	Revenue share
ProfitWell Retain	Stripe + Braintree, analytics-heavy	% of recovered revenue
Stunning	Stripe-native, email-focused	Flat monthly
Recurly	Already on Recurly	Built-in
Chargebee Smart Dunning	Already on Chargebee	Built-in

When to use a third-party tool: If you're <$500k MRR and don't have engineering bandwidth to build retry logic + email sequences, a tool pays for itself quickly. Above that threshold, build it in-house for more control.