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Compound growth is a wonderful concept–especially when it applies to subscription-based businesses’ customer-retention rates and, by extension, their average customer lifetime value (ACLV).

The flip side–a declining customer-retention rate–is a daunting challenge, particularly given the recent economic travails that have impacted online merchants of all stripes.

On a recent trip to the Midwest, I met with a number of prospective clients, all of whom had witnessed customer-attrition rates climb north of 15 percent. Even more troubling to them, the attrition in many cases resulted from not only voluntary opt-outs, but also from involuntary payment failures.

Just how important is managing involuntary payment failures to a merchant? We at Vindicia recently ran reports on our client base to determine how well we are helping clients tackle this issue. We discovered that, across various markets, our clients can raise their transaction success rate by over two percent on a monthly basis. Assuming a one-year CLV, this two-percent monthly number becomes very significant annually, exceeding 20 percent.

Keep in mind that attrition for yearly subscriptions can be a lot higher. Among our clients who offer them, payment failure rates on the initial transaction sometimes reach 30 percent. Learning the best practices of how to minimize payment failures and maximize customer retention is one of the most important aspects of running an automatic payment, subscription-based online business. The impact can be eye-opening.