July 6, 2010 | Authored by: Vindicia Team
Retention, More Than Meets The Eye
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.
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