dunning-playbook

Complete guide to recovering failed payments and reducing involuntary churn.

Dunning Playbook

Complete guide to recovering failed payments and reducing involuntary churn.

Why Dunning Matters

Failed payments cause 30-50% of all subscription churn
Most failed payments are recoverable with the right strategy
Subscription businesses lose an estimated $129 billion annually to involuntary churn
Effective dunning recovers 50-60% of failed payments

The Dunning Timeline

Day -30 to -7: Pre-dunning (prevent failures)
Day 0:         Payment fails → Smart retry #1 + Email #1
Day 1-3:       Smart retry #2 + Email #2
Day 3-5:       Smart retry #3
Day 5-7:       Smart retry #4 + Email #3
Day 7-10:      Final retry + Email #4 (final warning)
Day 10-14:     Grace period ends → Account paused/cancelled
Day 14+:       Win-back sequence begins

Pre-Dunning: Prevent Failures Before They Happen

Card Expiry Management

| Timing | Action | |--------|--------| | 30 days before expiry | Email: "Your card ending in 4242 expires next month" | | 15 days before expiry | Email: "Update your payment method to avoid interruption" | | 7 days before expiry | Email: "Your card expires in 7 days — update now" | | 3 days before expiry | In-app banner: "Payment method expiring soon" |

Email template — Card expiring:

Subject: Your card ending in 4242 expires soon

Hi [Name],

The card on file for your [Product] subscription expires on [date].

Update your payment method now to avoid any interruption:

[Update Payment Method →]

This takes less than 30 seconds.

— [Product] Team

Card Updater Services

Major card networks offer automatic card update programs:

| Service | Network | What It Does | |---------|---------|--------------| | Visa Account Updater (VAU) | Visa | Auto-updates stored card numbers and expiry dates | | Mastercard Automatic Billing Updater (ABU) | Mastercard | Same for Mastercard | | Amex Cardrefresher | American Express | Same for Amex |

Impact: Reduces hard declines from expired/replaced cards by 30-50%.

How to enable:

Stripe: Automatic — enabled by default
Chargebee: Enabled through gateway settings
Recurly: Built-in, enabled by default
Braintree: Contact processor to enable

Backup Payment Methods

Prompt for a second payment method:

During signup: "Add a backup payment method" (low conversion)
After first successful payment: "Protect your account with a backup card" (better timing)
After a failed payment is recovered: "Add a backup to prevent future interruptions" (best timing — they felt the pain)

Pre-Billing Notifications

For annual plans or high-value subscriptions:

Email 7 days before renewal with amount and date
Include link to update payment method
Show what's included in the renewal
Required by some regulations for auto-renewals

Smart Retry Strategy

Decline Type Classification

| Code | Type | Meaning | Retry? | |------|------|---------|--------| | insufficient_funds | Soft | Temporarily low balance | Yes — retry in 2-3 days | | card_declined (generic) | Soft | Various temporary reasons | Yes — retry 3-4 times | | processing_error | Soft | Gateway/network issue | Yes — retry within 24h | | expired_card | Hard | Card is expired | No — request new card | | stolen_card | Hard | Card reported stolen | No — request new card | | do_not_honor | Soft/Hard | Bank refused (ambiguous) | Try once more, then ask for new card | | authentication_required | Auth | SCA/3DS needed | Send customer to authenticate |

Retry Schedule by Provider

Stripe (Smart Retries — recommended):

Enable "Smart Retries" in Stripe Dashboard → Billing → Settings
Stripe's ML model picks optimal retry timing based on billions of transactions
Typically 4-8 retry attempts over 3-4 weeks
Recovers ~15% more than fixed-schedule retries

Manual retry schedule (if no smart retries):

| Retry | Timing | Best Day/Time | |-------|--------|--------------| | 1 | Day 1 (24h after failure) | Morning, same day of week as original | | 2 | Day 3 | Try a different time of day | | 3 | Day 5 | After typical payday (1st, 15th) | | 4 | Day 7 | Morning of the next business day | | 5 (final) | Day 10 | Last attempt before grace period ends |

Retry timing insights:

Retry on the same day of month the original payment succeeded
Retry after common paydays (1st and 15th of the month)
Avoid retrying on weekends (lower approval rates)
Morning retries (8-10am local time) perform slightly better

Dunning Email Sequence

Email 1: Payment Failed (Day 0)

Tone: Friendly, matter-of-fact. No alarm.

Subject: Action needed — your payment didn't go through

Hi [Name],

We tried to charge your [card type] ending in [last 4] for your
[Product] subscription ($[amount]), but it didn't go through.

This happens sometimes — usually a quick card update fixes it.

[Update Payment Method →]

Your access isn't affected yet. We'll retry automatically, but
updating your card is the fastest fix.

Need help? Just reply to this email.

— [Product] Team

Email 2: Reminder (Day 3)

Tone: Helpful, slightly more urgent.

Subject: Quick reminder — update your payment for [Product]

Hi [Name],

Just a heads-up — we still haven't been able to process your
$[amount] payment for [Product].

[Update Payment Method →]

Takes less than 30 seconds. Your [data/projects/team access]
is safe, but we'll need a valid payment method to keep your
account active.

Questions? Reply here and we'll help.

— [Product] Team

Email 3: Urgency (Day 7)

Tone: Direct, clear consequences.

Subject: Your [Product] account will be paused in 3 days

Hi [Name],

We've tried to process your payment several times, but your
[card type] ending in [last 4] keeps getting declined.

If we don't receive payment by [date], your account will be
paused and you'll lose access to:

• [Key feature/data they use]
• [Their projects/workspace]
• [Team access for X members]

[Update Payment Method Now →]

Your data won't be deleted — you can reactivate anytime by
updating your payment method.

— [Product] Team

Email 4: Final Warning (Day 10)

Tone: Final, clear, no guilt.

Subject: Last chance to keep your [Product] account active

Hi [Name],

This is our last reminder. Your payment of $[amount] is past
due, and your account will be paused tomorrow ([date]).

[Update Payment Method →]

After pausing:
• Your data is saved for [90 days]
• You can reactivate anytime
• Just update your card to restore access

If you intended to cancel, no action needed — your account
will be paused automatically.

— [Product] Team

Grace Period Management

What Happens During Grace Period

| Setting | Recommendation | |---------|---------------| | Duration | 7-14 days after final retry | | Access | Degraded (read-only) or full access | | Visibility | In-app banner: "Payment past due — update to continue" | | Retry | Continue background retries during grace | | Communication | Dunning emails continue |

Access Degradation Options

Option A: Full access during grace (recommended for B2B)

Lower friction, customer feels respected
Higher recovery rate (they still see value)
Risk: some customers exploit the grace period

Option B: Read-only access (recommended for B2C)

Can view but not create/edit
Creates urgency without data loss fear
Clear message: "Update payment to resume full access"

Option C: Immediate lockout (not recommended)

Aggressive, damages relationship
Lower recovery rate
Only appropriate for very low-cost plans

Post-Grace Period

| Timing | Action | |--------|--------| | Grace period ends | Pause account (not delete) | | Day 1 post-pause | "Your account has been paused" email | | Day 7 post-pause | "Your data is still here" reminder | | Day 30 post-pause | Win-back attempt with new offer | | Day 60 post-pause | Final win-back | | Day 90 post-pause | Data deletion warning (if applicable) |

Provider-Specific Setup

Stripe

Enable Smart Retries:

Dashboard → Settings → Billing → Subscriptions and emails
Enable "Smart Retries" under retry rules
Set failed payment emails in Dashboard → Settings → Emails

Custom retry rules (if not using Smart Retries):

Retry 1: 3 days after failure
Retry 2: 5 days after failure
Retry 3: 7 days after failure
Final:   Mark subscription as unpaid after last retry

Webhook events to handle:

invoice.payment_failed — trigger dunning
invoice.paid — cancel dunning, restore access
customer.subscription.updated — status changes
customer.subscription.deleted — final cancellation

Chargebee

Built-in dunning:

Settings → Configure Chargebee → Retry Settings
Configure retry attempts and intervals
Settings → Configure Chargebee → Email Notifications → Dunning

Dunning options:

Automatic retries with configurable schedule
Built-in dunning emails (customizable templates)
Grace period configuration per plan

Paddle

Managed dunning:

Paddle handles retries and dunning automatically
Limited customization (Paddle manages the relationship)
Webhook: subscription.payment_failed, subscription.cancelled
Best for hands-off approach

Recurly

Revenue Recovery:

Configuration → Dunning Management
Set retry schedule per plan
Configure grace period and final action (pause vs cancel)

Advanced features:

Machine-learning retry optimization
Per-plan dunning schedules
Built-in Account Updater

In-App Dunning

Don't rely on email alone. Show payment failures in the app:

Banner Pattern

┌──────────────────────────────────────────────────────┐
│ ⚠ Your payment of $29 failed. Update your card to    │
│ avoid losing access. [Update Payment →]  [Dismiss]   │
└──────────────────────────────────────────────────────┘

Rules:

Show on every page load during dunning period
Allow dismiss (but show again next session)
Direct link to payment update (fewest clicks possible)
Don't block the product — let them continue using it

Modal Pattern (for final warning)

┌─────────────────────────────────────┐
│                                     │
│  Your account will be paused        │
│  on [date]                          │
│                                     │
│  Update your payment method to      │
│  keep access to your [X] projects   │
│  and [Y] team members.              │
│                                     │
│  [Update Payment Method]            │
│  [Remind Me Later]                  │
│                                     │
└─────────────────────────────────────┘

Measuring Dunning Performance

Key Metrics

| Metric | How to Calculate | Target | |--------|-----------------|--------| | Recovery rate | Recovered payments / Total failed | 50-60% | | Recovery rate by decline type | Recovered / Failed per type | Soft: 70%+, Hard: 40%+ | | Time to recovery | Days from failure to successful payment | <5 days | | Pre-dunning prevention rate | Prevented failures / Expected failures | 20-30% | | Dunning email open rate | Opens / Sent per email | 60%+ | | Dunning email click rate | Clicks / Opens per email | 30%+ | | Revenue recovered (monthly) | Sum of recovered payment amounts | Track trend | | Revenue lost to involuntary churn | Sum of failed + unrecovered amounts | Track trend |

Benchmarking

By company stage:

| Stage | Typical Involuntary Churn | Target After Optimization | |-------|--------------------------|--------------------------| | Early (< $1M ARR) | 3-5% of MRR/month | 1-2% | | Growth ($1-10M ARR) | 2-4% of MRR/month | 0.5-1.5% | | Scale ($10M+ ARR) | 1-3% of MRR/month | 0.3-0.8% |

ROI Calculation

Monthly failed payment MRR:        $10,000
Current recovery rate:              30% ($3,000 recovered)
Target recovery rate:               60% ($6,000 recovered)
Monthly improvement:                $3,000/month
Annual improvement:                 $36,000/year
Cost of dunning optimization:       ~$200-500/month (tooling)
ROI:                                6-15x