Customer Success, Chargebacks, and SaaS Startups

Emily VuittonEcommerceLeave a Comment

Customer Success and Chargebacks at SaaS Startups

Earlier this year, Nudgespot published a blog post aimed at rounding up the best of the best actionable customer success insights for Saas startups. The team at Nudgespot is continually adding more resources to the 75+ Actionable Insights and Resources To Customer Success for SaaS Startups, so you should probably bookmark it!

Their post resonated with our team, because customer success goes hand-in-hand with chargebacks. Furthermore, SaaS startups often utilize recurring billing, making them particularly susceptible to chargebacks with corresponding recurring billing reason codes.

Customer Success in Billing and Payments

Billing and payments is a pretty critical element for SaaS startups to have in place, let alone get right. A solid billing and payment system will eliminate friction for the customer at the point of purchase. But recurring billing isn’t just a one-time purchase. This makes the landscape unique for SaaS startups, who have used recurring billing far before it went mainstream with razors and makeup.

Our favorite strategy Nudgespot provides is from Neil Patel, who suggests aligning recurring billing with gradual upgrades. SaaS startups have the edge here as their product/service perfectly lends itself to ongoing improvements. Whether it’s a particular level of software speed, storage, or features, providing customers with noticeable improvements will keep them engaged for longer periods of time. Instead of pushing users to full-blown customers right away, nurture them through the process. Send them updates on when their free trial ends, or when the first billing occurs.

Nudgespot also provides a resource from MarketingLand that lists some basic but awesome tips for improving recurring billing programs:

  • Prepaid recurring billing should be the standard.
  • Make signup as simple as possible.
  • Keep your prices fair.
  • Monthly billing periods work best.
  • Support as many payment types as possible.

Recurring Billing Chargebacks

Our favorite tips included in the post from MarketingLand are those that directly impact how many chargebacks the SaaS startup will experience:

  • Explicitly inform the customer that recurring billing is in place.
  • Give options for billing dates.
  • Provide refunds.
  • Send reminders before each invoice.
  • Print the next billing date in each invoice.

All of the tips listed above help the customer understand when billing will happen. Hopefully, this mitigates any instances of friendly fraud where the customer didn’t understand they were signing up for a recurring service and initiated a chargeback when it hit their account. Providing refunds will help avoid chargebacks from happening in the first place.

However, chargebacks will happen. Each card network has specific reason codes to indicate discrepancies reported by the cardholder.

Visa Reason Code 41

Cancelled Recurring Transaction

  • This chargeback occurs when the merchant is notified by the cardholder to cancel a recurring transaction. However, the merchant still carries out the transaction.

MasterCard Reason Code 4841

Cancelled Recurring Transaction

  • The cardholder states they shouldn’t have been charged because they already cancelled the transaction.

MasterCard Reason Code 4850

Cancelled Recurring Transaction/Installment Billing Dispute

  • This chargeback occurs when a customer states the transaction should have been a credit to the credit card account rather than a sale.

American Express Reason Code 4544 / C05

Cancellation of Recurring Goods/Services

  • The cardholder provided supporting documentation that the merchandise ordered was canceled.

American Express Reason Code C28

Cancelled Recurring Billing

  • A charge has been submitted after the merchant was advised to discontinue all future billing.

For SaaS startups, customer success and chargebacks go hand-in-hand. Focusing on customer success throughout the entire lifecycle, particularly recurring billing and payments, will lead to fewer chargebacks that SaaS startups need to deal with. That allows the focus to remain on growing the actual business, not responding to chargebacks.

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