1# Dunning Playbook
2 
3Complete guide to recovering failed payments and reducing involuntary churn.
4 
5---
6 
7## Why Dunning Matters
8 
9- Failed payments cause 30-50% of all subscription churn
10- Most failed payments are recoverable with the right strategy
11- Subscription businesses lose an estimated $129 billion annually to involuntary churn
12- Effective dunning recovers 50-60% of failed payments
13 
14---
15 
16## The Dunning Timeline
17 
18```
19Day -30 to -7: Pre-dunning (prevent failures)
20Day 0:         Payment fails → Smart retry #1 + Email #1
21Day 1-3:       Smart retry #2 + Email #2
22Day 3-5:       Smart retry #3
23Day 5-7:       Smart retry #4 + Email #3
24Day 7-10:      Final retry + Email #4 (final warning)
25Day 10-14:     Grace period ends → Account paused/cancelled
26Day 14+:       Win-back sequence begins
27```
28 
29---
30 
31## Pre-Dunning: Prevent Failures Before They Happen
32 
33### Card Expiry Management
34 
35| Timing | Action |
36|--------|--------|
37| 30 days before expiry | Email: "Your card ending in 4242 expires next month" |
38| 15 days before expiry | Email: "Update your payment method to avoid interruption" |
39| 7 days before expiry | Email: "Your card expires in 7 days — update now" |
40| 3 days before expiry | In-app banner: "Payment method expiring soon" |
41 
42**Email template — Card expiring:**
43```
44Subject: Your card ending in 4242 expires soon
45 
46Hi [Name],
47 
48The card on file for your [Product] subscription expires on [date].
49 
50Update your payment method now to avoid any interruption:
51 
52[Update Payment Method →]
53 
54This takes less than 30 seconds.
55 
56— [Product] Team
57```
58 
59### Card Updater Services
60 
61Major card networks offer automatic card update programs:
62 
63| Service | Network | What It Does |
64|---------|---------|--------------|
65| Visa Account Updater (VAU) | Visa | Auto-updates stored card numbers and expiry dates |
66| Mastercard Automatic Billing Updater (ABU) | Mastercard | Same for Mastercard |
67| Amex Cardrefresher | American Express | Same for Amex |
68 
69**Impact:** Reduces hard declines from expired/replaced cards by 30-50%.
70 
71**How to enable:**
72- **Stripe**: Automatic — enabled by default
73- **Chargebee**: Enabled through gateway settings
74- **Recurly**: Built-in, enabled by default
75- **Braintree**: Contact processor to enable
76 
77### Backup Payment Methods
78 
79Prompt for a second payment method:
80- During signup: "Add a backup payment method" (low conversion)
81- After first successful payment: "Protect your account with a backup card" (better timing)
82- After a failed payment is recovered: "Add a backup to prevent future interruptions" (best timing — they felt the pain)
83 
84### Pre-Billing Notifications
85 
86For annual plans or high-value subscriptions:
87- Email 7 days before renewal with amount and date
88- Include link to update payment method
89- Show what's included in the renewal
90- Required by some regulations for auto-renewals
91 
92---
93 
94## Smart Retry Strategy
95 
96### Decline Type Classification
97 
98| Code | Type | Meaning | Retry? |
99|------|------|---------|--------|
100| `insufficient_funds` | Soft | Temporarily low balance | Yes — retry in 2-3 days |
101| `card_declined` (generic) | Soft | Various temporary reasons | Yes — retry 3-4 times |
102| `processing_error` | Soft | Gateway/network issue | Yes — retry within 24h |
103| `expired_card` | Hard | Card is expired | No — request new card |
104| `stolen_card` | Hard | Card reported stolen | No — request new card |
105| `do_not_honor` | Soft/Hard | Bank refused (ambiguous) | Try once more, then ask for new card |
106| `authentication_required` | Auth | SCA/3DS needed | Send customer to authenticate |
107 
108### Retry Schedule by Provider
109 
110**Stripe (Smart Retries — recommended):**
111- Enable "Smart Retries" in Stripe Dashboard → Billing → Settings
112- Stripe's ML model picks optimal retry timing based on billions of transactions
113- Typically 4-8 retry attempts over 3-4 weeks
114- Recovers ~15% more than fixed-schedule retries
115 
116**Manual retry schedule (if no smart retries):**
117 
118| Retry | Timing | Best Day/Time |
119|-------|--------|--------------|
120| 1 | Day 1 (24h after failure) | Morning, same day of week as original |
121| 2 | Day 3 | Try a different time of day |
122| 3 | Day 5 | After typical payday (1st, 15th) |
123| 4 | Day 7 | Morning of the next business day |
124| 5 (final) | Day 10 | Last attempt before grace period ends |
125 
126**Retry timing insights:**
127- Retry on the same day of month the original payment succeeded
128- Retry after common paydays (1st and 15th of the month)
129- Avoid retrying on weekends (lower approval rates)
130- Morning retries (8-10am local time) perform slightly better
131 
132---
133 
134## Dunning Email Sequence
135 
136### Email 1: Payment Failed (Day 0)
137 
138**Tone:** Friendly, matter-of-fact. No alarm.
139 
140```
141Subject: Action needed — your payment didn't go through
142 
143Hi [Name],
144 
145We tried to charge your [card type] ending in [last 4] for your
146[Product] subscription ($[amount]), but it didn't go through.
147 
148This happens sometimes — usually a quick card update fixes it.
149 
150[Update Payment Method →]
151 
152Your access isn't affected yet. We'll retry automatically, but
153updating your card is the fastest fix.
154 
155Need help? Just reply to this email.
156 
157— [Product] Team
158```
159 
160### Email 2: Reminder (Day 3)
161 
162**Tone:** Helpful, slightly more urgent.
163 
164```
165Subject: Quick reminder — update your payment for [Product]
166 
167Hi [Name],
168 
169Just a heads-up — we still haven't been able to process your
170$[amount] payment for [Product].
171 
172[Update Payment Method →]
173 
174Takes less than 30 seconds. Your [data/projects/team access]
175is safe, but we'll need a valid payment method to keep your
176account active.
177 
178Questions? Reply here and we'll help.
179 
180— [Product] Team
181```
182 
183### Email 3: Urgency (Day 7)
184 
185**Tone:** Direct, clear consequences.
186 
187```
188Subject: Your [Product] account will be paused in 3 days
189 
190Hi [Name],
191 
192We've tried to process your payment several times, but your
193[card type] ending in [last 4] keeps getting declined.
194 
195If we don't receive payment by [date], your account will be
196paused and you'll lose access to:
197 
198• [Key feature/data they use]
199• [Their projects/workspace]
200• [Team access for X members]
201 
202[Update Payment Method Now →]
203 
204Your data won't be deleted — you can reactivate anytime by
205updating your payment method.
206 
207— [Product] Team
208```
209 
210### Email 4: Final Warning (Day 10)
211 
212**Tone:** Final, clear, no guilt.
213 
214```
215Subject: Last chance to keep your [Product] account active
216 
217Hi [Name],
218 
219This is our last reminder. Your payment of $[amount] is past
220due, and your account will be paused tomorrow ([date]).
221 
222[Update Payment Method →]
223 
224After pausing:
225• Your data is saved for [90 days]
226• You can reactivate anytime
227• Just update your card to restore access
228 
229If you intended to cancel, no action needed — your account
230will be paused automatically.
231 
232— [Product] Team
233```
234 
235---
236 
237## Grace Period Management
238 
239### What Happens During Grace Period
240 
241| Setting | Recommendation |
242|---------|---------------|
243| Duration | 7-14 days after final retry |
244| Access | Degraded (read-only) or full access |
245| Visibility | In-app banner: "Payment past due — update to continue" |
246| Retry | Continue background retries during grace |
247| Communication | Dunning emails continue |
248 
249### Access Degradation Options
250 
251**Option A: Full access during grace (recommended for B2B)**
252- Lower friction, customer feels respected
253- Higher recovery rate (they still see value)
254- Risk: some customers exploit the grace period
255 
256**Option B: Read-only access (recommended for B2C)**
257- Can view but not create/edit
258- Creates urgency without data loss fear
259- Clear message: "Update payment to resume full access"
260 
261**Option C: Immediate lockout (not recommended)**
262- Aggressive, damages relationship
263- Lower recovery rate
264- Only appropriate for very low-cost plans
265 
266### Post-Grace Period
267 
268| Timing | Action |
269|--------|--------|
270| Grace period ends | Pause account (not delete) |
271| Day 1 post-pause | "Your account has been paused" email |
272| Day 7 post-pause | "Your data is still here" reminder |
273| Day 30 post-pause | Win-back attempt with new offer |
274| Day 60 post-pause | Final win-back |
275| Day 90 post-pause | Data deletion warning (if applicable) |
276 
277---
278 
279## Provider-Specific Setup
280 
281### Stripe
282 
283**Enable Smart Retries:**
2841. Dashboard → Settings → Billing → Subscriptions and emails
2852. Enable "Smart Retries" under retry rules
2863. Set failed payment emails in Dashboard → Settings → Emails
287 
288**Custom retry rules (if not using Smart Retries):**
289```
290Retry 1: 3 days after failure
291Retry 2: 5 days after failure
292Retry 3: 7 days after failure
293Final:   Mark subscription as unpaid after last retry
294```
295 
296**Webhook events to handle:**
297- `invoice.payment_failed` — trigger dunning
298- `invoice.paid` — cancel dunning, restore access
299- `customer.subscription.updated` — status changes
300- `customer.subscription.deleted` — final cancellation
301 
302### Chargebee
303 
304**Built-in dunning:**
3051. Settings → Configure Chargebee → Retry Settings
3062. Configure retry attempts and intervals
3073. Settings → Configure Chargebee → Email Notifications → Dunning
308 
309**Dunning options:**
310- Automatic retries with configurable schedule
311- Built-in dunning emails (customizable templates)
312- Grace period configuration per plan
313 
314### Paddle
315 
316**Managed dunning:**
317- Paddle handles retries and dunning automatically
318- Limited customization (Paddle manages the relationship)
319- Webhook: `subscription.payment_failed`, `subscription.cancelled`
320- Best for hands-off approach
321 
322### Recurly
323 
324**Revenue Recovery:**
3251. Configuration → Dunning Management
3262. Set retry schedule per plan
3273. Configure grace period and final action (pause vs cancel)
328 
329**Advanced features:**
330- Machine-learning retry optimization
331- Per-plan dunning schedules
332- Built-in Account Updater
333 
334---
335 
336## In-App Dunning
337 
338Don't rely on email alone. Show payment failures in the app:
339 
340### Banner Pattern
341```
342┌──────────────────────────────────────────────────────┐
343│ ⚠ Your payment of $29 failed. Update your card to    │
344│ avoid losing access. [Update Payment →]  [Dismiss]   │
345└──────────────────────────────────────────────────────┘
346```
347 
348**Rules:**
349- Show on every page load during dunning period
350- Allow dismiss (but show again next session)
351- Direct link to payment update (fewest clicks possible)
352- Don't block the product — let them continue using it
353 
354### Modal Pattern (for final warning)
355```
356┌─────────────────────────────────────┐
357│                                     │
358│  Your account will be paused        │
359│  on [date]                          │
360│                                     │
361│  Update your payment method to      │
362│  keep access to your [X] projects   │
363│  and [Y] team members.              │
364│                                     │
365│  [Update Payment Method]            │
366│  [Remind Me Later]                  │
367│                                     │
368└─────────────────────────────────────┘
369```
370 
371---
372 
373## Measuring Dunning Performance
374 
375### Key Metrics
376 
377| Metric | How to Calculate | Target |
378|--------|-----------------|--------|
379| Recovery rate | Recovered payments / Total failed | 50-60% |
380| Recovery rate by decline type | Recovered / Failed per type | Soft: 70%+, Hard: 40%+ |
381| Time to recovery | Days from failure to successful payment | <5 days |
382| Pre-dunning prevention rate | Prevented failures / Expected failures | 20-30% |
383| Dunning email open rate | Opens / Sent per email | 60%+ |
384| Dunning email click rate | Clicks / Opens per email | 30%+ |
385| Revenue recovered (monthly) | Sum of recovered payment amounts | Track trend |
386| Revenue lost to involuntary churn | Sum of failed + unrecovered amounts | Track trend |
387 
388### Benchmarking
389 
390**By company stage:**
391 
392| Stage | Typical Involuntary Churn | Target After Optimization |
393|-------|--------------------------|--------------------------|
394| Early (< $1M ARR) | 3-5% of MRR/month | 1-2% |
395| Growth ($1-10M ARR) | 2-4% of MRR/month | 0.5-1.5% |
396| Scale ($10M+ ARR) | 1-3% of MRR/month | 0.3-0.8% |
397 
398### ROI Calculation
399 
400```
401Monthly failed payment MRR:        $10,000
402Current recovery rate:              30% ($3,000 recovered)
403Target recovery rate:               60% ($6,000 recovered)
404Monthly improvement:                $3,000/month
405Annual improvement:                 $36,000/year
406Cost of dunning optimization:       ~$200-500/month (tooling)
407ROI:                                6-15x
408```
409