Selling recurring subscriptions is a great idea to consider for any WordPress Plugin or Theme business. After all, it’s much easier to get repeat sales from existing customers than it is to find new customers. It’s cheaper on marketing ($0), and also more dependable/predictable income. However, if done incorrectly, it can sink your whole business.
The hidden monster: Chargebacks
To help shed some light on how this can hurt your business, you have to first understand what a chargeback is, and just how much it can hurt your company.
A chargeback happens when a customer doesn’t recognize a charge on their credit card statement, picks up the phone and calls their credit card provider, and reports the charge as fraud. If, for any reason, a customer does this for a charge you’ve placed on their credit card, you can lose your ability to sell completely, as your company becomes labelled as being possibly-fraudulent.
Solution 1: Require explicit opt-ins for auto-recurring payments
Automatically recurring payments increase the likelihood of chargebacks – especially if the customer didn’t explicitly opt-in. Some WordPress eCommerce plugins will force the customer to agree to auto-recurring payments, never giving them the option to opt-out, much less opt-in.
By making the customer explicitly check a box that says they want to be automatically charged in the future, you greatly reduce the chances that the customer opted-in by accident, and thus reduce chargebacks. This way, people won’t opt-in by accident, or because they didn’t read a note on your checkout screen saying it auto-recurs.
Solution 2: Reduce the time period between recurs
A monthly recurring payment is much easier to remember than a yearly one. It can be hard to remember what you ate for breakfast last week. It can be even harder to remember something you bought an entire year ago. When that suddenly is re-charged to the customer’s credit card a year later, the chances of the customer forgetting what it was for are much higher than they are for a monthly recurring charge, one that they’ve seen month after month.
If your business model can’t use monthly recurring payments, it may be a good idea to avoid auto-recurring payments, which in-turn will greatly reduce the chances of getting chargebacks.
Solution 3: Properly label the charge
When the customer is examining their credit card statement, any charges they don’t recognize are likely to cause a chargeback. The label beside each charge on a credit card statement is often called the Statement Descriptor, and it’s important to make sure you are setting a good one. You want it to be short and to the point, while being as clear as possible about who you are, and what the charge was for.
Solution 4: Send renewal reminder emails
Sending out a renewal reminder email a month before renewal, and also 2 days before renewal, can help to remind the customer of the upcoming charge. However, these often don’t work as you might expect they should. People don’t always pay attention to these types of emails, and even if they do, they typically won’t see the charge on their card until a month later, long after your reminder email was opened. Thus, this is the least effective solution of the ones outlined here.
Combining all possible solutions will help to reduce chargebacks, which hurt your ability to sell, and can harm your relationship with your legitimate customers.