Dunning Playbook

Complete guide to recovering failed payments and reducing involuntary churn.

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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

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The Dunning Timeline

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Pre-Dunning: Prevent Failures Before They Happen

Card Expiry Management

Email template — Card expiring:

B1

Card Updater Services

Major card networks offer automatic card update programs:

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

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Smart Retry Strategy

Decline Type Classification

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 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

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Dunning Email Sequence

Email 1: Payment Failed (Day 0)

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

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Email 2: Reminder (Day 3)

Tone: Helpful, slightly more urgent.

B3

Email 3: Urgency (Day 7)

Tone: Direct, clear consequences.

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Email 4: Final Warning (Day 10)

Tone: Final, clear, no guilt.

B5

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Grace Period Management

What Happens During Grace Period

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

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Provider-Specific Setup

Stripe

Enable Smart Retries:

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

Custom retry rules (if not using Smart Retries):

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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:

1. Settings → Configure Chargebee → Retry Settings
2. Configure retry attempts and intervals
3. 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)
• Paddle Billing webhooks (dot-separated event_type names):
• transaction.payment_failed reports a failed payment attempt. Use its subscription_id to associate a subscription renewal; a failed one-off transaction is not subscription churn.
• subscription.past_due reports that the subscription is past due.
• subscription.canceled reports an effective cancellation. A cancellation scheduled for the next billing period emits subscription.updated first; retain access according to the current subscription state until that change takes effect.
• Configure notification subscriptions for these exact names. subscription.payment_failed and subscription.cancelled are not Paddle Billing event types; do not mix Billing webhooks with the separate Paddle Classic alert names.
• Verify the payment-failure and cancellation contracts before wiring account state changes.
• Best for hands-off approach

Recurly

Revenue Recovery:

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

Advanced features:

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

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In-App Dunning

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

Banner Pattern

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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)

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Measuring Dunning Performance

Key Metrics

Benchmarking

By company stage:

ROI Calculation

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