Smart Dunning: dunning that reduces churn

It is a well-known fact that acquiring new customers costs significantly more than retaining existing ones. High customer satisfaction and low churn are therefore key business objectives for most companies that rely on recurring payments (such as electricity, broadband, and insurance providers). To improve these essential KPIs, you need to identify the situations in a typical customer lifecycle that cause friction—and thus increase the risk of customer churn.

Reminders and debt collection = high-risk factors for churn

At Billogram, we have examined the risk factors that can arise during the most frequent interaction between your business and your customers: billing. Based on extensive data and customer research, we have found that the risk of churn is:

• Twice as high if a customer receives a payment reminder after the due date.

• Five times as high if the case proceeds to debt collection.

One of the most effective ways to prevent customer churn is to avoid these situations altogether—for example, by sending a friendly reminder on the due date.

Two common mistakes you should avoid

Instead of taking a proactive and personalized approach, many companies make two costly mistakes:

1. Standardized processes for handling overdue payments, regardless of the customer’s previous payment history.

2. Viewing reminder and collection fees as extra revenue without considering the administrative costs—or the cost of losing a customer.

This can lead to frustration—and thus an increased risk of churn—among customers who want to pay and can pay, but who for some reason missed a payment once. Of course, some customers consistently default, and those you may be able to afford to lose. But if you design your dunning process around these exceptions, you will lose far more customers than necessary.

Successful experiment led to fewer collection cases and lower churn

So, how can you implement a dunning strategy that is both cost-effective and minimizes unnecessary friction for your customers?

To answer this question, we at Billogram conducted extensive experiments together with mobile operator Hallon. Customers were divided into different groups and received different actions in case of a late payment: direct to collection, a friendly SMS reminder—or no action at all.

One of the most important conclusions was that 80% of customers who were sent to debt collection would have paid even without this friction-heavy action.

Data from the experiment was then used to build machine learning models that can predict which customers will pay without debt collection—allowing them to be redirected to a softer intervention. As a result, Hallon successfully reduced its collection cases by a full 80%, while also decreasing churn and reducing pressure on customer service.

From data-driven insights to practical functionality

To enable more companies to benefit from these findings, we have now transformed them into a concrete functionality within Billogram’s platform, called Smart Dunning.

Because the platform orchestrates the entire Invoice-to-Cash process in one place, we can set up rule-based workflows based on your company’s preferred actions at different stages and scenarios. Everything from distribution channels to timing and tone can be tested and evaluated to determine what delivers the best results, linked to KPIs such as:

• Percentage of customers who pay on time

• Number of reminders and collection cases

• Number of invoice-related customer service inquiries

• CLV (Customer Lifetime Value)

• Churn rate

Over time, AI continuously optimizes these workflows, training on real data from your customer base. This means greater precision over time, ensuring that the right customer receives the right action at the right time—benefiting both the customer experience and your cash flow.

In short: dunning as it should be.

Learn more about Smart Dunning in our webinar
In our recorded webinar, Billogram’s experts, together with Solomon Seyoum from Hallon, share insights into how the dunning experiment was conducted and the results it delivered. You’ll also learn how to apply these insights to your own business to create a better and more profitable customer experience. Stream the webinar here.