Dunning(Payment Recovery)

Dunning is the systematic process of communicating with customers to collect overdue or failed payments. The term originates from the 17th century verb 'to dun,' meaning to persistently demand payment of a debt. In modern business, dunning has evolved from manual collection letters to sophisticated automated workflows that recover revenue while maintaining positive customer relationships.

For subscription businesses and SaaS companies, dunning is critical for reducing involuntary churn - customers who leave not by choice, but because their payment method failed. Studies show that up to 40% of subscription churn is involuntary, caused by expired cards, insufficient funds, or bank declines. Effective dunning can recover 50-70% of these failed payments.

Modern dunning encompasses multiple communication channels including email, SMS, in-app notifications, and even physical letters. It also includes automated payment retries, which attempt to process the payment again at optimal times when success rates are higher. Smart dunning systems use machine learning to determine the best times and methods for each customer.

The dunning process typically follows an escalation timeline: an initial friendly reminder, followed by more urgent communications, and finally a warning of service suspension or account cancellation. The key is balancing persistence with respect - being firm enough to recover revenue while maintaining the customer relationship for future business.