Dear SaaStr: How do you handle B2B customers who want a refund on an annual subscription because they didn’t realize that their credit card would get charged again a year later?
Yes, autorenewals likely are in your T&Cs. And yes, if your customer keeps using the product after the renewal date, they owe you. They’re using the product still, after all.
But if they didn’t intend to renew, and don’t want to use your product — enough with the autorenewal then. You refund them, 100%. And you move on to bigger and better things.
It’s better for everyone this way:
First, it doesn’t help to not process the refund. In SaaS, once a customer churns — it’s gone. It comes off your ARR/MRR “base”. It really doesn’t matter much if you lose them in month 18 or 24. Revenue that does not recur in SaaS is really revenue you basically never even had.
Second, if you don’t do the refund, that’s a rip-off — at least in the customer’s eyes. So you’ve broken the relationship for years, if not life. They might come back as a customer later if you treat them well. If you try to rip them off? Well, then they’ll only come back if they are desperate and have to. And worse, if they were happy, you’ve lost the chance for them to recommend you to others. More on that here: CLTV Isn’t The Whole Story. Don’t Shortchange Second-Order Revenue. | SaaStr
Third, it’s all just too much work. Any customer that is paying on credit card isn’t paying that much. It sucks up way too much energy to deal with payment dramas on customers that you lost — especially small-dollar customers. Focus the team instead, with that same energy, on keeping the customers you do have. And the same goes for attempting to enforce auto-renewals on invoiced deals as well. If they won’t pay, they won’t pay. Just shut off the app and move on.
A bit more here:
