All subscription based businesses experience unwanted credit card errors. We typically see between 5% and 15% of recurring credit card transactions fail. (Some companies can be higher, depending on their audience).

Unlike other recurring billing services, Recurly has designed our architecture (and our payment gateway) specifically to address this critical issue to help improve the overall economics of our customers’ businesses.

Assume:

• 1000 Subscribers
• $45 Avg. Invoice
• $45,000 Monthly Revenue
• 6 month expected subscriber lifetime

In this example, we’ll assume that this business experiences an AVERAGE amount of credit card errors and declines (10%) on a monthly basis.

Recurly has consistently observed a range in incremental improvement of failed transactions (via PRE/POST analysis) of  10% to 27%. (This varies depending on the audience and related composition of error types experienced by each company) Again, we will assume an AVERAGE mid-range performance in incremental recovery of failed transactions.

This example reflects conservative assumptions and highlights the sensitivity and importance of aggressively addressing credit card errors and declines before it results in unwanted subscriber churn.  Every customer that churns today has a negative impact on your annuity revenue stream in future periods.  This is how Recurly is able to make the bold claim that our service is self-funding.

It isn’t a big stretch to assume that your internal development staff probably isn’t very good at this. (Why would they be?).  Understanding credit card processing is tough enough, but understanding how to improve transaction errors and declines is both an art and a science. You have to live in the details to get it right, and that is what we do here at Recurly every day.

If you operate a subscription-based business, you should understand how much of your subscriber churn is related to your billing operations. Recurly’s service will help you improve this critical area of your business. As the example above demonstrates, our service more than pays for itself. Best of all, you get to focus back on other important areas of your business.

As we like to say…Let Recurly automate your recurring billing. Your business will thank you.  Your Board and Investors will too.

Cheers,

The Recurly Team

Inside your customer’s account you’ll now see an Activities view displaying the who, what, when, and why of all account activity (starting mid-December 2011).

Take a look and send feedback our way. We look forward to better assisting your company in troubleshooting and understanding customer account activity.

Recurring billing is more than just managing the ‘clockwork’ of billing.

Most early stage companies are interested in simply getting ‘set up’ to manage the task of billing customers on a recurring basis. Mid-enterprise companies – with revenue velocity – are far more interested in optimizing their recurring billing to ensure that they are retaining their existing subscribers, and minimizing addressable subscriber churn. This is where Recurly has set itself apart from other available solutions. (See the ‘Recurly Advantage’)

Recurly addresses your PCI compliance concerns.

We provide a set of transaction forms (Recurly.js), which help your company own the entire user experience on your own website/domain, and securly pass credit card billing information to us without having to ever ‘touch’ credit card information. This keeps auditors, processors, banks and regulators happy, and your own CFO will be happy that you don’t have to spend time and money to become PCI certified.

Recurly helps you optimize your customer retention (LTV).

One of the biggest challenges encountered with recurring billing is the frequent declines of transactions from existing subscribers. (Typically, 5% – 15% of existing monthly subscriber credit card transactions fail). Recurly works on your behalf to respond to many common error types with highly optimized responses to ensure that we are ‘re-capturing’ revenue by correcting as many of your declined transactions as possible.  For example: with ‘Expired Credit Card’ errors, we are able to correct as much as 80% of expired card errors with optimized responses.  The Recurly service uses optimized responses for over 60 of the most commonly encountered error types to help correct credit card declines. This results in what is frankly ‘found money’.  We get ahead of your card declines, so that they don’t result in unwanted subscriber churn.

Recurly helps you avoid unwanted customer churn.

This aspect of our service is how we have set ourselves apart from many subscription billing vendors.If you can prevent your customers from having to receive an email requesting that they come update their billing information, then you have avoided the potential for your customer to take the ‘lazy path of least resistance’ – which is to do nothing…and let their service expire.  Our efforts in this area have yielded between 10% and 27% lift in recovery of declined transactions, which translates immediately to very material improvements in your subscriber churn and monthly recurring revenue.

Recurly helps your company grow through various stages: Multi-Currency support.

Many companies set out charging for their product/application/service in a single currency. Once they decide to start serving multiple geographies, it becomes increasingly important to offer plans in local currencies. Recurly easily supports the addition of multiple payment gateways, and ‘Intelligent Payment Routing‘ which allows you to route transactions to the appropriate payment gateway based on currency type or transaction amount.

IF Euros –> Gateway A

IF $USD –> Gateway B

These factors combined with premium reporting, business insights and customer support dashboard controls have made Recurly the vendor of choice for many mid-enterprise companies.

If you have questions about how Recurly might help your business, please contact us. We can help relieve your subscription billing pain.

We offer a low-pressure, consultative approach to solving your subscription billing objectives.  Our existing customers are our best advocates.

sales@recurly.com

Cheers,

- The Recurly Team

The folks over at Pipedrive have gone one step further with their push notification integration. In just one afternoon, they used push notifications to create a performance monitor. Now their team is able to see (and hear!) transactions as they occur.

Check out the Pipedrive folks at https://www.pipedrive.com/en-US. If you’ve done any custom integrations with Recurly, we’d love to hear about it!

We’d like to thank our new investors from BV Capital for sharing our enthusiasm for our business. In addition to BV Capital, our existing investors: Polaris Venture Partners, Harrison Metal Capital and FreeStyle Capital all joined in to help us continue in building a great company. We’re fortunate to have such great people involved with Recurly. In addition to our first-class investors, we have amazing employees, and so it follows that we tend to attract amazing customers as well.

Thank you, all.

WE’RE HIRING EXCEPTIONAL PEOPLE!

ESPECIALLY ENGINEERS

We plan to aggressively build out our team to keep up with our appetite to satisfy our growing list of customers. We also don’t plan to rest on our laurels, and have an exciting roadmap ahead, so help us put the word out to the Ruby, Node.js and Javascript engineering community.

We’ve got a tight team of talented engineers, and we’re looking to expand.  Our office is big and we’ve got room to grow, so take a look at our JOBS page and see if there is something that suits you or somebody you know.

Stay posted. We’re planning a party to celebrate, and you’re invited.

Cheers,

The Recurly Team.

The Recurly Payment Gateway

We are proud to announce that we have built the first payment gateway designed to support recurring billing as the primary use-case. This means that we access rich error messages from the payment processor to optimize many different common credit card decline types. As we have communicated recently, credit card declines lead to painful customer churn, which is one of the most important and sensitive metrics for any subscription business.

During beta testing, our trials demonstrated a range of 10-27% incremental lift in recovered invoices for a variety of different kinds of businesses (Both B2B and B2C).

The new Recurly Payment Gateway is now bundled with the Recurly service. In addition, we are adding critical customer retention reports so that our customers can track the long term trends of their customers by cohort month, and by subscription plan.

New Recurly Pricing

As of today’s announcement, Recurly’s pricing structure has also changed.

We now charge a simple 1.25% and $0.10 per transaction per month, with a $69 monthly fee .

Grandfathered Pricing

Existing Recurly ‘live production’ customers will remain on their original pricing unless they choose to take advantage of the Recurly Payment Gateway, or any of our premium features – such as Retention Reports, Salesforce Integration, PayPal Payments or Multi-Currency support. We will continue to support other payment gateways to offer the broadest choice to our customers, but the cost of other payment gateways are not inclusive with our new pricing.

No Merchant Account, No Problem

All you need to take advantage of the Recurly service is your own merchant bank account. If you don’t have one already, we can help you apply and get set up with an account offering extremely competitive rates.

We’re excited about our role in helping companies to optimize their subscriber renewal rates. Our ambition is to make the Recurly service a distinct competitive advantage for our customers.

If you have any questions about the Recurly service, or the Recurly Payment Gateway, please contact sales@recurly.com.

We can help.

Cheers,
The Recurly Team.

For the purposes here, we’ll avoid the finance theory and focus on the general concepts of subscription economics that matter most to every company offering products, applications or services on a subscription basis.  In order to grow any business, it is of first-order importance to first know what your customers are worth – at all times.

Early customer retention rates decay as lower quality users are acquired

Concept 1 – Understand Customer Lifetime Value

A company offering a service for $19.95 per month with healthy customer retention rates, and an expected Lifetime Value (LTV) of 24 months can expect their customers to deliver $479 in revenue on average. (The green line indicates the slope of retention curves and gives an approximation of a 24 month expected timeline).

At this stage, many companies commit this expected customer LTV to memory, and want to ‘stomp on the gas’ to acquire as many customers as possible.

[For riveting guidance on appropriate ratios of customer acquisition costs to LTV for SaaS companies, see David Skok's post on SaaS metrics here]

Concept II – Understand Customer Retention At ALL Times

Customer retention becomes a very sensitive variable, comprising the “T” in Lifetime Value (LTV). In the chart above, we present anonymized, actual data from a Recurly customer that started with very healthy customer economics. Strong retention rates indicated an expected customer lifetime of 24 months and average customer revenue of $479 over their lifetime. As marketing programs ramped up, channel partnerships were launched, and customers were acquired aggressively to fuel growth. Over this same period, the product did not change substantially, but the average ‘quality’ of customers declined, and so did customer retention.

Frequent Assessment of Customer Economics is Vital For Success

The example company here demonstrates a very common cycle which is experienced when customer economics are not assessed on a frequent basis. Better yet, they should be assessed on a per channel, per partner, per campaign basis in order to prune the ‘losers’ and add more profitable marketing programs in a repeatable fashion.  It is rare for companies to have resources and infrastructure dedicated to understanding customer economics over ongoing periods of time until they have hundreds of employees.

Much of the recent speculation over the likelihood of Groupon’s (NASDAQ: GRPN) success centers singularly around this concept.  Their S-1 Filing indicates that they spent $179MM in Q1 of 2011, acquiring 33 MM customers at approximately $5.42 per customer. They surely have teams of people monitoring the value of their customers over time, and while customer acquisition costs are important, customer retention rates ultimately determine whether your business is growing profitably or not.

If your business offers a product, application or service on a subscription-basis and you’d like to have better visibility into your customer economics, have a conversation with us. Contact sales@recurly.com

Recurly can help.

Friday morning at 7am PST, a hard drive in our primary storage array failed. This storage array uses four drives in a RAID 10 configuration, with an extra hot spare and a second idle drive. Using four drives in a RAID array improves our disk performance and allows for a drive to fail, without losing data. Hard drives are guaranteed to fail and we planned for this scenario.

Immediately after the drive failure, the hot spare backup disk kicked in as designed. Unfortunately, the hot spare failed 4 minutes later. At this point, we joined the idle drive with the three working drives in the storage array. In order to get back to a 100% safe point with the data across four drives, we began the process of rebuilding the RAID array — this means the data had to be redistributed across the four drives. Normally this process is transparent and causes no perceivable performance degradation.

When the second drive failed in quick succession, the storage array immediately disabled the write cache to protect itself from any potential data loss should the power go out. We were unaware that the write cache was disabled. Unfortunately, this is the real cause of our performance degradation on Friday. Rebuilding the storage array requires copying large amounts of data. When the write cache was disabled as the array was being rebuilt, the disk access was 60-100x slower than usual with long latency. Once the RAID array rebuild process was started, it could not be stopped nor could the write cache be enabled until it was complete.

The entire RAID rebuild took approximately 14.5 hours and completed after 9:30 pm PST. We were able to improve the site performance during the outage by rebuilding and switching over to a database running off local disk, synchronized with two additional slave database servers for safety. Because the disk access of our primary database was competing with the RAID rebuild and write-cache disabled, the process took until 4pm for us to setup the new, local database. At this point, the performance of the site dramatically improved.

Recurly is designed with a very modular service oriented architecture. While our disk access was diminished, we disabled non critical services such as our reporting services and third-party synchronization services. New transactions were still processed throughout the event, albeit with a delayed performance. Push notifications and emails were all enabled.

By 10pm, the RAID array completed its rebuild. We replaced the first faulty drive and re-enabled the write cache. Next, we rebuilt the storage array again, this time with no impact to our site performance. Finally, we replaced the second faulty drive at 2am.

Now that the event is over, we’ve learned a few things about our storage array. We are adding six additional drives to the storage array with a new configuration that will allow us to lose even more than 2 drives in quick succession without a need to ever disable the write cache. We are working with our storage vendor to further optimize our storage array for safety and performance.

The event tested our monitoring tools, which all worked as expected and alerted us immediately to the problems. The rest of our architecture has already been designed to handle failure. We have multiples of every critical service and redundant backup servers. Our application also knows how to behave if a non-critical service is unavailable or to perform to the best of its ability should a critical service not be available.

We have several checks in place to prevent duplicate subscriptions and multiple, simultaneous transactions on behalf of one account. We will be strengthening our checks for duplicate one-time transactions in the event a merchant times out the API before our application or their payment gateway returns a response.

The event was unfortunate and I sincerely apologize for the impact it had on our customers. We have and will continue to invest heavily in our infrastructure to provide a reliable service.

Our team is ready to unveil our biggest update yet: API v2 and support for multiple subscriptions on a single account. API v2 incorporates feedback we heard from our merchants and allows you to integrate with even more flexibility than ever before. For many customers, multiple subscriptions enables scenarios that were difficult workarounds with our first API.

API v2 Improvements

Over the past two years, we’ve heard from hundreds of customers that our first API works incredibly well. From day one, our REST API was designed to be easy to use. We’ve lived with it for two years and found several ways to improve it: better validation errors, more transaction details, reliable pagination, links to nested resources, easier authentication, and official support for creating plans, add-ons, and coupons via the API.

Updated Client Libraries

With the release of API v2, we’re also releasing three completely rewritten client libraries: PHP, Ruby, and Python. PHP now has better exception and error handling. The Ruby client no longer depends on ActiveResource, and it will take advantage of Nokogiri if installed for faster XML parsing. And our Python library is a dramatic update from the first version. An update to our .NET library is coming soon.

Because our API now supports better pagination, the client libraries can paginate through very long lists transparently using iterators. The libraries will automatically lazy load the next page of results when needed. The pagination also switched from page numbers to a cursor, which means the result list no longer returns duplicates if a new record is inserted while you are paginating the results.

Multi Subscription

Recurly was designed to take the pain out of subscription billing. Most merchants manage a single subscription per account and we solved that use case rather well. We took our time to really understand how successful companies manage multiple subscriptions per customer. Next, we built a new API from the ground up since we knew API v1 could never support multiple subscriptions. Finally, we added clarity to our UI to simplify multi subscription management. We hope you like the end result as much as we do.

Updated Documentation

Our documentation has been rewritten to complement our new API and client libraries. It’s fully up to date for API v2 and our client libraries. We pride ourselves on providing documentation that is clear, simple, and complete. This revision has required a complete refresh of our documentation, and we’re proud of the end result.

Back in March 2011, we launched Transparent Post to simplify PCI compliance for our merchants. Today, we are taking it to the next level with the release of Recurly.js. Recurly.js is our open-source Javascript library that gives you great looking credit card forms to securely create subscriptions, one-time transactions, and update billing information for your customers.

Dynamic Total Calculations and Fully Customizable CSS

The library performs client-side validation of cardholder data, immediate pricing calculations for add-ons and Value Added Tax (VAT), and coupon validation. Out of the box, the forms have a great looking design that can be easily embedded into your website. Or, you may customize the CSS to make the forms match your website.

In addition to looking great, the library handles transaction failures gracefully. Should a transaction be declined, the library automatically highlights the appropriate fields and displays proper error messages for your customers.

PCI Compliance

Recurly.js continues our tradition of simplifying PCI compliance for our merchants. After performing client-side validation on the cardholder data, the library securely submits the order details directly to Recurly. Because the sensitive cardholder data is never transmitted to your web servers, your PCI compliance scope is dramatically reduced. This allows you to host the credit card order forms on your website without the headaches of PCI compliance.

Learn More

Learn more about Recurly.js from our intro video and examples, documentation, or GitHub project.