Successful Tactics for Achieving Sales Retention and Optimizing Your Recurring

Payments ProgramJason Hembree, Business Technical Architect, Technology, Jewelry Television

Your source for payments education

Overview1. Situational Overview – Industry Trends

2. Case study – Jewelry Television

1. Initial Point of Sale Declines and Save Strategies

2. Recurring/Installment Billing Optimization

3. Opportunities, Summary, and Key Takeaways

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Credit Cards Go Unpaid First

3May 2018

Credit Card Delinquency Rates are Rising

4May 2018

Credit Card Delinquency Rates are Rising

5July 2018

Jewelry Television Case Study

6

Jewelry Television Facts

• Broadcasts 24/7 Live Television into 86 Million U.S. Households

• Over 400 Contact Center Agents handling 8MM inbound calls annually

• Over 25 Million Payment Authorization Requests Annually• Launched Installment Billing Program in 2012

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Initial Sales Retention Strategies

• Opportunities• 4 Tactics to Implement• Observed Results

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Initial Sales Retention OpportunitiesSituational Overview• Sales Representatives did not understand the meaning of each of the payment

response codes

• Disconnect between Sales Representatives and Back Office Payment Support

• No automated email communications in place

• Declined Sales Orders were automatically cancelled after 14 days

• Customers were frustrated to later learn that their order had been cancelled

• High Sales Order Cancellation Rate due to Payment Decline Failure (~5%)

• Sub-Optimal Decline Resolution Rates (31% - 35%)

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Analysis of POS Payment Responses

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Rank Reason % Rank Reason %1 Approved 85.81% 1 Approved 81.67%2 Insufficient Funds 7.80% 2 Do Not Honor 6.72%3 Do Not Honor 4.77% 3 Insufficient Funds 5.91%4 Generic Decline 0.73% 4 Generic Decline 3.35%5 Decline CVV2/CID Fail 0.24% 5 Invalid Account Number 0.64%6 Invalid Account Number 0.19% 6 Decline CVV2/CID Fail 0.62%7 Restricted Card 0.14% 7 Expired Card 0.37%8 Expired Card 0.10% 8 Invalid Transaction 0.20%9 Invalid Transaction 0.06% 9 Restricted Card 0.12%

10 Cardholder transaction not permitted 0.04% 10 Account Number Does Not Match Pay 0.12%11 Lost/Stolen Card 0.04% 11 Lost/Stolen Card 0.06%12 Pick Up Card 0.02% 12 Exceeds Approval Amount Limit 0.06%13 Exceeds Approval Amount Limit 0.02% 13 Cardholder transaction not permitted 0.05%14 Issuer Unavailable 0.01% 14 Pick Up Card 0.04%15 Call Issuer 0.01% 15 Issuer Unavailable 0.02%16 No such issuer 0.01% 16 Call Issuer 0.02%17 Call Discover 0.01% 17 No such issuer 0.02%18 Exceeds number of PIN entries 0.00% 18 Processing Network Unavailable 0.01%19 Processing Network Unavailable 0.00% 19 Call Discover 0.00%20 Call Issuer 0.00%21 Invalid Pin 0.00%22 Invalid Amount 0.00%23 Invalid Merchant 0.00%

Credit Card Call Center Transactions Credit Card Web Transactions

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Payment Response Classifications

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Response Classification Point of Sale Action Script Additional InformationAdditional System

Action

Account Closed Edit Order

We were unable to obtain an authorization on one or more payments. Would you like me to try a different card or payment method?

The issuing bank has indicated that the account is currently closed. If the customer has additional questions, please direct them to call the issuing bank.

Method of Payment shall be deactivated for the Customer Account.

Authorization Approved Complete OrderYour order has been placed successfully. Payment Authorization(s) are approved.

Authorization Approved - Security Code Invalid Edit Order

I may have entered your Card Security Code incorrectly. Would you please verify the Card Security Code for this account so I may try again?

The payment authorized successfully, but has been cancelled because the Card Security Code was entered incorrectly according to the issuing bank. Please validate the code with the customer and resubmit. No more than 4 attempts should be permitted.

Payment shall be automatically cancelled.

Authorization Declined Edit Order

We were unable to obtain an authorization on one or more payments. Would you like me to try a different card or payment method?

Payment Authorization(s) were Declined by the Issuing Bank.

Call Issuer Complete OrderYour order has been placed successfully.

Consumer Protection will contact Issuing Bank for further verification.

Issuer Communication Error Complete Order

Your order has been placed successfully.

An authorization response was not obtained due to an issuer communication error. The payments will be automatically reprocessed.

Temporary Soft Decline Edit Order

The issuing bank has returned a temporary soft decline for this card. For faster delivery, I can take a different payment method OR we can resubmit this payment over the next few days. If resubmission doesn’t succeed, we would like to notify you via email.

The issuing bank has returned a Temporary Soft Decline for this card account. Many Temporary Soft Declines are resolved automatically within 1-5 days and succeed with recycling attempts. If the recycling attempts do not succeed, the customer will be contacted via email or phone. For additional information, the customer should be encouraged to contact their issuing bank. Email Address capture is strongly encouraged.

Order Management Payment Authorization Response Classifications

Targeted Payment Response Examples

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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000Sales Order Cancellations Due to Payment Decline

Failures

Cancelled Orders Decline Cancel Rate

Launch of TargetedPayment Response Intiative

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91.8% 91.8% 91.9%90.3% 90.0%

88.3% 88.9%91.8% 91.8% 91.7% 92.5% 91.7% 91.8% 91.9% 91.9% 92.3% 92.7% 91.5% 91.8% 92.9% 92.9% 91.9%

94.4% 94.6% 94.8%93.3% 93.1%

91.8% 92.9%95.0% 95.1% 95.5% 95.7% 94.8% 95.1% 95.4% 95.5% 95.6% 96.0% 95.0% 95.5% 96.0% 96.0% 95.6%

31.8%34.1%35.2%

31.3%30.9%29.8%

35.7%39.2%40.3%

45.4%43.7%

37.0%40.5%

43.7%44.5%42.8%45.2%

58.7%54.9%55.9%55.9%

53.7%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Decline Resolution Rate Impact on Cumulative Approval Rate

Initial Aproval Rate Total Approval Rate Decline Resolution Rate

Recurring/Installment Billing Optimization• Opportunities• 3 Tactics to Implement• Observed Results

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Recurring Card On File OpportunitiesSituational Overview• Recycling Not Intelligent and therefore More Costly $$• Over 200K Active Delinquencies at any given time• Delinquencies per Customer Range from 1 to 180• Large Volume of Card Expirations due to Chip in Card and Data

Breaches• StretchPay Delinquency Notifications Costly ($500K++ Annually)

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Recurring Aged Decline Success Rate

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Authorization Decline Response Success RateInsufficient Funds 42.6%Call Issuer 35.0%Exceeds Appproval Amount Limit 51.9%Invalid Account Number 12.1%Pick Up Card 8.8%Lost/Stolen Card 6.0%Expired Card 31.6%Restricted Card 38.3%Invalid Transaction 15.7%No Such Issuer 3.9%Invalid Pin 33.3%Transaction Not Allowed At Terminal 100.0%Exceeds Number of PIN Entries 58.8%Cardholder Transaction Not Permitted 21.9%Invalid Amount 80.0%Do Not Honor 12.9%Generic Decline 21.3%On Negative File 0.0%Insufficient Buying Power 52.7%Total 19.8%

*Declines 3 Weeks or Older

Forget your training on Hard vs. Soft Declines. Most can be Recycled!

Timing is Everything. TEST! TEST! TEST!

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1. Beginning of Month

2. End of Month

3. Second objective

4. Third objective

3. Middle of Month

4. Thursday/Fridays

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91.6%

6.5%

77.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1 2

Recurring Payments Authorizations and Recovery Results

Initial Approval Rate Incremental Approval Rate Decline Resolution Rate

Cumulative98.1%

22

29%

22%

18%

12% 11%

4% 4%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Days 1 - 3 Days 4 - 7 Week 2 Weeks 3-4 Month 2 Month 3 Month 4+

Recurring Payment Decline Recovery by Time Period

Recovery

Recurring Results of Targeted Actions• Recycling Engine Optimization

• Over $20MM in Revenue Recovery Annually• 10%-15%+ Recovery Rate per Recycling Run• Recycling Expense cut by nearly 70%

• Auto Account Updater (AAU)• Over $15MM in Revenue Recovery Annually• For every $1 spent on Recovery, JTV captures ~$50+ in Revenue• Reduced AAU Expense by 33% by persisting updates

• Consolidated Customer Delinquency Notifications• Easier to read for customers• Reduction in Expense by 52%

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Next Steps In Effective Customer Communications

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Remaining Opportunities

• BIN Intelligence• Partial Authorizations/Partial Payments• Recurring Billing Indicators• Leverage Text Messages/Self Service to communicate

and resolve Late Payments• Payments Chaining

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Summary & Key Takeaways • Industry Trends Suggest Delinquency Rates are Rising!• Leverage Data to Create an Aggressive and Intelligent Recycling

Strategy• Use of Account Updater is Mandatory!• Evaluate the effect of prepaid cards, and determine a strategy for

acceptance• Constantly monitor and analyze detailed data – transactional, BIN-

level, and more• Don’t set it and forget it• Continuously ask “How Might We Improve Our Revenue Retention

Rates through Payments Optimization.” There’s usually always more room for improvement.

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Questions?

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Thank you

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• Don’t forget to submit your session evaluation!

JASON HEMBREE, BUSINESS TECHNICAL ARCHITECT, JEWELRY TELEVISION