The Big Five of Customer Churn

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It’s a no-brainer that subscription economy success depends not just on acquiring customers but keeping them. And most companies have caught on to the basics of customer retention – smooth onboarding, analytics, customer check-ins, etc. But, how do you take that to the next level? And then the more interesting challenge – How do you do it in a way that’s scalable across different types of customers? Nick Mehta, CEO of Gainsight explains:

 

1. Monitor sponsor changes

Central to business relationships is the connection between the buyer and seller. But, what happens when the person you sold to leaves the company? Even in B to B, the truth is that you really sell to an individual who believes in your promise of the product or service. Job changes are one of the biggest sources of customer churn in B2B technology and probably all of B2B in general. 
It’s critical to figure a way to track your buyers both at the executive level (decision makers) and at the level of the power user (whoever uses your system day to day). Use this information wisely and it can dramatically reduce customer churn. It may also lead you to new customers as you follow your buyer to his/her next company. Sponsor tracking is a universal requirement in B2B because at it’s core,  it is a human sale.

2. Dissatisfaction

The key is to notice dissatisfaction ahead of time. The obvious one is to notice people who aren’t using your product or service. But, what about subtle indicators that indicate dissatisfaction which builds up over time? This is the passive dissatisfaction of people who aren’t saying’ you’re horrible’ or ‘you’re excellent’ but kind of living somewhere in between. 
Passive issues grow over time and all the annoying little things add up to the big decision to churn. Watch for long support cases, non-responsiveness, late payments and other subtle signs of dissatisfaction. These are usually the lost data points in most companies. Figure a way to track those and then have a standard, consistent response for your customers.

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3. Sticky Usage

Most companies have a simplistic way to look at customer retention i.e. people not using my service are probably at risk. While this is very true, the converse is not true. Just because they’re using your service doesn’t mean they are necessarily happy with it. Find out what’s sticky about what you do. 
Then, color code your customers. Red is obvious – they’re not using your service. That’s clearly that. But what about the ones that are using it? The default should be yellow i.e. they are at risk. A lot of companies default to the green because it’s mentally easier to process. But, you’ve got to be a little bit paranoid about your customers in the subscription economy. So, default to yellow and really think that every customer is at risk. And then, of course, work to get those yellows to greens.

 

4. Root Cause Analysis 

Companies often run away from customer churn. It’s over, they move on. But, it’s important to embrace it and say “Look, this is a learning opportunity for us.”

Begin with defining churn codes clearly so they don’t overlap each other. If they overlap, you won’t be able to identify the root cause. And make it hierarchical so you can narrow down the root cause. Another aspect of this is that many companies only look at the final action and miss the early actions. Remember, the little things add up to the final decision. Analyze the entire timeline to find out what happened.
I’m a huge fan of third-party interviews. You can do it for a sample of your customers, or if you’re a B2B, do it for your high value relationships. It’s unbelievable what people will tell you when they’re not talking to you! 

 

5. Focus on the Positive 

In churn reduction, we focus so much on the negative but for a lot of businesses, the most ROI you can get is from upsells.  And the simple model there is to up-sell and get advocacy. Measure your team not just in terms of churn loss but also on advocacy and up-sells. Give your customer success team incentives to not just to avoid the negative but to do the positive.

Advocacy drives customer success – your advocates begin to feel like they’re an extended part of your company and often get their team to use your product or service more. So, advocacy drives customer success, it’s not just the other way around.  And when you get there, celebrate the good times.  

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