Churn Fighting Focus: How Wrong Customers Can Cripple Your SaaS Growth
At some point, professionally and/or personally, we have all been through a breakup. And as part of that experience, many of us have probably either uttered or received the classic breakup line: “It’s not you, it’s me.”
Undoubtedly this line has been overused and overworked, causing it to become little more than a meaningless cliché. But when we hear this line as Customer Success professionals, it should give us serious pause. While customer acquisition is at the heart of SaaS growth, acquiring the right customers is at the heart of effective, sustainable SaaS growth. So when we hear “it’s me” from our customers, we need to carefully consider if it’s actually us, if we are reaping the results of pursuing the wrong customers.
In this thoughtful post, Chargify explores the real danger in selling to the wrong customers and how this can negatively affect your company’s growth. We highly recommend checking out the full read but here is an outline of Chargify’s key points to get you started:
- Selling to the wrong customers can significantly affect your SaaS business: There are many harmful fallouts from selling to bad-fit customers including higher churn, increased support costs, lowered employee morale, drag on growth and off-target feedback influencing product decisions. And ultimately all of this can also add up to serious damage to your brand and reputation. As Richard Felix, Co-Founder of Sense Labs, puts it, “Unhappy clients are complainers and those who complain tend to tell their friends. And contacts. And total strangers. There are enough online forums discussing SaaS and online tools that an unhappy customer has plenty of outlets for venting, a frustrating fact when they weren’t the right fit for your product in the first place.” But if you want to stop selling to the wrong customers, you first need to understand…
- The difference between unhappy and wrong-fit customers: As Chargify astutely points out, “It is important to understand that customers who are unhappy or challenging aren’t necessarily the wrong fit for your SaaS. In fact, customers who are complaining about product issues to your team can actually be doing you a huge favor!” Research findings indicate for every customer who complains about an issue, there are 26 other customers having the same issue who aren’t talking to you about it. So what separates the unhappy customers from the wrong-fit customers? Chargify suggests using Lincoln Murphy’s definition to kick-start your thinking: “A customer should be considered a bad fit when you cannot deliver immediate value, nor can you – based on where you’re at today, your available resources, etc. – realistically deliver future value in the required timeframe for these customers.” Once you isolate the demographics of wrong-fit customers, then you have to figure out…
- How to stop selling to wrong-fit customers: No longer selling to wrong-fit customers is often easier said than done. But never fear, Chargify dives deep into the necessary steps you need to take including:
- Mindset changes: Throughout the organization, there needs to be a change in mentality from acquisition being a numbers game to focusing on identifying prospects who truly need your product: “The sales team’s mindset should include a focus on the right customer relationships rather than seeing sales as simply transactions.”
- Interdepartmental collaboration: When you look at collaboration as it applies to selling to the right customers, there may be additional ways teams can join forces to better ensure the wrong customers are not being sold to. For example, giving Customer Success the opportunity to review new deals means that fit and expectations can be proactively evaluated, reducing the likelihood of a bad-fit customer.
- Sales education: First, stop trying to appeal to everyone. Second, education is essential; as Lincoln Murphy explains: “If a salesperson has not been explicitly told the characteristics of a bad fit customer, why they’re a bad fit and what the negative consequences of doing business with that customer are, the fact that there is a possibility they might not be a great fit isn’t reason enough for the salesperson to give up that sale, miss their numbers, and take home less pay.”
- Incentive sales staff accordingly: As Chargify succinctly puts it, “Incentives for sales staff should focus on the quality of customers, not just the quantity. When your goal is to have sales selling to the best-fit customers, consider aligning sales commissions with customer LTV and churn rates.” Don’t believe that this can make a real difference? We recommend checking out this read.
Customer Success Around the Web
- Why Sales should care about Customer Success: As an emerging discipline in SaaS and other recurring revenue businesses, Customer Success has to justify its existence every day. But the reality is that Sales and Customer Success cannot exist without each other and that together they are much more than the sum of their parts. This excellent post dives into the key reasons that Sales should care about CS. An important read for anyone with Sales and CS teams that feel at odds.
- 10 ways to make customers fall in love with your business: In this age of automation and innovation, caring for your customers has never been more important. When you consider that as many as 89% of consumer begin doing business with a competitor following a poor customer experience and that up to 60% of consumers will pay more for a better customer experience experience, it becomes clear that creating a customer-focused culture of this nature is a business opportunity that should not be overlooked. This interesting post gives 10 ways to help make your customers fall in love with your business, from the practical (offer ongoing support and specials) to the ideological (prioritize genuine interactions). A great read for companies of all sizes and stages.
- Why CS is all about adoption, not addiction: We all know the facts about customer loyalty. It’s easier and less expensive to sell to an existing customer rather than acquire a new one. Loyal customers are also more likely to buy more from you and recommend you to other potential prospects. Take a moment to think about your own customer base. Would you consider most of your customers to be loyal? Or, could it be that some of those customers may actually be in an unhealthy, addictive relationship, rather than in a truly loyal relationship? Addiction is when your customer feels that they are locked in. What we want to get to is a state of adoption, where the competition is locked out. This short but great post explores how CS teams can identify addicted customers and take proactive steps to nurture addicted customers and get them back to full health via positive adoption.
Word to the Wise
This week’s wisdom comes from Nate Skinner, Chief Customer Officer at Campaign Monitor. Being in the extremely crowded email marketing space, Skinner knows better than anyone the importance of standing out, a challenge he he has effectively tackled by blurring the lines between Customer Success and Marketing and letting Critical Mention’s successful customers tell their story for them. In this interview, Skinner emphasizes that for Campaign Monitor, Customer Success is not just about renewals and upsells; they convert new customers by familiarizing them with the experience of current customers as a part of the sales process.
We recommend watching the full interview but his thoughts on the power of customer testimonials were particularly interesting to us:
“It’s all about objectivity, I think in the context of being a vendor of anything, really. The more you can have other people talking about what you’ve done for them, and how you’ve helped them grow, the better. For us having our customers advocate on our behalf is a singular differentiation between what you would do if you were putting it on a website versus what they’re doing for us. So, the difference really is simple. If we say we can help you, that’s one thing. If a customer says, ‘They’ve helped me, and here’s how.’ We feel like that’s way more impactful, and that’s why we do it.“
Fighting Churn is a newsletter of inspiration, ideas and news on customer success, churn, renewal and other stuff and is curated by ChurnZero.