There is an experience universally dreaded by all Customer Success pros: The Surprise Cancellation. A customer who you thought would renew unexpectedly gives notice, leaving you with the ever-so delightful tasks of trying to convince that customer to stay and then, if you aren’t successful, trying to explain to your manager what the heck happened.
But as much as we all fear this experience, truly surprise customer cancellations are less common than we think. Outside of factors they cannot control – such as going out of business – customers typically do not change their minds about you and your product on a dime. Instead, the cancellation comes as a surprise to you because you missed key indicators that things were not going well. Did the support team have a lot of issues or complaints from this customer? Perhaps you were not paying close enough attention to notice a drop in engagement or usage? Did you not take a lower score on a recent satisfaction survey seriously enough?
The tricky part about red flags is that the indications of a potential cancellation are going to be unique to each business. But as this thoughtful post by Milton Herman, a CSM at ClearVoice, explores, there are general guidelines and remedies that businesses can follow to identify and proactively engage their customers who are at risk. We highly recommend checking out the full read but here are three of Herman’s six signals and remedies to get you started:
- Lack of Usage: A drop in usage is the epitome of a red flag. As Herman puts it, “If customers are not using your product, they won’t see value in it. They could be confused about how to use the product or are using other tools to get things done. And of course, looking at the big picture of usage also breeds better decisions. What is the customer’s average length of web session? Are they utilizing all or most of your product features?” For an even more effective approach, we recommend focusing on usage of features that are related to goals/outcomes the customer has identified. For example, if they told you that a deeper understanding of their data was paramount to their success, then you should be especially concerned if they are not using your intelligence tools.
- Remedy: Engagement Campaigns. As you see a customer’s usage start to slip, proactively engage them with content that will inspire and empower them use your product to achieve their goals. But as Herman points out, there are several important characteristics of an effective engagement campaign; you can’t just send out any old content and expect results. First, you need to target the right individuals; sometimes you’ll want to connect just with your power users or just with your exec stakeholders, other times you’ll want to communicate with them both. Second, your content needs to be both personal and creative; customers are likely to ignore anything that smells like a generic blast and that offers the same techniques and CTAs they’ve already been given. Third, and most importantly, make sure your content is undeniably useful. Focus on the benefits the customer will reap if they begin using your product again and do as much of the work for them as you can, so you are setting them up for success.
- Support/Assistance Requests: As Herman quips, “As with dieting, moderation is key for support requests. Too many, and your customer is likely getting frustrated; too few, and your customer might be running into bugs without reporting them and using workarounds that diminish the product value.”
- Remedy: Empowered Support Team. In many businesses Support is the customer’s first line of defense, a position that gives Support a unique view of customers’ concerns and attitudes. This means that any tickets where a customer become flustered/upset needs to be documented and properly escalated to the CSM so they can step in and provide assurances. Additionally, we recommend making sure that support is available to your customers in a variety of mediums; Forrester has reported that more than 70% of consumers prefer to use a company’s website to get answers as opposed to phone or email, yet, 58% of consumers are unable to resolve their issues via the web. Herman recommends creating “a dynamic self-service database, so your support team can focus on legitimate concerns instead of routine processes.”
- Time to perform key actions: While each customer is different and will move at their own pace, in general there are time frames during which key actions and/or results need to occur in order for a customer to be healthy in the long run. As Herman puts it, “Users who are abandoning actions or taking an unusually long or short time to perform an action can tell you a lot.” Getting customer to experience ROI in as short of a time as possible is critical to developing healthy, renewing customers.
- Remedy: Track milestones and engage around them. Herman explains this remedy with an example: “Groove, a support software startup, attached durations to important actions within their app. For instance, they knew it took 20 seconds to integrate a Twitter account. This allowed them to automate an email whenever customers were spending far longer than average on that action.” We recommend defining and tracking the timeline in which key actions/results should occur so you can automate personalized emails and in-app content if a customer starts falling behind and then escalate to the CSM if the customer appears to become stuck.
Customer Success Around the Web
- Reasons you should hire CS leadership before Sales: Nudge.ai, a modern sales platform that uses AI to provide teams with actionable insights on their target customers, recently hired a head of their Customer Success team and they did this – gasp – before hiring a head of their Sales team. While announcing their new Director of CS, Paul Teshima, Nudge.ai’s CEO, took the opportunity to talk about why they chose to hire CS leadership ahead of Sales leadership. Teshima offers a variety of good reasons – from the fact that CS gets you to product market fit faster and that customers come for your product but stay for the people – and we highly recommend reading his post. It’s an important view for any business that has not matched it’s CS growth with it’s Sales growth.
- Why your customer experience feels impersonal and mechanical: In relationships – especially in business – there is a natural push and pull. One person wants something, the other party provides something. In business, if you are the provider it is much easier to provide the same thing to everyone. Providing something different to everyone that walks through your doors is time consuming and it can be expensive, cutting into your profits. But providing something different to everyone is the future of customer experience. Why? Because everyone wants something different and they are now able to get it. Customers crave tailored products and experiences, when they want them – and they are now able to demand them. So what’s a business to do? This post explores the challenges (and benefits) of mass personalization in our new customer-driven world order. An interesting read for anyone exploring or already leveraging automation in their CS strategy.
- Ways customer retention promises long-term growth: True business growth doesn’t happen with a new customer’s first purchase. It occurs when they stay for the next year and the one after that and eventually – the ultimate growth catalyst – they tells their friends and colleagues to become your customer too. Yet 44% of companies surveyed by Invesp place a stronger focus on acquisition, with just 18% paying more attention to retention. That means their time, focus, strategies and finances aren’t being leveraged to the fullest extent. Factor in the expense of acquiring customers – which costs six to seven times more than keeping one who already exists – and it becomes clear that, while customer acquisition cost is an important metric, it’s not the most important one in forecasting long-term success. This post dives into six different ways to re-think your retention tactics to maximize your long-term growth. A quick but thoughtful read.
Word to the Wise
This week’s wisdom comes Tomasz Tunguz, a venture capitalist at Redpoint Ventures, in an article he wrote after preparing an S-1 analysis for ServiceNow, the third largest public SaaS company in the world. Tunguz came across a section in their latest annual report called “Key Factors Affecting Our Performance,” in which the company described two distinct ways they evaluate churn. One was common – Upsell Rate – but the other was unusual, despite having the common name of Renewal Rate. Tunguz’s interest in their unique calculation for Renewal Rate caught our attention:
“The Upsell rate is the calculation of the dollar retention or negative net churn figure, and is commonly used by SaaS startups. While it’s a great metric, using upsell rate alone to judge the health of the business can lead to false conclusions. For example, if one massive customer buys more seats, the upsell rate will look great, at better than 100%. But if the company is losing 10% of the rest of its customer base each month, the startup is in trouble. So, in addition to dollar retention, startups will often calculate unit retention, as a way of seeing past the effects of large customers on dollar retention. But the unit figure has some problems, particularly if a startup has a very diverse customer base with lots of smaller customers, who will churn at very high rates, and depress the unit retention. ServiceNow’s renewal rate is a great replacement for unit renewal. It’s a metric of revenue retention that doesn’t allow large customer upsells to mask customer churn, and it conveys the health of the broad base of the business.”
Consider adding this Renewal Rate to your SaaS startup’s key metrics. It’s another terrific diagnostic tool to understand the health of your customer base.