When churn isn’t a bad thing
Yup – you read that right! In a somewhat ironic twist, we’re starting this week’s Fighting Churn post with a discussion on why sometimes churn isn’t a bad thing for your business.
We know you love your customers and when they decide not to renew, it affects your business. Consumers can churn for a wide variety of reasons, some of which you can impact, others of which are outside your sphere of influence. There is also a wide variety of ways to calculate and understand churn, from user churn, to revenue churn, to gross churn, to net churn. It can be a messy, confusing situation.
To make matters even more muddled, customer success thought leaders perceive churn differently. Some experts believe churn is a natural part of your business operations, that its best to set a churn benchmark and use it as a guide for future growth. These leaders believe that comparing your churn rate to other companies can be misleading and that the key to managing your churn is a strong understanding of what the “background level” of churn will be for your business. But other thought leaders see churn as preventable – and the ultimate priority. They would advise that your team take a proactive approach to retaining all customers and caution that accepting churn as inevitable is a dangerous, slippy slope.
So this complexity in definition and variation in strategic approach begs an important question: Is churn always bad?
The real answer is that it depends on the school of thought, the circumstances and your company. But as you explore the underlying reasons for your customers’ departures, look for examples where your customer success team sighed in relief when a particular customer left. What was notable about this customer, what made them difficult? The truth is that in some scenarios, a customer leaving is not only acceptable but it is actually a positive thing for your business.
- The Wrong Fit Customer: We can make the mistake of believing that all our customers are a good fit for our product because, after all, they did buy it. But this is not necessarily true; some customers are square pegs trying to fit into your product’s round hole. For such a misfit customer it is unlikely that they will ever see the value of your product, despite your customer success team’s best efforts. For them the cost will always outweigh the service. Letting a Wrong Fit Customer go can save your customer-facing teams a great deal of time, energy and frustration trying to support a customer who would have never been satisfied.
- The Bankrupt Customer: Businesses can dissolve unexpectedly, leaving your company without a client. Or maybe your customer merges with another company, resulting in a change in executive buy-in, available resources and/or tools already in use. While it is certainly possible for customer success teams to recover in some of these scenarios, the road is often very uphill. Understanding which of your customers are most at-risk for disappearing can inform the level of effort you put in to keep such a customer when things aren’t looking good. Cycling this information back to the sales team can also help minimize the number of high-risk customers you have to deal with in the first place.
- The Transient Customer: Trends and fads have an effect on your churn rates. Some companies operate in environments where customers discontinue services today, but renew again in two months. In such a transient market, churn is expected because customers change their minds frequently and their situations and resources fluctuate rapidly . If your business is in such a market, you have two choices: 1) you can accept it and actively work the leaving-returning-leaving habits of your customers into your churn and revenue predictions or 2) you can work to eliminate this type of churn by making your product and services more integral to your customers’ lives. If you decide to go with the first option, be sure to have clear guidelines around the amount of effort your customer success team should put into trying to save a customer from leaving each time it happens. If you are confident that a return is possible, your efforts might be beter focused on nurturing the potential return than fighting the exit.
Ideas for automating personal emails
Sending a personalized email from an important leader at your company – such as the CEO, the founder or the CCO – became a popular trend among Customer Success teams for a simple reason: it worked really well. This style of email was extremely effective at starting conversations, getting people engaged and developing customer relationships.
But as the trend caught on, many businesses starting making the same fatal mistake: the automation of these emails was making it painfully obvious that the email wasn’t really from the person it claimed to be. The two most common issues were the reaction time (I just signed up 2 minutes ago…no CEO is just waiting around to send welcome messages) and the response hours (it’s 2 AM, there’s no way the founder is awake and emailing me).
But beyond this, many businesses were (and still are) only leveraging the personal email in a welcome scenario, immediately after a customer comes on board. Additional opportunities to reap the benefits of the personalized email have largely been overlooked. But this great read offers seven powerful use cases where the personalized email is your best approach. Here are three of our favorites to get you started:
- [Customer Name] Achieved their [First Success]: “Hey, I just saw you closed your first deal, awesome!”
- Consider adding a note about only knowing high-level actions, so the big brother/creepy factor is reduced
- Not sure what a “first success” might be? We recommend this read.
- [Customer Name] Completed a Survey: “Just saw that you filled out the survey, thanks for doing that. BTW, I was wondering…”
- Ask an open-ended question. The hypothesis is that they’re more likely to answer this bigger question because you asked them directly than in the survey itself.
- You could trigger this email based on certain response criteria in the survey itself.
- [Customer Name] Cancelled their Account: “Oh man, I’m sorry to see you cancelled your account. Could you tell me about your experience with our product?”
- Don’t ask for feedback – it’s about them. Ask about their experience.
- A lot of companies like to ask people “why are you leaving?” while someone is leaving. You might get some good answers, but most likely you’ll get whatever they can answer that allows them to cancel as quickly as possible. In fact, even if they weren’t upset with you before, they might be as soon as you make them answer questions to cancel their account, pretty much ensuring you get a less-than-helpful answer to the question. But once they’re cancelled, they’ll be calm and will probably give you a better answer.
Principles of a customer-centric company
As the Customer Success space grows, there are several phrases that we’ve all heard about the “right” way to approach customer success:
“Customer Success is a function of every department.”
“Customer Success can’t exist in a silo.”
“Customer Success is everyone’s job.”
But what does that really mean in practical terms? What does a customer-centric company really look like? How do you determine if your company is doing the right things, focusing on the right goals? What are the thoughts and behaviors you need to encourage every day?
As you work to answer those questions, consider these four basic principles of a customer-centric company and be sure you are taking them to heart:
- Be proactive, not reactive: If you wait for a customer to contact your company, it’s support – the opposite of success. And support issues are like cockroaches. An investment in success means sharing learnings across departments and changing actions based on building a stronger relationship with customers. Continually work toward getting the experience right up front, rather than reacting to a comment or complaint after the fact. Building a process around what to do with feedback, including how and when to share it with your product, marketing, and sales teams, is the difference between developing a cycle of feedback loops on which you can grow, adapt, and become proactive, versus living in a constant reactive state.
- Foster empathy: There comes a point when the sale is closed and a customer takes the leap to hire your product to help them solve a particular problem. Empathize with that! Don’t allow yourself to become so desensitized that the acquisition of customers becomes something binary. These are people, putting trust in you. Identify places in your process where a customer is taking a leap, even if the value isn’t 100% clear to them yet. This is where you need to reciprocate and show them you understand their fears and offer relief. Obviously the level of of risk they’re taking varies greatly depending on the product/service you’re providing, the price point, and the impact on their businesses/lives. Recognize this and reciprocate appropriately.
- Be data-driven: Whether tracking data or listening in on conversations, it’s imperative to have some method for tracking success. One of the best places it start is to look closely at your best customers and identify successful behaviors that can be encouraged and repeated with other, less successful customers. Build systems around increasing these behaviors and measure efforts for success.
- Include every department in customer-facing considerations: This means having a process for confirming that all decisions made throughout the organization enhance customer goals and intentions. Marketing needs to consider messagaing and expectation-setting as closely as design and development optimize UX. There needs to be consistency in tone, messaging, and experiences throughout the lifecycle. Keep everyone customer focused, even if they’re not customer-facing.
Word to the Wise
This week’s wisdom comes from Tom Krackler, SVP of Products at Zuora and Rachel English, Director of Customer Success at Zuora. In the seventh episode of the Helping Sells Radio podcast, Krackler and English discuss the future of customer success in the subscription economy. We highly recommend listening to the full episode – it’s chock full of interesting CS discussions and predictions – but here are a few take-aways that caught our ears:
- Attitudes around customer success have changed
- Customer success is now a strategic function at companies and CS leader is sitting at the table in the executive meeting, board meeting, and is really driving a core part of this strategy of a company. That wasn’t true with older business models that were about upfront sales and maintenance contracts.
- Customer Success is now responsible for customers sticking around and making them successful is in a much more commanding role in driving company strategies and decisions.
- Customer Success has become more defined and now is a direct driver of primary business outcomes any subscription business is trying to achieve.
- To what degree should companies foster self-service in their customer success programs?
- Self-Service is always needed as an option no matter what. Self-service should be easy to find and great quality.
- Do a good job of making valuable content that helps customer achieve great results with software or service is essential for all kinds of customers and companies.
- Not every customer will use it, but you can make sure the content is of top-notch quality and also make sure it’s easily accessible. That’s actually tough to do. Finding it, searching it. Don’t get little siloes for customers that’s hard to navigate.
- The more you can show you have information available, even customers who prefer for 1:1’s or phone with problems will gradually get used to the reliable place to go to get info in middle of the night.
- It should be an ongoing an initiative to have great content that customers can serve themselves.
- The real purpose of measuring customer success
- Ultimately there’s a handful of metrics that are driving every business decision and board level discussion: cost for acquisition, recurring revenue, etc. Roll up into how it impacts those. Internal goals and metrics.
- Core belief is that if what you care and focus about is help customers get ongoing value from relationship with company, those metrics are a byproduct of it and a positive one.
- If you believe those come together, everyone can have the right motivation.
Fighting Churn is a newsletter of inspiration, ideas and news on customer success, churn, renewal and other stuff and is curated by ChurnZero.