Churn, or the loss of customers, is always present in the mind of CEOs, CCOs, and investors. However, it should be on everyone’s mind as it affects the entire company.
While it is very important for a company’s success, it doesn’t have to be an all-consuming fear. Churn can actually be a catalyst that turns a company’s trajectory into world-class Net Dollar Retention (NDR).
Whether it provides essential software or not, every SaaS company has to work hard to keep customers satisfied and continue to subscribe.
The need for a team to manage customer relationships and needs became clear as companies started losing customers. SaaS companies have pioneered Customer Success as a function, building dedicated teams to manage relationships and make sure customers are happy and seeing value from a product or service they purchased. While it may take heavy lifting to build a team from scratch, and change a company’s behavior, the benefits are exponential. CS teams not only influence retention rates, but also the organization’s brand and product roadmap.
The question is, how do you develop a team and quickly adopt a “CS mindset” to have the most significant effect on churn?
Your new logo is someone else’s churn.
With the rise of SaaS, churn has become a bigger and more common problem by creating a “subscription mindset” and making the switching off of solutions practically effortless. SaaS has focused on providing value by creating intuitive onboarding and implementation but that is not a differentiator anymore. Companies must differentiate themselves by ensuring the customers realize value and prove ROI.
In SaaS, there’s nothing that ties a customer to you contractually beyond their renewal date, so you have to make sure you’re delivering value to them across their entire customer lifecycle. Otherwise, you run the risk of customers churning.
But there is good news! Customers also churn from your competitors. You have a great opportunity to take advantage of this fact and drive growth from someone else’s churn.
One thing to keep in mind is that not all churn is bad.
Companies strive to create a product or service that retains customers. In addition to building a product that keeps customers satisfied, it’s equally important to focus on selling to customers that are an ideal fit for your product. The ideal customer profile (ICP), is someone that will benefit the most from implementing and then scaling your offerings. Understanding your ICP is pivotal for the long-term success of your company as it can increase a customer’s lifetime value. That will in turn impact churn, and increase revenue over the course of their relationship with your organization.
Our Executive Playbooks pose the right questions to ask about your customers and prospects to define your ICP. The answers to those questions, and whether or not you take action on them, lets you determine if a prospect is a good fit or if a customer is a potential churn. If they churn because they are not the right fit for your product, it can actually be a benefit for your teams. It will allow you to focus on the right accounts and grow Net Retention.
As your post-sales team breaks into new industries and use cases, both your product and the definition of “perfect fit” will evolve and increase in the Total Addressable Market (TAM). You may see a short-term rise in churn but it can be worth it in the long run. As TAM increases, and churn decreases, the revenue and value of the company will be positively impacted. The good news is that negative churn (aka NDR) eventually becomes an incredible growth accelerator.
To see what churn looks like for a healthy recurring revenue business, take a look at the newest Customer Success Executive Playbook to Avoid Excessive Churn. One bit of advice: learn what healthy companies’ KPIs look like. How do you define good Net Dollar Retention? What does their install base strategy and success look like? Use those as guiding metrics to shape your goals but keep in mind that every company has a unique path to success.
One piece of good news about focusing on churn and fighting to remedy it is that the solutions to churn will make every other part of a business better.
Satisfied customers are important assets for every organization. They are reliable for references, referrals, case studies, and have a high chance of purchasing more year over year. Churned customers share their experiences with friends and colleagues, and as we all know, word of mouth is very powerful.
Churn can also be the catalyst to remedy and it can change all parts of your business for the better; everything from establishing better alignment and also developing a more robust product. Use it to push for better collaboration, reporting, and visibility so you are all aligned on one goal: customer success. Most of all, you will find that the experience you create addressing churn will retain customers and dramatically improve expansion opportunities.
At Gainsight, we’ve been addressing churn using our own platform for over 10 years. We know that our experience and what we have learned from our customers can save others’ pain and time. It starts with having a wealth of knowledge and best practices at your fingertips and if you want to dive deeper, download the Customer Success Executive Playbook to Avoid Excessive Churn. We also have a webinar series that may provide some tips and tricks from the experts.
