Churn: SaaS Growing Pains
In the recurring revenue world, churn scales with your business. The more your business grows and expands, the more churn you’ll experience. While some churn is expected, it must be kept at a manageable level in order to maintain a healthy customer retention rate. This will empower your organization to drive market-leading Net Dollar Retention (NDR). In order to keep pace with the rapid rise in growth and churn rates, you’ll need to implement a predictive and proactive process for identifying and reducing customer churn.
In a recent article, we partnered with Involve to share 4 integral steps to creating a robust churn prediction model so that you can successfully predict churn before it happens. In this article, we’re building on this method by sharing 5 expert-backed tips to effectively and proactively prevent churn so that you can drive best-in-class Net Dollar Retention.
1. Understand Your Customers’ Reasons For Churn
Before you can deploy your team and appropriate resources to save your at-risk customers, you need to thoroughly understand their reasons for churning. Using your churn prediction model is a good starting point to begin to piece the picture together. What is your data telling you about why this customer is churning? What do you have in your toolkit to address this issue and take corrective action? Answering these questions will allow you to segment your churning customers into manageable groups, such as implicit vs. explicit churn, so that you can target the right customers with the right actions at the right time.
In the case of explicit churn, go beyond your initial dataset and dig a little deeper by obtaining direct feedback from your customer to truly understand their motivations in their own words. This feedback can be obtained by the Customer Success Manager (CSM) in charge of the account or through an email, survey or phone call. The most direct method is often the most effective at eliciting accurate and detailed responses. Once you know exactly why a customer is leaving, you can build out timed processes and outcomes-based playbooks to prevent churn.
2. Design Relevant Churn Prevention Processes & Playbooks
There are a myriad of reasons why your customers might be churning – unfulfilled product feature requests, unfavorable contract terms, product adoption issues, etc. You need to build playbooks, with corresponding processes, that address each of these unique issues. These playbooks are crucial to empowering your team with the tools they need to prevent churn and avert your at-risk customers from taking their business elsewhere.
Based on the insights you’ve gleaned from your churn prediction model, you need to determine what is going to move the needle for at-risk customers. You need to determine what actually drives value for your customers, from their perspective, and build out your processes to address their needs and goals. For example, for customers who are experiencing increased Support tickets or a decrease in usage, this could be as simple as deploying resources from your Education team or Marketing content. On the other hand, for explicit churn, you may need to take more drastic steps such as offering more favorable contract terms, discounts, additional products, the option to pause instead of outright canceling their subscription or even an extension while you prove your value. For each of these churn segments, you need to clearly define the escalation paths your team can take by building out thorough playbooks with detailed processes so that they can effectively prevent churn.
Take your playbooks to expert-level by closing the loop. For the various processes and actions you have outlined in your playbooks, state their level of effectiveness at reducing churn. For example, if you find that for a particular risk, recovery is 100% if your CEO intervenes and engages with the stakeholder, make sure that’s clearly outlined in your playbook. If a certain action reduces your rate of churn, or inversely raises it, make sure your teams have access to that information so that they can take the most impactful actions, greatly increasing their ability to prevent churn. As more customers experience your cancellation flow, you can continually feed your data model and tweak and improve your playbooks and processes to figure out which actions are most effective at reducing churn.
3. Leverage Your Cross-Functional Ecosystem To Troubleshoot Churn
Preventing churn is a team effort. To manage churn efficiently, you must leverage any and all reinforcements to prevent at-risk customers from departing. This may require pulling in any relevant executives, other department leads, and the various customer data sources across your organizational ecosystem.
Leveraging cross-functional data allows you to get a deeper understanding of your customers and their sentiment so that you engage with them more effectively. For example, if an at-risk customer has 20 unfulfilled product feature requests, having that information from Product is crucial to any engagement that your Customer Success organization may take with that customer. Another important reason to obtain a 360-degree view of your customer is to determine the best course of action and select the additional resources you need to pull in for support. For instance, if you realize that a particular customer requires more favorable contract terms to prevent churn, you may need to pull in your Finance and Sales teams for additional support. Or hypothetically, if you realize that a VP engagement rather than a CSM would make the difference for your customers, you can use these insights to garner the executive’s continued commitment and assistance.
As the ValueXperience framework emphasizes, reducing churn in support of best-in-class Net Dollar Retention isn’t the responsibility of any one team or department. The hefty demands of the modern B2B customer lifecycle necessitate cross-functional collaboration in order to drive the best possible experience for your customers and deploy the most effective initiatives to prevent churn.
4. Plan For Inevitable Churn
If you operationalize your churn prediction model correctly then your explicit churn (customers who are on the verge of churning) should decrease while your implicit churn (customers who are showing early signs of churn) should increase significantly. Don’t be alarmed if 50% or more of your customers are suddenly in the red – this means your model is working and highlighting potential risk that exists in your organization. Instead, think of this new data as your churn threshold and use it as a barometer to measure your churn prevention efforts. All of your initiatives should be designed to help you stay below this baseline.
While your business is likely doing everything in its power to prevent churn, it’s important to acknowledge and accept that some churn will happen. This could be because of reasons entirely outside of your organization’s control, such as the completion of a project, a merger/acquisition or the company going out of business. Or, churn might occur if the customer/product wasn’t a great fit. In this case, there could be an opportunity to optimize your Sales motion to ensure your organization is attracting the right customers; here’s how you can create an Ideal Customer Profile to help you acquire the right customers that will drive higher revenue retention and expansion rates for your business.
In the above instances, it’s important to know when to walk away and implement an optimal offboarding process that embraces this inevitability and manages the experience of the customers who are leaving you in a seamless and positive way.
Fortunately, this isn’t an entirely lost opportunity. Your churning customers are a valuable source of information that you can leverage to iterate your churn prediction model and improve your processes to prevent other customers from churning in the future. If your churned customers experienced issues with your product or service, chances are they aren’t alone. By collecting feedback from your churned customers, you will likely unearth blind spots in your current process or opportunities for entirely new initiatives.
5. Keep The Lines Of Communication Open
Sometimes, churn isn’t the end. Even if a customer does end up churning, you should always keep the conversation open in case they ever want to return to your business. Check in with your customer one month after their offboarding is complete to ensure everything went smoothly and that they were able to access all the assets they needed. This also gives you an opportunity to get back in touch and maintain a relationship with your customer post-churn. Sometimes, the grass isn’t greener on the other side and your churned customer may decide they like your product better. Or perhaps, an individual within the business will move to another organization that will be the perfect fit for your product.
If the customer is ever able and ready to come back, they will remember these thoughtful gestures and will be significantly more likely to return. But, if you end the relationship on a negative note, customers will avoid your business, and even worse, tell other customers about their poor experience with your organization. In fact, some research finds that 95% of customers will tell others about a bad experience (Zendesk, 2013). The bottom line: treat your churned customers with the same level of respect and care as when they were current customers, and always keep the door open for communication and collaboration.
Retain More Customers With A Solid Churn Prevention Strategy
Churn is an inevitable and unavoidable part of doing business in B2B technology. While some churn is inevitable, you can mitigate this danger by creating a robust churn prediction model that alerts you to risk and designing right data-driven processes and playbooks that address churn triggers. By implementing a thorough churn reduction plan that is supplemented with the right cross-functional support, you will empower your team to effectively and proactively prevent churn and enable greater revenue retention for your business.
Are you looking for churn in the right places? Here are 4 often overlooked churn indicators that may be hiding in your customer data.
