Customer Success Strategies to Reduce Customer Churn in 90 days
Analyze 7 types of Customer Churn
Segment customers based on reason for Churn
Learn specific strategies to reduce customer churn
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What is this e-book about?
“How to reduce customer churn” is the biggest pain for a SaaS company. A leaky bucket can never grow. This e-book gives you practical strategies to analyze, understand and reduce customer churn right away.
Whether you have teams of customer success managers for a few months or even years, these strategies will be valuable in reducing customer churn.
Table of Contents
Overview Customer Success Strategies………………………………..2
1. Collect Data to analyse Customer Churn………………………….3
2. Churned Customer Data Analysis ………………………………….5
- 12 Data Points you should collect…………………………………7
3. Customer Interviews …………………………………………………..10
4. Segmenting Customer Churn ………………………………………12
5. Customer Churn: Bad Fit ……………………………………………14
6. Customer Churn: Missing Functionality ………………………17
7. Customer Churn: Missed Outcome ……………………………..21
8. Customer Churn: Never Onboarded ……………………………25
9. Customer Churn: User left the company……………………..29
10. Customer Churn: High Price ……………………………………..33
11. Customer Churn: Company Acquired …………………………38
Customer Success Strategies
Everyone will tell you customer success is a long term game. And there is no doubt that benefits surpass the efforts and investments by many folds.
What can you do to get quick results? At least a taste of what value looks like with customer success? What are some quick strategies that can provide quick tactical wins? And also offer a baseline for a long-term strategic initiative?
Even if you have a team of customer success managers for a few months or even years, these strategies will be valuable in reducing customer churn.
Collect Data to analyze Customer Churn
Before we begin working on customer churn, we need to start by understanding what is causing the churn. And to get a clear answer to this question we need to dig into historical customer churn data.
Let us begin with the list of customer who have churned out in the last 90 days.
You could do less or more. About ~30-50 customers data should be a good starting point for a B2B SaaS company. Say, you have High Volume, low Average Revenue per Account (ARPA) (less than $2K) with hundreds or thousands of customers. Then you can target data where customers have churned out in the last 30 days. In this case, anything above 100 accounts should be fine.
Churned Customer Data Analysis
We cannot cure, if we cannot diagnose. To get to the diagnosis, we need to investigate. So let us get to it right away. We are trying to find out answers to a few fundamental questions. Their answers will work as our guiding principles for rest of the action plans.
- Find out who is leaving?
- Find out when are they leaving?
- Find out why are they leaving?
- Find out what to do they need to stay?
12 Data Points you should collect.
We live in an information-rich world and there is no dearth of data. But most of the trust is still hiding behind some key data points.
Let us collect those basic data points for every customer who left you within the targeted period (as discussed above).
- Account Name
- Purchase Date
- Data of leaving
- Customer Segment (if you segment your customer
- Tip:- Think how are customer A’s needs different from Customer’s B and look for patterns to identify segments.
- Sales Rep
- CSM (if any)
- Support Rep (if any)
- Ask (Via Email or phone interview): What were you hoping to achieve when you originally purchased or subscribed the product?
- Ask (Via Email or phone interview): Why did you leave?
- Ask (Via Email or phone interview): What we could have done to keep you as a customer?
Tip: Assume that you have hundreds of customer and it’s not possible to call them. In that case, you can take a sample of 50-100 customers to email or do a phone interview.
Analyze the product engagement data to learn how were they using the product. That should give you enough indicators to answer the above questions.
In the case of low ARPA companies, we’ll mostly rely on product usage data for investigation purpose. However, it will be a good idea to conduct a dozen interviews to validate your findings.
Conduct phone or email interviews to understand “why”.
Many of the above data points can be collected by using your internal systems. But for most of the revealing details, you will have to speak to your customer
Conducting churn interviews with all the people who canceled the contract is the most important step before we can try to fix anything.
Tip: Sometimes this information is already captured as part of the process.
Template for requesting a customer phone interview.
Subject: Can you spare 15mins for a call with Company
I am the Director of CustomerSuccess at Company. I understand you just canceled your contract for Company. As a customercentric company we always strive to learn from you and your feedback.
Will you be open to a 15 minutes phone call, sometime next week? We’d like to understand the reasons behind you leaving Company.
Director Customer Success, Company
Segmenting Customer Churn
Categorize each customer based on the reasons for churning.
We use the understanding of why each customer left and put them in a different bucket. This will form the basis of our strategy to reduce customer churn.
Each customer churn category is explained in detail later but here is a quick list for your reference.
- Bad Fit
- Missing Functionality
- Missed Outcome
- Never Started
- User / Buyer left
- Price or Cost of Ownership
- Company acquired / merged / closed
Chapter 5: Customer Churn type 1
Bad Fit is the opposite of your Ideal Customer Profile (ICP). Bad Fit customer type is the customer to whom we should never have sold the product to start with. We never built the product for this customer or use case.
Bad fit cases are easy to realize over an interview. When the customer is explaining his/her reason for churning, you start to wonder right in the middle of the conversation. Who sold the product to this person? Or how did we never have a conversation with him/her right at the start of the buying cycle?
Strategy for handling Bad Fit churn
Bad Fit churn is bound to happen. So the only way of avoiding a Bad Fit churn is by avoiding selling to a company which is not your ICP.
- Train your sales team in recognizing ideal customers and those who do not meet the ICP criteria.
- To avoid any conflict of interest between sales reps and selling into a bad fit ICP, any sales commission paid for should be reversed in case such a customer leaves in the first 90 days.
Chapter 6: Customer Churn Type 2
Missing functionality churn is caused by missing a feature that your customer asked for multiple times. Their patience eventually runs out and they give up on your product.
It’s common to see feature requests pouring in and a customer constantly checking with you.
Remember it’s also a pain for your customer to move from a current product to a new product. Even if the latter is a better product. So, for a customer to churn, the pain of missing feature needs to be greater than the combined pain of switching and pain of waiting for the feature.
Missing Functionality Customer Churn happens
Pain of missing feature > (Pain of switching + Pain of waiting for feature development)
Strategy for handling Missed Feature Churn
- Product road map: Create and release a product road map to your customers. In case you don’t have one, it will be worth making one. Your road map could forecast or announce ‘to be released’ functionality and features up to 2 to 4 quarters.
- Re-prioritizing your product road map: Analyse how many customers are you losing because of a particular missing feature. Use the data to re-prioritize. Identify the top features (up to 10) because of which your customers are leaving you. Share the updated product road map right back with your customers.
- Upfront expectation management: If some features will not be available in the near term, train sales, support and customer success teams on expectation management. Let the customer know that this feature will not be available in the near term. Setting up expectations will take off a ton of frustration and will also remove any post-sale surprise.
Quick Win Tip: Just creating and sharing your roadmap will stop customers from looking for options, since they will know that the feature will be released as per the plan.
Chapter 7: Customer Churn Type 3
Missed outcome churn type is where the customer is unsuccessful in getting the desired outcome from using your product.
If there is one type of churn that should absolutely not be acceptable, it has to be this one.
This is also where most of the retention magic happens. If you have most customers falling into this category, then you should be very excited since this is the most straightforward to fix. Note that we are not suggesting it is the easiest or undermining the efforts needed to fix. ?
This is where your product is capable of delivering the exact outcome your customers want. But despite that, if they are not able to get to the desired outcome, it becomes a tough task to reduce customer churn.
Strategy for addressing Missed Outcome Churn
Analyze what’s missing and work on it.
- Customer domain knowledge: Work on creating a guided educating training program. It could be delivered one to one aka high touch, one to many aka low touch or self-educating material, aka tech-touch approach.
- Webinars: Conduct webinars that are not limited only to educating on product usage, but also on building domain expertise and sharing knowledge on solving the business challenges to get to the desired outcome.
- Unless your product requires a lot of custom changes, consider going prescriptive in taking a customer to their desired outcome, especially when you are dealing with high volume.
- Product onboarding experience: Work on making the product easy to use and intuitive. Make it easy for users to get to their desired outcome. Make help available right within the product.
- Getting started guides: Make the product simple and easy to setup and use
- Analyze product usage data: See where your customers are getting stuck. Work with your product manager and product design team to fix it.
Chapter 8: Customer Churn Type 4
In this customer churn type, the customer never got started with the product. The customer may have tried and then given up or might not have started at all.
Understand the reason for never getting started via the customer interview. It will be a good idea to keep an offer for resetting the subscription data handy, in case they would like to give it a try after your conversation.
A few areas worth analyzing for tackling this customer churn are:
- Time to value: How long and how much effort it takes before the customer starts to get value. In case it is too much time and effort, work with the product design team to reduce time to value.
- Make help and support available for getting started. This could be self-help, user guides, manuals or even in product instructions. It could be from your support or success teams.
- Guide, Train, Configure, Onboard customers. For free or for a reasonable fee.
- Revisit and streamline the Onboarding processes for your Customer Success team.
- Monitor Onboarding of new customers using Account Health Monitoring.
Chapter 9: Customer Churn Type 5
User or Buyer left the company
It happens. People move on all the time. A Customer Success Manager would have invested so much in training them, making them successful. But despite having a champion in the company, the customer churned. And left a dent in the recurring revenue in the portfolio of the customer success manager.
This churn is especially difficult to handle if the executive who purchased the software moves on and the new replacement executive is not informed about the value of your product. Hence he/she decides to cancel the subscription.
Strategy for reducing this type of Customer churn
- Prepare early: Keep warm relationships with more than one contact. One is too risky, especially for large accounts.
- Prepare a backup in advance: Keeping a tab on the value delivered so that the value of your product can be easily demonstrated to the new executive.
- Request knowledge transfer: Request your champion to hand over the relationship and the product to the new user.
- Bring in the Sales Representative: One of the best ways to tackle this churn is to bring in the Sales Representative working alongside the Customer Success Manager. Treat the account just like a fresh sale and start by pitching value.
Chapter 10: Customer Churn Type 6
While we are so focused on delivering value, the truth in the SaaS market is that the cost of switching is constantly coming down. Customers do churn and switch because of the pricing.
This makes a very interesting case and requires a careful analysis. One of below cases must be true for this type of churn to happen.
- Your product is genuinely overpriced.
- Your customer never used the product fully and hence never got to the value advantage you have over your competitors.
- Your customer is not able to calculate and see the ROI correctly and hence churned.
But how do we find out? A good follow-up question to ask in the customer interview will be why does the customer feel that the product is priced higher?
Strategies to address customer churn due to high pricing
- Calculating Product Return on Investment or ROI: How obvious is the Product ROI for your customers? For many products, it is not that obvious, and if that is the case, it might make sense to work with your product design team to effectively build some metric that specifically depicts that. (eg: Saved X amount, or Saved X clicks)
- Communicating ROI effectively: This could be an easier problem to solve if you are calculating but not communicating. Then it’s a simple solution to constantly remind customers of the measurable value delivered.
- Understanding Total Cost of Ownership (TCO): Sometimes, it is not the cost of the Product, rather the TCO. For example, people needed to operate it. This requires a detailed understanding and what can you add or change in the product to bring that down.
- Competition Price Analysis: It might also be possible that there are new cheaper players or an existing player has reduced price. A typical move from being strategic to being a commodity over time.
- Calculate and Monitor Product Stickiness: Cost of switching a product could be higher as a customer utilizes more and more features. You can use Customer Success analytics to calculate product stickiness for every account.
Chapter 11: Customer Churn Type 7
Churn is usually not accepted, but many will tell you that when a company is acquired, merged or closed, it is acceptable churn. I disagree.
If and when a business shuts down, you don’t have much choice there. So that churn is fine.
But for the rest of the cases, I see an opportunity to expand into the new combined entity. It is time to bring in sales representatives in action one more time, working along with the Customer Success Manager.
It is true that customer success is an essential and permanent part for every SaaS company. It requires a well planned effort to build the team, putting together the right processes and implementing the right set of customer success tools for you to see the full blown impact of rolling out customer success.
The strategies explained above will help uncover some areas even for the companies where you have existing customer success teams and also for someone who is considering giving customer success a first time try.
I am positive that these strategies will help move the needle enough for you to convince your management to finally roll out a complete customer success practice.
If you need any more help with your Customer Success practice, whether it is around setting up Customer Success team, hiring a Customer Success Manager or you are a business focused on reducing Customer Churn, please do not hesitate on reaching out to me directly at email@example.com.
P.S. If you are looking for a Customer Success Software, you may like what we have built at CustomerSuccessBox. I invite you to check it out. All the best with keeping customers forever!