3 Ways to Address Customer Churn
April 15, 2019
When one looks at the typical SaaS method of sales and customer success, there is a clear funnel in place. While the awareness, education, and selection stages of the sales cycle are well-known and well-defined, the customer success side of this funnel is less well known. Onboarding, usage and impact, and growth are the subsequent customer success stages that make up the other side of this team funnel, and they’re actually some of the most important parts of a business. According to Julie Persofsky, Partner & Customer Success Advisor of Winning By Design, between 75 and 93% of a company’s revenue come from the growth stage of the customer success funnel.
In order to see this revenue, however, customers need to actually get to this stage, which means they must be able to see value and actually realize impact from a product. Customers who fail to make it to this stage (aka, those who slip through the cracks in the ‘customer bucket’) are the ones who churn.
In the past few years as the traditional SaaS sales and marketing model has taken hold, customer churn has been the sole responsibility of customer success teams. It’s been up to customer success managers and team leaders to catch the customers who leak out of this bucket, figure out how they slipped through the cracks, work to get them back on board and fix whatever caused the leak in the first place. But, modern methodology tells us that the customer churn process doesn’t have to fall entirely on the shoulders of customer success roles.
Here are three ways SaaS companies can address customer churn:
1. Look at Sales
If a customer success team starts to see an unreasonably high level of customer churn, turning the eye on customer success practices isn’t necessarily the first step. Instead, looking backward at the sales process can give more answers. Analyzing the sales process can help identify what is actually coming into your customer bucket and why these customers are there. Instead of selling based on ideal customer fit, sales reps should be selling based on customer pain.
Everyone on your team should have a clear understanding of the value proposition of your product and why a customer would purchase it in the first place. Then, your customer success managers (CSMs) can start to track why customers are leaving – and why they’re staying. Understanding why customers are staying uncovers the value they’re seeing in the product and helps identify whether or not these accounts were sold based on pain or fit.
2. Look at Onboarding
If the sales process is running smoothly and customers are being sold on pain but accounts are still churning, then it’s time to look at the onboarding process. The ideal benchmark of the first time-to-value should be around 30 days, depending on your internal processes and procedures. This short timeline is ideal because, if you have a 12-month contract and your customer isn’t seeing value for 120 days, they don’t have a lot of time to see enough value to want to renew.
If your onboarding process is dragging on from customer to customer and accounts are churning like crazy, it’s okay to go back to the drawing board. Revamping onboarding processes doesn’t mean running back to product to make technical changes. Instead, customer success teams should start by analyzing processes and trying to figure out why it’s taking customers so long to see value from their new product.
3. Look at the Product
If you have looked at the two points above and your team is still seeing customer churn, then it’s time to turn to the product team. Clearly, your customers aren’t receiving the desired impact (both rational and emotional) from the product or service they wished to see. So, your two courses of action are either to go back to your product and rework the solution to meet customer’s needs or to look at what you’re actually selling customers and rework this value proposition to meet the value proposition of your solution. A the end of the day, it’s the job of a product or service to deliver a desired impact to customers, and if it can’t do this then it isn’t fit to go to market.
When it comes to addressing customer churn, it’s important to look at the issue from all angles. Because customer success is such an important part of an organization and is responsible for such a large amount of a company’s revenue, it’s impossible to successfully scale an organization if you’re relying on customer success to fix churn problems. Every SaaS organization has some level of churn, but if it’s systematic then it’s a bigger issue than customer success and should be tackled by sales, customer success, and product together.
Learn More Detail About This Approach
Do you want to learn more about how the three ways to address customer churn?
You can watch Julie Persofsky explain this methodology in more detail in her recent recorded whiteboard session, ‘How to Handle Churn as an Organization and Keep your Company Focused on Growth,’ available here.
Learn more about how ClientSuccess can help your company develop a strong Customer Success methodology and strategy with easy-to-use customer success software by requesting a 30-minute demo.
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