The Leaky Bucket and How to Stop It
Imagine a bucket filled with holes. Now, imagine trying to keep that bucket full of water. Even as you add more into the bucket, the holes continue to leak out water, creating a vicious cycle that can go on forever. For Customer Success Managers (CSMs), the leaky bucket cycle is a real thing, it just involves customers rather than water.
The Leaky Bucket Could Be Costing You
This video from Service Excellence Partners, featuring Ed Powers, introduces this leaky bucket concept – and raises a few questions. First, customer churn is a critical issue for the cloud computing industry. In fact, as Ed mentions, customer churn costs the cloud computing industry $10 billion every year. Add this to the fact that it costs 7x more to get a new customer than to keep a current one.
How The Bucket Relates to Customer Success
Customer churn is an organization-wide issue. There are multiple factors involved, from executive relationship status to budget and so on. The secret is to find these holes and reshape the bucket (or the customer success strategy) to close these holes once and forever.
Just patching up holes with band aids is a temporary solution that will likely lead to greater rates of customer churn down the road. Customers can always tell hastily made decisions from a thoughtful and planned strategy, and pushing quick fixes can cause unnecessary confusion and irritation.
It’s also difficult for customer success teams and entire organizations in general to be continuously trying new quick fixes only to be revisiting the same problem in a few weeks or months.
Why Continue To Fill Up Leaky Buckets?
Unfortunately, most companies are aware of the holes in their buckets, and just continue to fill the bucket constantly to compensate for all of the customers slipping out the holes. The thought process here is that there are always more organizations to backfill the ones slipping away.
Going back to what Ed Powers mentioned in his video, however, it costs 7x more to attract a new customer than to keep a current one. And yet organizations are happy to pour resources and time into keeping their buckets full while viable customers are leaving. This is an unreasonable strategy and will, in time, wear down both the new and existing business teams.
Fixing The Leaks With a Permanent Solution
Instead of just patching up the leaks and hoping for the best, customer success teams can take proactive steps towards minimizing customer churn and leakage. Sometimes this means getting an all-new bucket. Going back to the drawing board and creating a new customer strategies to stop leaks before they happen by completely removing the holes all together. The critical step here, however, is to constantly reinforce the new bucket to prevent any holes or leaks in the future.
Another way to stop customer churn is to identify the root causes of why customers are leaving. Is there one overarching reason? Does every ‘hole’ in the bucket have a corresponding reason? Go back and look at individual cases to determine root cause, and then work to ensure these issues no longer exist. Instead of a quick band-aid, this strategy acts as reinforced steel within the bucket that stops leaks in their tracks.
It Takes a Dual Focus on New Business and Current Customers
If a team is only focused on filling the business bucket but doesn’t focus on the holes, there will be unavoidable customer churn. If an organization only focuses on filling the holes but doesn’t fill the bucket, there will be a draught of new customers. Basically, winning organizations must bridge this gap and actually do both at the same time – focus on new business (filling the bucket) as well as current customers (filling the holes).
This bucket strategy only works as a dual responsibility between a sales team and a customer success team. Together, with additional support from other departments, a company can eliminate unnecessary churn while consistently filling the new customer bucket with new and prospective customers.
How is your company filling the holes in your leaky bucket? How are you simultaneously adding new customers to the mix? At the end of the day, all you should need is a bigger bucket!
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.
New posts each Tuesday and Thursday.
Also worth reading
The role of a customer success manager (CSM) in the SaaS industry has become increasingly complex. As platforms themselves become more innovative and functional, and as customers become more well-versed in how these solutions impact their business, CSMs are faced with more questions and challenges than ever before. While working with customers takes a certain [...]
Customer Success Webinar: How to Handle Churn as a Organization and Keep your Company Focused on Growth
ClientSuccess will host Julie Persofsky, Partner & Customer Success Advisor of Winning By Design, for this month’s customer success webinar series: How to Handle Churn as a Organization and Keep your Company Focused on Growth. Julie will walk you through a framework to help your organization understand the main cause of churn and how to [...]
Welcome to our blog series CSM from the Trenches, a community for frontline Customer Success Managers (CSMs) that discusses trends, best practices, and advice for the frontline. Being on the CSM frontline allows us to directly influence the success of our clients. I love that; as our clients are successful, we’re successful. Each day we [...]