Churn. It drives executives crazy. It keeps customer success managers up at night. It’s regarded as an indicator that your business is either successful, or on the brink of collapse. But is it really something you should be focused on everyday, in terms of preventing and assigning weight to? The answer is complicated.
Is all churn bad?
The short answer is no. If you lose a client that you wouldn’t qualify as a lead for your sales team today, then the cost of resources that would have been needed to “make it work” with this client probably outweigh the revenue you would have gained. An easy example is client size. If, in your early days, there were barriers to entry in your industry forcing you to target small businesses and price gouge your competition, then that client was qualified as a fit at that time. If your growth has caused a shift in strategy and your target market is no longer small businesses, then your customer success team shouldn’t be held responsible when a legacy client threatens to leave if their already discounted price isn’t reduced even more.
What if a client goes bankrupt or simply can’t afford your service anymore? Should you panic that your churn rate is climbing? Of course not. You can’t worry about aspects of a client’s business you can’t control. Now, you shouldn’t neglect these clients that are struggling, but you also shouldn’t hold your customer success team accountable when they ultimately leave.
Now that we’ve established that specific types of churn shouldn’t raise red flags, what about the churn that is preventable, surprising, and painful? This bad churn should be a staple of your customer success team’s focus, especially if this type of churn makes up a large percentage of your overall losses. It’s important to make sure you’re differentiating between the different types of churn so you’re not making a mountain out of a molehill. If your bad churn is a small percentage of your total churn, you’re probably in a pretty good place. If not, use some of these strategies to help avoid churning customers you want to keep.
When fighting churn that is within your control, try the APPS approach: Analyze – Predict – Prevent – Segment
Analyze your clients with all of the tools and resources you have available to you. Track behaviours and usage in your platform. Monitor support tickets to determine how often they need assistance, and how successful you are at solving their issues. Determine customer happiness and the strength of the relationship with someone on your team (preferably a CSM). Determine underused features and products and see if it correlates to customer size or industry.
Once you’ve done this you can predict with some accuracy whether or not a client is a churn risk. Gather all of your clients that fit into this category and develop a prevention strategy.
- Do they need more resources to be self-sufficient with your product?
- Do they need a senior technician to troubleshoot their quality issues?
- Are they a high touch client that isn’t receiving the right amount of contact from your customer success team?
These are all examples of questions you’ll start to be able to answer once your strategy becomes clear.
Now that your strategy has been determined for each client, segment them into groups that can be tackled in a similar fashion. Determine the best people to handle each situation and go all out to right the ship(s). If you don’t aggressively show your clients that you care about solving their problems, they will assume that you don’t.
But what about the churn outside your control?
You’ve now got a handle on your bad churn, but the churn that’s beyond your control is still contributing to your net churn number in a negative way. So how do you fix the unfixable? Simple. Don’t focus on what you can’t control. Instead, impact your net churn number by strengthening your relationships with your ideal clients and foster growth from within.
If you’ve reached the holy grail of preventing bad churn, don’t just kick your feet up and applaud a job well done. You’re missing out on a perfect opportunity to shift your customer success resources to your successful accounts and increase their adoption, growth, and promotion. Investing in your clients that are ready and willing to bring you more business (either through their own growth or the referral of others) will help reduce that net churn number to get you to the penultimate metric: negative net churn!
In many cases, this strategy can, and should, run parallel to the APPS approach. The reality is that churn is inevitable, but existing client growth and promotion are not a guarantee. Determine where you’ll get the maximum return on the effort put forth and measure your progress constantly. We update our net churn number at our daily huddle meeting to keep us accountable and motivate us all towards a common goal. When it comes to churn, negative is positive!